which payment method typically charges the highest interest rates

highest interest rates
highest interest rates

Taking advantage of credit card companies for their offers is a time-tested strategy that you can benefit from. One of the best offers out there are the credit card offers with 0% APR. There are other articles that we have used to discuss how you can take advantage of these offers for purchases or balances on your credit cards. This article will discuss the power of credit card interest arbitrage and how you can use credit companies’ credit card offers with 0% APR to create a profitable opportunity for you!

For More info ⇒ https://www.polleverywhere.com/example/polls/which-payment-method-typically-charges-the-highest-interest-rates-11322423

The offers range, but credit card companies give the cardholder an introductory 0% rate on all new purchases and balance transfers. When you do a “balance transfer,” most card companies will issue a check to you in your name for the amount that you are transferring over. Some cards, depending on your credit, will allow for up to $25,000 to be used in this manner. Some card companies make the credit card interest arbitrage process much easier than others, but you can request the balance transfer check and some companies will drop the check in the mail to you. As soon as you receive it, you deposit in a high yielding money market account. Assuming you can find a money market account yielding the short-term rate of 4.5%, you could make a couple of dollars off of the credit card company lending you money for free (just by pursuing credit card offers with 0% APR)!

The examples below highlight different balance transfer amount deposited into a high yield money market account for 12 months at a time as well as the power of credit card interest arbitrage opportunities.

Amount

Interest

$5,000

 $   225.00

$10,000

 $   450.00

$20,000

 $   900.00

$25,000

 $1,125.00

$50,000

 $2,250.00

Not bad for just making a phone call or filling out an application!

Don’t Lease a Car! — Why It’s Almost Always a Poor Financial Decision

Let’s get right to the point. Leasing a car is almost always a very poor financial decision.  I’m going to focus the next few Woody’s Goodies on car buying tips.  But the first tip is, DON’T LEASE A CAR! Summarized below are my views on the disadvantages of leasing a car:

  1. The selling price is usually MSRP.  Many dealers hide this value from you, diverting you to low monthly payments. Many car salespeople will simply tell you it’s cheaper to lease, where you can’t figure out that the price charged was MSRP, and stole your trade-in because they are not required to disclose a trade on a lease form;
  2. Confusing finance charges. Some dealers try to confuse you and lie about something called the “money factor” and often won’t even tell you the money factor.  Well, let me tell you about the money factor.  It’s usually a very high-interest rate as compared to the interest rate you can obtain if you purchased a car.  To convert the money factor into an interest rate, simply multiply it by 24;
  3. The long-term cost of leasing is more than the cost of buying no matter what the dealer tells you. Dealers don’t compare apples with apples when telling you that a lease is cheaper than buying. Let me illustrate what happens. Most people lease for 36 months or borrow (if purchasing) for 60 months. However, dealers like to compare a 36-month lease payment to a 24-month loan payment (even though it’s rare for people to borrow for 24 months). Therefore, they can convince people that buying a car is much higher than leasing a car because of the appearance that the monthly payment on the lease is much less. They don’t tell you that they packed the lease payment with hidden extended warranty, credit life insurance, $500 dealer acquisition fee, $300 disposition fee, etc.;
  4. Depreciation in any auto lease is RIDICULOUS.  With leasing, every 3 years you pay approximately 50% depreciation in car value, so after 2 leases in 9 years, you have paid 150% depreciation.  If instead, you purchased the car and drove it for the same 9 years, you still have not used up 90% depreciation. Obviously, buying is cheaper, end of the story;
  5. Possible double tax when leasing a car. Most states tax your monthly payment.  But some states like Illinois and Texas tax the full amount of the car even though you are only using up to 50% of the value then returning it.  Even worse, if you buy the car at the end of the lease, you again pay sales tax on that residual amount!  Don’t even consider leasing if you live in Illinois or Texas.
  6. High Insurance Cost.  Lessors require you have minimum insurance policies of $300,000;
  7. If you lease the car, you may not get a manufacturers rebate.  This can increase the cost by $500 to $1500, so make sure you get the rebate!  Some dealers try to get out of it, and they may keep it for themselves;
  8. Lemon laws don’t cover leases in some states.  For example, the Illinois attorney general’s office stated that the three day right to cancel law does not apply to an auto purchase, and Illinois Lemon Law only applies to new cars, not used car sales of leases;
  9. Misleading dealer lease ads. Many ads state very low monthly payments, like $275 per month for a BMW.  However, there’s usually only a tiny stock number of the only car there at that price.  To get low monthly payments, you need huge down payments (which are sunk cost lost forever since you don’t own the car). The fine print also may state that taxes are extra;
  10. Calculate your own lease payment. Dealers love to volunteer to do a lease versus purchase analysis for you.  Tell them, sure go ahead.  Then tell them you want a print out of the analysis so you can take it home and check it.  You then MUST be able to figure out the lease payment on your own, and lookup residual values (available on various websites (i.e. Edmunds.com)).  For your convenience, I have attached a spreadsheet which will help you in calculating your lease payment (LEASE PAYMENT CALCULATOR ATTACHED);
  11. Mileage limits. Most leases limit you to 12000 miles/year. Some are 10,000 miles. Many of my friends have paid thousands of dollars at the end of their lease for excess mileage.
  12. You are responsible for program maintenance. Better keep damn good records of every oil changes tune up, etc. and do them on schedule too. Don’t give them any chance to claim excess wear and tear; and
  13. All 4 tires must match! This is in every lease contract. Leasing companies charge you for mismatched tires, and they charge MSRP, which you can get cheaper in a tire shop;
  14. Accidents may trigger early termination. Some leases actually may terminate upon an accident, and you’re still obligated to pay off the lease. Car insurance covers the damages, but not the cost of paying off the lease. You’ll need “gap insurance” for that (another additional cost of leasing). You should definitely buy gap insurance when you lease, but shop it, because if you buy it from the dealer, you’ll b e getting a raw deal;
  15. Dealers love to offer you and early out on your lease.  Dealers will often volunteer to pay your early lease termination penalties and buy you out of your current lease.  But they do this so they can roll you into another lease (thereby selling another car), and in essence, they have just financed all that debt into the new lease. Now you’re paying off 2 leases.  Thanks for nothing!
  16. Tax law changes have reduced the tax considerations of leasing versus buying and focused the decision on the real economics as mentioned above. Since 1998, taxpayers have the option of using the standard mileage rate on either leased or purchased autos. Prior to 1998, standard mileage rate was only available if the taxpayer owned the auto. This removed the advantage that purchased autos had over leased autos regarding required record keeping.Do yourself a favor, don’t lease a vehicle.  As a matter of fact, buying a 1 or two-year-old vehicle is by far the best way to go.  Today, you can even get those used vehicles with 5 and 10-year warranties still intact.  If for some crazy reason you decide to lease, please use my lease calculator (file attached) and make sure the dealer isn’t ripping you off.

    Rate Lock Basics: What Everyone Should Know

    What is a rate lock? According to the Consumer’s Guide to Mortgage Lock-ins, a rate lock is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is being processed.

    Establishing a rate lock will depend upon the lender. It may take weeks before all of the paperwork is prepared, so locking in a rate during this time benefits you, the consumer.

    There is a disadvantage, however to a rate lock. Let’s assume that your lender has given you a rate lock and is now processing the paperwork. Let’s also assume that the interest rate has gone down. The question then becomes whether or not the lender will offer you that lower rate.

    It is important that the rate lock is given to you in writing. The Consumer Guide asserts that some lenders have pre-printed forms that set out the exact terms of the lock-in agreement, while others may only offer an oral agreement. It is prudent course of action to seek out only those lenders who offer the former, rather than the latter.

    Will you be charged for a rate lock? Some lenders do assess a fee at the outset for a rate lock. Also be aware that some may also keep that fee if, for whatever reason, your application is withdrawn.

    How much is the fee? That depends entirely on the lender. They may charge you a flat fee, a percentage of the mortgage amount, or a fraction of a percentage point added to the rate you lock in. It varies among lenders.

    How long will the rate lock be available? Although the normal lock-in time is from 30-60 days, there are some lenders who may only offer the rate lock for 7 days, while others may offer you a 120-day rate lock. Keep in mind that the longer the time given, the more money you will pay for this service.

    Here are some questions you can ask each lender you visit regarding rate locks, as posed by the Consumer Guide:

    * Does the lender offer a lock-in of the interest rate and points?

    * When will the lender let you lock in the interest rate and points? When you apply? When is the loan approved?

    * Will the lock-in be in writing? If the lock-in is not in writing, you will have no record of the lender’s agreement with you in case of a dispute.

    * Does the lender charge a fee to lock in your interest rate? Does the fee increase for longer lock-in periods? If so, how much?

    * If you have locked in a rate, and the lender’s rate drops, can you lock in at the lower rate? Does the lender charge you an additional fee to lock in the lower rate?

    * Can you float your interest rate and points for now, and lock them in later?

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