‘Banking Business’ Articles
Review Your Banking every month…at least. And a mini one weekly.
Better Banking Rule of Thumb #5
It seems like common semse, but ask a million people and you’ll likely get a “Never” as an answer from every single person. Except, perhaps in a child’s eyes. “Grandma, can I put my money in that bank? That one pays 4 and a half percent; my money only gets half…” A simple savings that pays a lot more than another will likely be a great idea, provided of course the costs are also minimal or non-existant.
Now, how many people will make that move? Some, people will I’m sure, but remember, there are costs attached to any kind of banking you do. Where people fall asunder to very costly banking practices often begins this way. You get that very tasty bait and then you get hooked by impossible attached costs.
Banking is another part of your financial investments. You do an audit of your finances every year at least for tax purposes. Banking is often far more important. So why do you not pay more attention to it?
But Review Your Banking you must. Begin with these:
1) Is your credit card servicing you or are you servicing it big time? Check out the costs involved. You may be paying overdraft charges you never agreed to, but retroactively being dumped on you.
2) Keep a close eye out on which bank is offering what. You must make a banking comparison and be knowledgeable. That knowledge becomes a great bargaining power when you sit down with your banker to discuss banking needs versus costs.
3) Be aware of those dreaded surprise fees. Banks often have you sign a blanket waver which allows them to basically wring you dry. They can even do more damage than that but you get the picture.
4) Pay attention to the bank related trends. Is your banking system getting hit with unusual losses. Expect to get hit soon. So you can take advantage of the situation and not get caught offguard when it comes. Online banking losses might be one. But is your bank the big victim? If so, get out of there!
5) Taking experts’ advice on how to optimize your bank account and banking practices. Save costs where you can, get that extra percentage point of interest, pay less mortgage, lower your credit card payments, etc.
6) So you bank online with the latest nifty gadget with your cell phone or your computer. Do you realize, there are hackers ever ready with their thieving software ever ready to steal your banking information? In fact your whole identityt could be stolen and used at your expense. Do you protect yourself against that? Do take precautions?
7) What happens if your bank fails? Will the FDIC save you? Scary thought. Is all of your investments in there safe? It depends on the country’s rules and protection available to depositors. If you’re over the safety limit, move that money around for safety and better investment.
8) Review your foreign banking availability too. Does your bank support your wish to travel and actually undertake the necessary transactions on your behalf as you need them? Getting stranded and getting your holiday ruined is really no joke. Imagine, your cash forwading did not get forwarded. Your credit card did not get that credit increase after you had deposited more than the necessary cash but you got billed for it anyway…
You or someone you know may hear rumblings about banking misdemeanours or have experienced it in some way. Please give me your comments below and tell us.
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Better banking overseas appears to be a pipe dream to many people.
But speaking to many who travel, this more to do with its apparent mystery caused by misinformation and lack of information, not truth.
Better Banking Rule Of Thumb #4.
Once understood, really, overseas banking is just an extension of your banking services.
Is banking overseas the same as offshore banking?
First of all, this must not be misunderstood to be offshore banking, which is putting funds largely out of the jurisdiction of the country you may reside in to work or live in. It is perfectly legal to do so, provided you do it properly and legally with the right professional help.
Banking overseas can also be taken to mean in some situations, to be derived in part, as offshore banking, but it need not necessarily be so. If you travel frequently, you will be better off to use foreign banks or banks that have branches that are quite widely spread across the globe, including your country of domicile.
What you are actually doing is that you are maintaining separate accounts in all the countries that you travel to. Funds that are required from time to time, are often moved to or transferred from those locations. It can be a handfull to maintain, however, but in these days of the secure computerized systems, that problem is significantly reduced.
Why maintain so many accounts all over the world?
Now, you are not maintaining your accounts in every country. Far from it. You only maintain accounts at your main points of entry like in Hong Kong as a gateway to China, or Singapore as a gateway to South East Asia or Switzerland in Europe.
The Hong Kong Bank or HSBC has service banks all over the world which can be set up in such a fashion. Hence their claim to be the World’s Local Bank.
This is especially great when you travel frequently on business or invest significant amounts of money in other parts of the world as a diversification strategy. Also, many Asians have migrated to many parts of the world and many people have actually several domiciles built up.
This is not a pipe dream. Moderately wealthy people have moved to countries like Thailand and Vietnam or China along with maintaining homes in Europe or North America. The world has become an international playground.
So, it makes great sense to have banking done right all over the world, instead of relying on one solitary bank account sending money to and fro all over the world. Doing that will likely set off alarm bells at your local Bank which may lead to unecessary duress and really stupid investigations into your unusual activities – imagine that. And what have you done wrong? Absolutely nothing. Savvy investors and travellers know this already hence their strategy.
Now, this is to do with banking convenience. You can simply take off from England to China at a moment’s notice, without worrying about transfering mega amounts of business money. You simply focus on your business at hand. This is simply put, good business strategy.
You see, at your local bank, sending such sums back and forth will certainly have your funds and accounts frozen.
For the sake of your own sanity, organize yourself a great system of better banking overseas.
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Posted in Better Banking Overseas, Personal Bank | 2 Comments »
You’re all prepped and ready for your holiday but make sure the better banking experience goes with you.
Better Banking Rule of Thumb #3
When traveling, banking gone bad can be your worst nightmares. If you’ve travelled frequently, one or some of the following could have happened to you. They could have all been avoided, or at least if you’re aware of the possible pitfalls, they become easier to handle.
1) Counterfiet Money. Yes, this one is a common enough nightmare. Getting caught with counterfiet currency is often so serious that the unwary traveller is almost always dumbfounded when it happens. Even cash from the bank are sometimes counterfiet. What you can do is to have the currencies checked for authenticity before you leave.
2) Cash limits when travelling. There are limits to the amount of cash you can carry with you, especially in and out of the US. But in many countries now, there are more and more travel cash restrictions. Frequently, the limit approaches E or $10,000 or less. Please check with the authorities, or the travel agent may be of help.
3) Better Exchange Rates. Sometimes, bank exchange rates really get you. A spread of 5% or more is common. However, when exchanging currency from one main currency to another, it is easy enough in your home country. But trying to get an almost unknown African currency from say, the US may be impossible. This is the strategy I use when travelling.
a) Simply carry US dollar currency and when you get to your destination, use it. They will usually accept it liberally (otherwise use Euros or British Pound). But make sure you use lots of small denominations like $1 notes. Large notes are diifficult to negotiate there.
b) If you go to Singapore or Hong Kong for example, simply carry your main currency. You can have far better service and more agreeable exchange rates than say in Canada or the UK. Besides, you’re going to need the greater amount of dollars you get as those countries are very costly. You can also get to the liscenced street money exchangers.
c) If you have lots of transactions at your home bank, get to know the people there. You’ll get better rates at the local bank sometimes. Try it.
4) Use traveller’s checks. Well, these are really ruled by transaction costs. Often an extra 1-2% on top of the echange rates and then more transaction costs at the other end where you’re travelling to. Don’t expect preferential rates. The only advantage with these negotiables is the extra safety they provide. If you lose them, you can have them replaced during your holiday. It is adviseable to carry some travellers checks as insurance just in case.
5) Use plastic. Travelling with credit cards can be a life saver or it can put you in the poor house. You’ll need to have tons of discipline to use this. It’s just too easy to splurge and then have hell to pay when you get home.
ATM cash withdrawals in foreign currencies are extremely expensive. You’ll be hit with the ATM fee, the currency exchange rate, a transaction fee, and sometimes some kind of insurance fee you don’t know about. Also, be very careful where you use your credit card. Always take the receipt and the processing should be done within your view. Use cash whenever possible instead. Lost credit cards must be immediately reported and cancelled. Oh yes, carry more than one for emergency use.
Alternatively, credit cards can get you discounts, travel advantages, and sometimes even more travel rewards that you didn’t bargain for like preferential treatment. You can go ahead of the line when booking for shows, airline tickets, or even cruises and dinner engagements.
6) Banking Overseas. The Domain of the Savvy Traveller. So you travel somewhat frequently. And you might go to a popular holiday destination on occassion. You should take advantage of foreign banking then. Many banks today are really international banks. They have many branches all over the world .
For example you might travel to Monaco, England, Hong Kong, Singapore or any other hundreds of world destinations. If you live in Canada for example, you can set up an account with the HSBC Bank here in Canada and when you travel, set up another account in say, Hong Kong. This makes transfering more cash than the travel cash limits will be imposed upon you.
Believe me, when you get to Hong Kong on a business trip which includes regional travel, money goes extremely fast. A month’s business stay could run you multiples of what your travel cash limit and credit card combined might afford you.
7) Invest Your Foreign Travel Reserves. Sounds interesting huh? Yes, you can invest that foreign held money. Sometimes, as you may not be needing this money for many months or even a year or more, why not put them into a good mutual fund or get self directed and actually make transactions online? You can also get the use of credit cards or even a checking account too.
Lately, some far eastern markets have been rising against the tide of the western stock prices. This might be a truly well deserved holiday in the making all paid for.
But cause for concern is that you may be required to file for tax purposes what you transfer or location of your assets and how much you make there. Check with your specialist tax accountant.
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Posted in Better Banking, Personal Bank, Personal Banking | 1 Comment »
Spread your risks through Multiple Banks for Better Banking.
Better Banking Rule of Thumb # 2.
Afterall, you are taking a risk with your money, if you deposit it in a bank. In essence, you are investing in that bank. The misconception is that when you put money in a bank, you are leaving it there for safe keeping. That’s a load of baloney.
Be very clear here: You are an investor with a whole bunch of rules stacked largely against you – meaning, you have to abide by all the rules and regulations imposed upon you and then also the new ones that will invariably not be in your favour.
Remember, you are being an entrepreneur when you are recreating your own banking system to build your wealth. You make use of the system. It is there for your use. Do not be dictated to by the bankers themselves. Once you put money into their bank, they control it to their benefits.
Once you understand this, you can see why it is the wisest course of action to have at least 2 bank accounts that are kept active.
How can you do this and not lose your sanity from over administration?
Here’re my simple ways of dealing with multiple bank accounts.
1) In Bank #1, have a savings and checking account with one bank. This will be your active account with an ATM card and a credit card too. Yes, you can also have some managed investments like Guaranteed Investment Certificates or Bonds too. Make sure there’s no fancy investment here.
2) In Bank #2, also have a savings account and a checking account but here, you can have more fancy investments here like your Retirement Savings and Investments, Mutual Funds, etc. This is not your main activity account, but keep up some activity to keep it current. You can have another credit card and ATM card as a standy by.
3) If you are in business, set up a seperate account here. Make sure you do have a simple savings account for easy and cheaper cash transfers. You’ll get your business credit and ATM card here too. You might even want to have an interest paying account here for surplus or standby cash.
Now here are some extremely important points:
a) All these accounts must be in different banks.
b) These banks must not be co-owned by one another.
c) These banks must not be branches of each other.
The reason for this precaution in simple – banks can and will have the power to transfer one deficit account to another, if they are of the same bank – especially if it’s in the same branch.
Imagine this nightmarish banking scenario – you are in default to the bank on a line of credit for a pile of money in your business account, so they take your personal investment account to balance the deficit business account. This can happen visa versa, even if the business is considered a seperate entity. It’s because your name happens to be on that business account. Sucks huh? Scary too.
Here are other reasons to have more than 2 bank accounts.
1) If and when (it’s invariable) you find one being a real pain to deal with, just move your account service around to another bank.
2) You can’t be held hostage for your own funds – at least you have something to fall back on. Whatever happens to one, you have another.
You can read a little more about the wisdom of having multiple accounts.
But for me, the main reason is from right at the beginning – you are in control of your own money – therefore, you are being your own bank.
Technorati Tags: Better Banking, Diversification, Multiple Banks
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Posted in Better Banking, Diversification, Multiple Banks, Personal Bank | 1 Comment »
Who else wants to know how banks work and better yet, how they make all that moolah and then lose it all too?
It’s simple financial wizardry 101.
Let’s start with the 2 misconceptions and the answers at the same time.
1) You save your money (deposit) in bank. They pay you 1% per annum (more like .25% today) and they lend out money to borrowers at the rock bottom rate of 5% per annum for a mortgage.
The bank makes 4% on your money right? Right so far.
2) Then to make real money, the bank needs to find huge amounts of capital (your money) to lend and make that 4% profit. So you think that’s all they can lend? Wrong.
Financial Wizardry 101.
In most countries how much banks can lend depends on the reserve required declared by the central bank. In the US it’s the Federal Reserve. This is typically 10%. This method of reserve requirement magnifies the banks money creation from lending money. Banks don’t have to keep 100% reserves of cash but only a fraction of that is called fractional reserve banking.
So, you lent that bank $1,000,000 of your hard earned money and they in turn can then lend up to 10 times more on the original capital you supplied them.
Math says they can lend $10,000,000 form your money. If they only charge 5% per annum, they can gross $500,000 in interest earned. And they pay you just $10,000. Wallach! Financial Wizardry, aided and abetted by the government entity called the central bank.
Then to add in sult to injury, they lump on as much service fees on you as possible to claw even that little bit of money they pay you back. Gut wrenching indignation isn’t it?
OK, if they make so much, why do they still lose money and sometimes, we lose it all too?
1) The number one problem, is that banks love to lend huge sums to larger entities (not just home mortgages) and when the economy tanks, or if there is an error of judgement even in good economic times, the principal sums become incapable of being repaid.
All at once, the principal money on deposit at the bank gets reduced and therefore, they need to withdraw from the loans being handed out. That as you can see will reduce the amount being loaned as a multiplier of the principal at the bank.
2) Then as is often the case, money already loaned is commited to a borrower. Therefore the bank will need to borrow from a lender who will charge a significantly higher rate of interest plus fees which suddenly eats into the money the bank makes in interest. Of course, if this happens often enough, the bank may,
a) Squeeze the borrower and enforce the return of some or all the borrowed capital (look at your terms of loan very carefully – you might be surprised);
b) Go into default and if your money is guaranteed by the government, you’re in luck. But if yolou’re the one with that million bucks sitting there, you’ll get 10% of your money back, without interest.
Yes, it’s Financial Wizardry but since you supply the capital, that is what’s at risk.
Now, I’ll ask you to consider your financial freedom using the banking resources as the prime financial vehicle.
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Posted in Banks Are Businesses, How Banks Work, Private Banking Services | 1 Comment »
Better Banking can sound like such a moronic phrase. After all that I’ve been critisizing banks about, is there such a thing?
Better Banking Rule of Thumb #1
Well, yes, there really the first rule of thumb for Better Banking.
The concept is not new and very simple.
Banking Partnership.
1) When banks start out they tend to have excellent service and help their customers maximize their investments or savings.
You can find banks (do your due diligence) that will have an officer who will sit with you to understand your financial requirements and try to tailor it as best he or she can. For example; You plan to buy a house 6 months to a year down the road. But you don’t yet have enough money to do it and added to the problem, you’ve had a bad credit history a few years ago.
This bank officer could offer you a credit check for a credit card application. At the same time, any credit discrepencies can be found and dealt with. You may be started on an investment schedule to save and invest for that down payment -this program may take a year or two, or less depending on your income and proven savings rate.
Every 3 months or so, that bank will continue to monitor your financial needs and offer you a more diversified investment portfolio, depending on risks. At the same time, they will also reduce your banking fees if you remain a good and diligent customer.
2) Equally important, the tellers and bank officers will try to tailor your banking accounts to your special needs, thus minimizing your banking fees even more.
Every month a teller or a bank officer will look at my banking practices and offer me some new package that will lower my banking costs some more.
I remember doing this in some banks I have dealt with and I am still banking with them. However, it is still possible to do so even at some large banks that have the policy of your banking pleasure and trust at heart.
3) Now, you as the customer has an important part to play in this relationship too. You need to keep to this schedule made out for you.
If you are unhappy with it or require to reduce the commitments or advance them, simply go back to the bank. They will be very glad to help you out. This is your responsibility. Even if you do not get your credit card on the first try, a good report from the bank for the next several months will offer you a nice surprise. Often, I have seen mortgages approved within a year because you have been able to prove to the bank you are one reliable customer.
Again, during times of duress such as falling incomes, missed payments or a credit crunch, working with the bank to reduce your pyaments can still be a very viable solution.
The main reason? Trust. This is still a people business after all.
There, a win, win relationship with the bank.
I know I have written to the contrary and those banks very much deserve that criticism. Big banks, in an effort to raise the number of customers and profits at the same time, often forego that ideology of the long term happy customer. Instead, every process is geared toward pure number of customers and fees that they can generate in order to stay afloat in the short term.
This is the recipe for very unhappy customers and gradually ruder tellers and bank officers. The customer service has gone the downward spiral of no return.
Now, what kind of banks are likely to be in such a position of customer trust? Many credit unions and some smaller banks (like this one) are. But DO YOUR DUE DILIGENCE. I can’t stress any more than that.
I’ve had my fair share of closing accounts due to incorrigible banking practices and rude bank staff. I’d like to say I’ve been privy to closing a bank branch or two, but that is another story.
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Posted in Better Banking, Personal Bank | 1 Comment »
Have you ever wondered why when playing poker with the banks you lose?
A Matter of Time
Banks are businesses. Run just like any other business. Except for one huge difference. They have a fiduciary duty to safeguard their clients’ money. So you give them money and you borrow money from them too. But with some of the banking practices of late in the news, whose money are they really safe-guarding?
Let’s take a quick view where you may be the loser – it might make you sick.
1) Lately, Banks in England have been playing cat and mouse with credit card fraud (and there may be more similar situations in a number of countries). Paying the thieves and leaving the card holders to foot the bill.
2) Some banks will reposess your car in a case of bankruptcy as a matter of policy. Well, so they take your car away and hope you can repay them more quickly by preventing you from getting to work and taking care of kids and elderly and errands…
3) After screwing up your, well your nations’ money and retirees’ money, and orphans’ money, pension funds, and oh, yes, your investments and mutual funds and…and…and…I get lost. The top bankers simply apologize profusely to the Teasury Select Comittee and call it quits. No bankruptcy, no penalties like the rest of us.
4) Then we get behind to the financial lenders and the world comes crumbling down. Who is it that goes for the jugular? Look at the number of financial suicides that financial ruin create. Man, these guys were not cut a break and look what happened to so many of them. Don’t ever let this be you.
Alright this is depressing me. I’ll stop here. There are literally millions of searches of these things called banks behaving badly…
But if you know how to make use of the system and actually create your own banking system that you can work from, none of these things will be as large and menacing as they seem. Of course nothing is perfect.
Like the best banking system put in place, time and conditions will change but change comes with it. The banks have to know this – especially if you have become a bank yourself and move with the times instead of squeezing your best customers everytime the economy tanks on them.
Technorati Tags: Banking Poker, bankruptcy
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Posted in Banks Are Businesses, Personal Bank | No Comments »
Planning for retirement certainly seems a thing of the past. Many planning to retire early by achieving their financial freedom certainly before the age of 65, can’t. The recent financial events have blown it for them.
Read this report in the Ottawa Citizen. It seems many people are now appearing resigned to work past their official retirement age of 65. The statement below sums it up very well.
“The Sun Life Financial survey shows nearly a majority of people in this country intend to work beyond the age of 65.”
This really says a little more about retirement planning, and it’s never too early to plan your retirement. After all is that the lifestyle you want?
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Posted in Financial Freedom, Lifestyle, Retirement Planning | No Comments »
Quick, get that calculator – it’s time to speculate on your net worth. You might be worth more than you think after all. No, I’m not talking about your personal net worth.
But here’s the part that sucks. You might be more valuable if you met with a tragic end. Then what you are suddenly worth to your bereathed ones might suddenly skyrocket. But then, you might just become disabled – not a very viable proposition if you ask me.
Then in steps the specialists. Yes, there are specialist that take into account the myriad variables of what you might be worth to your loved ones and the insurance companies will either argue to death about it or agree to the agreed to figure and both sides of the argument walks away satisfied and amply compensated.
Mind you, this is collosal business. Many of the big accounting firms like KPMG become valuators of the many variables like the speculation of your potential if you were a Harvard Graduate or a high school dropout – but perhaps you had a thriving business? Then there are lawyers to pay for too.
So, quickly let’s speculate on your net worth in case you become disabled – at least you will know what to insure yourself for, and sue for too.
Technorati Tags: Net Worth, Speculation
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Posted in Your Net Worth | 2 Comments »
The Stock Markets went into overdrive and rose on the news of an auto stimulus package in both the US and Canada. In total the rescue package amounted to $ 21.4 Billion – enough to encourage, investors believe, for the economy to be far more stable. There’s aparently enough to say the confidence in the economy will return.
Stock prices rallied Friday, as investors cheered the government’s pledge to lend as much as $17.4 billion to U.S. automakers, staving off possible bankruptcies that could have sent a debilitating blow to the economy and the labor market. Read more about the latest news from the Business Journal.
In Canada, the other country of the North American Auto Pact, has agreed to another $4Billion as a loan, available until March 2009.
Technorati Tags: Auto Pact, Stock Market, The Economy
Tags: Auto Pact, Stock Market, The Economy
Posted in Competition and Business Strategy, Financial Buzz | 1 Comment »
