Monthly Archives: June 2017

Credit Cards and Bankruptcy

The inevitable trap of credit cards and the preying by banks on their victims may lead many to bankruptcy. There is no easy way out of financial situations when income simply does not match expenditure. We all want the latest and best things on the market and many acquire them through loans on those pieces of plastic. The facts are, however, that the interest charged may mean that repaying such loans quickly puts it out of reach of meeting it. Banks are not so honourable that they will surrender their biggest money earners, namely the credit cards. The ones who use them are ‘cash cows’ supplying their lenders with huge incomes and vast annual profits. It’s like gambling when one puts money in and gets little back in return.

In times past I too was hooked on credit and then some valuable lessons came to hand. The goods I was buying during sales, and so forth, were costing twice as much as they would if the same items were bought for cash. Not only that but much of the stuff filling my cupboards was unnecessary and likely would never be used. Banks and sales go together. One often sees stores offering extra discounts for using a Visa card. It does not take a genius to know how much the business receives back for this slight-of-hand deal. Nor does one need a calculator to check on where the institutions are making most of their money.

At the moment in Australia interest loans on property have never been lower. One can get a mortgage for something like 1.5 percent or even less. That is because the banks know that people will be forced to sell that property at a great loss if they go bankrupt through using their credit cards. With that in mind the offer of extended credit is given to the mortgagee.

There is a move afoot here to force banks to disclose the source of their income while the Opposition wants a Royal Commission into banking practices. With the focus on the ongoing links between credit cards and bankruptcy prominent in the media it is long overdue. The best way to avoid the trap is to tear up the cards and have nothing to do with them. Bargains are only such when there is a genuine saving to be had from the purchase. If money is correctly managed then buying things for cash will quickly become a priority.

Trade Finance

Without trade finance, there wouldn’t be Indian spices, clothes, or jewelry in the United States. Or Apple’s iPhones in China, much less any other international product at any respectable distance from its origin. In fact, according to Investopedia, the World Trade Organization (WTO) estimates that international world trade has expanded 80%-90% thanks to trade finance. For this to continue, companies need to include trade finance in their business development strategies.

Market penetration and market development are key parts of a business development strategy. Market development involves selling more of your service or product to repeat customers. While market penetration is about expanding your product or service to other cities and provinces, it can involve inland trade finance. As you may have to renegotiate local and provincial trade deals. For instance, let’s say you sell jewelry. A business from a neighboring city may purchase your jewelry and sell it to its customers. You have a long history with this client. And know that your product is selling quickly in your customers’ shop. In which case, you could propose selling the client more jewelry for a bulk price. After negotiating, the client agrees. However, despite the long, positive history you’ve had with the client, the client may not feel comfortable paying you before you export the jewelry. This is where a trade financier or banking institution comes in, providing a letter of credit promising that you will export the jewelry upon payment.

With repeat customers, you’re doubling the number of products the repeat client is importing. And, with new clients, your new product or service will expand your client base. It’s important that you first create new products for your repeat customers before jumping to new customers, as it involves more risk. Again, trade finance can help cultivate more trust during this period of growth. Since trade financiers or banking institutions can create letters of credit, laying out the terms the importer and exporters must follow.

Structured Trade Finance

Structured trade finance (STF), a type of debt finance, is used as an alternative to conventional lending. This form of finance is utilized regularly in developing countries, as well as, in relation to cross border transactions. The objective is to encourage trade by making use of non-standard security. STF is generally used in high-value transactions in bilateral trading relationships. As a more complicated type of finance, STF is commonly related to commodity trading. Within the commodity sector, STF products are most prevalent. It is used by producers, processors, traders, as well as, end-users. These financial arrangements are tailored by banking organizations to meet the precise needs of the clients. STF products are primarily working capital financing, warehouse financing and pre-export financing. There are also some institutions that extend reserve-based lending, as well as, finance the conversion of raw materials into products, along with other customized finance products. In order to promote trading activities, STF products are extended across the supply chain.

STF structures are sponsored by limited recourse trade finance lines. The structure aims at offering better security mechanism and to act as an enhancement on the position of the borrower when viewed in isolation. Trade credit insurance, bank assurances, letters of credit, factoring and forfeiting are some of the STF products that have been positively affected by the latest technological advancements. These products have changed due the recent developments. The massive progress in communication and information domains have also helped the banking institutions to track the physical risks and events in the supply chain between the exporter and the importer. Structured trade finance products are used so that the risks related to trading in specific country and different jurisdictions can be mitigated. Any transaction together with STF products help to add resilience to the trade and the same cannot be said when looking at financing the individual elements of a trade. Moreover, it allows for lengthening the payment time, strategizing procurement, diversifying funding and enhancing the ability for clients to boost the facility sizes.

What makes STF extremely attractive is that the borrower’s strength in the transaction is not scrutinized as closely as compared to a vanilla loan. Here, the focus is more on the structure and the underlying cash flows. Another reason for STF’s popularity is that the transactions are not reflected in the balance sheet of a company and the presence of this financing option has helped several importers to maintain flexible credit terms with exporters. In recent years, structured trade finance products coupled with the recent advances in technology are considered as the fundamental reasons for the increasing volumes of international trade.

Credit Union

If you are currently banking with one of the “big banks” and are not happy with their services there are numerous reasons to consider banking with a credit union. If you’re not quite convinced they can be the right path for your finances, here’s a breakdown of the benefits of banking with a credit union.

  • Personalized Customer service

Because credit unions are banks for the people by the people and have smaller memberships than the typical larger institutions, you are able to get customized personal service. It’s much more of an intimate relationship than you would have at a traditional bank. The credit union employees actually know you and are invested in your success as a member. That’s because their focus is on making every consumer interaction a personal one, void of lines, long phone waits, and canned responses.

  • Accessibility

Since they serve their local communities, most of the time branches are not available outside of their service area. To make up for that they sometimes reimburse members for ATM fees or offer a shared ATM network if members have to go out of network to have access to their money.

  • Structure

Credit unions are owned and operated by their members. The minute you make your first deposit, you will have voting rights.

  • Lower Account Fees

They also have fewer fees across the board because they have lower overhead costs. Because they are typically smaller operations than big banks they can pass their overhead savings on to their members. According to Bankrate.com more than 75% of credit unions offer free checking, compared to 40% of banks. And many don’t stop there. They even pay members rewards in the form of high interest or dividends, cash back, and other perks, like ATM fee refunds.

Monthly maintenance fees are lower and members don’t have to keep as high a balance in the accounts to escape these fees.

  • Serving the Underserved

Credit Unions serve those that are usually locked out of the traditional banking system. This covers the large number of immigrants in communities that would otherwise not have access to necessary financial services.

  • Supporting the local community

The money that is deposited in your local credit union supports its members and the local community. They channel funds back into the local economy in the form of loans in support of small business, home purchase and loans that help members accomplish their financial goals.

  • Interest Rates

They offer higher-yield savings and checking account rates. Good luck finding an interest-yielding bank account at a megabank. They yield next to nothing for their account holders.

  • No scams

Employees aren’t pressured to meet unreasonable sales goals. So rest easy, no one is going to open a secret account behind your back.

  • Federally Insured

Your money is no more safe at a big bank than it is at a local credit union. Just like the FDIC at a traditional bank, deposits up to $250,000 at a credit union are insured by NCUA – a federally backed agency.

  • First-name basis

They take time to know their members. You’ll be a name, not just an account number.

  • Technologically Advanced

Credit Union’s have come a long way from their once obsolete style of banking. Today, the technology used at a credit union is just as advanced as a megabank. They have online banking options that feature mobile check deposit, smart chip cards, mobile apps, online bill pay, e-statements and more.