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Quick And Easy Facts About Low APR Credit Cards

Quick And Easy Facts About Low APR Credit CardsWhat does APR mean?

APR (annual percentage rate) is an economic variable used to describe the current interest rate for a whole year.

APRs are attached to credit cards to signify the interest payments attached to their specific line of credit. The APR of a credit card is outlined in the card’s disclosure statement. Many cards have variable APRs which will attach higher or lower interest rates depending on the spending habits of the card user and the items being purchased

The annual percentage rate is the percentage of interest paid for a 12-month period, meaning, if an individual possesses an APR of 10% their monthly interest percentage is .833%. The monthly interest is the amount that the issuer will charge to the remaining unpaid balance per month. For example, a card with an 18 percent APR has a monthly rate of 1.5%. If the cardholder has an unpaid balance of $500, the 1.5% is attached to the remaining balance and the holder is forced to pay an additional $7.50 each month.

The APR is listed as a percentage and typically attached to a credit card to describe the additional payments (used to satisfy the individual’s interest obligation) that the borrower is forced to pay to for the use of credit.

The APR is a finance charge expressed as an annual rate and takes the form of two specific definitions: the nominal APR and the effective APR. The nominal APR is the simplified interest rate delivered as a yearly percentage while the effective APR is the compound interest rate, which includes a fixed fee.

The nominal APR is calculated as the rate delivered for a payment period multiplied by the number of payment periods in that specific year.

The APR is delivered as an annualized rate rather than the monthly fees or rates that are typically applied to mortgages or other long-term loans.

Factors that Affect an APR

The APR on a credit card will fluctuate based on a number of factors and variables, the most critical of which is the holder’s credit history. Additionally, credit card APRs may change over time as interest rates, the Federal Reserve rate and the prime rate fluctuate to control inflation and to encourage borrowing.

Low APR Credit Cards

As a result of these fluctuations and factors, low APR credit cards today may not appear to be low APR credit cards in 5 or 10 years. Given the instability of the credit market and other negative macroeconomic issues present today, low APR credit cards contain an APR between 8 and 12%. Very rarely will an individual obtain low APR credit cards with a rate below 10 percent; however, the majority of card issuers will offer 0 APR for a fixed amount of time.

Those individuals with higher credit scores will be awarded with a lower APR. Lower APR credit cards are awarded to an individual with a higher credit score because of the mitigated risk of default—the issuer of the card views the individual as a safe investment and therefore grants the individual with the ability to possess 0 APR credit cards or credit cards with low APRs. The variables that calculate the APR can fluctuate upwards to 50%, meaning some cards may carry an APR of 50% while others may have an APR of 0.

The APR is only attached to the remaining balance of a credit card. If the individual fails to pay the complete balance owed and opts instead to pay the minimum balance, the APR will be attached to the remaining balance and then carried over to the following month.

Understanding Capital Gain

Understanding Capital GainWhat is a Capital Gain?

A capital gain is a profit that is realized from the investment into a capital asset (such as bonds, stocks, or real estate). A profit is realized in an investment when the return on the investment exceeds the purchase price (the price paid for the investment) of the particular asset or security purchased. As a result, a capital gain is the difference between higher selling price and a lower purchasing price, which subsequently results in a realized gain for the investing party. In contrast, a capital loss will arise if the proceeds from the sale of a capital investment or asset is less than the purchasing price.
A capital gain is commonly referred to as “investment income” that will arise in relation to the prices of real assets such as property, equity investments such as stocks or bonds, and intangible assets such as goodwill.
The majority of countries, including the United States, will impose a tax on capital gains that is placed on both individuals and corporations who are awarded a profit through their particular investments. Depending on the tax policy of the particular government, forms of relief may be made available to those that invest in the aforementioned assets. Relief on a capital gain is awarded in relation to holdings in certain assets, such as common stocks, to help encourage investment and entrepreneurship or to compensate for the negative effects of inflation.
Capital Gains Tax:
The capital gains tax is implemented on any capital asset that generates a real profit, either following the sale of the asset or through any means that generates increased value, such as in the way of interest. The amount of capital gains tax implemented is based on the increase in the net worth of the underlying asset.
The most common capital gains taxes are placed on the sale of stocks, property, bonds, and property. Not all developed nations implement this form of taxation and the ones that do levy the capital gains tax will impose different rates of taxation for corporations and individuals.
For the sale of equities that generate a profit, the corresponding national or state legislation will institute an array of fiscal obligations that must be adhered to regarding one’s capital gains.
In the United States, all individual and corporate tax payers will pay income tax on the net total of all their capital gains just as they would on any sort of income earned. That being said, the tax percentage is lower on long-term capital gains, which are profits realized on the sale of assets that have been held for over one year following the sale.
The tax rate on long-term capital gains was reduced in 2003 to 15% or 5% for individuals in the lowest two income tax brackets. In contrast, short-term capital gains possess higher tax rates; these forms of gains are typically taxed as ordinary income.
The Internal Revenue Service allows individual to defer their capital gains taxes with tax planning strategies (primarily structured sales) such as charitable trusts, private annuity trusts, installment sales, and a 1031 exchange.
The United States taxation model is unique in regards to capital gains tax because the country will levy a tax on worldwide income; the tax is placed on income no matter where in the world the individual resides.

Negative Amortization Quick Outline

Negative Amortization Quick OutlineWhat does Amortization mean?

Amortization refers to the distribution of a single lump-sum cash flow into many smaller cash flow payments or installments, as determined through an amortization table or schedule.
In the most common of meanings, an amortization is a loan with a unique repayment structure. Unlike other repayment models, each repayment in an amortization consists of satisfying both the principal balance and the interest attached to the loan.
Amortization is primarily used in loan repayments, most commonly in mortgage loans or sinking funds. The payments are divided into equal amounts for the duration of the maturity schedule. As a result of this uniformity, the amortization is regarded as the simplest repayment model. That being said, a larger amount of the payment towards the amortization is applied to the interest of the loan at the beginning of the amortization schedule, while more money is used to satisfy the principal at the end of the amortization loan.
Negative Amortization:
In regards to finance, negative amortization occurs when the underlying loan payment for any period is less than the interest charged over that particular period. When this relationship takes place, the outstanding balance of the overall loan increases; the payment offered by the borrower isn’t enough to cover the interest payments so the principal is not affected and thus carries over the next installment.
The shorted amount in a negative amortization (the overall difference between the interest and the repayment schedule) is then added to the total amount owed to the underlying lender. This practice; however, must be agreed upon before the payment is shorted so as to avoid a total default on the loan obligation.
Negative amortization is typically used during an introductory period, before any loan payments may exceed the interest and the loan itself becomes self-amortizing.
Negative amortization occurs only in loans in which the periodic payments do not cover the amount of interest due for that specific loan period. The unpaid interest then compounds and is capitalized monthly into the overall remaining balance of the loan. As a result, the loan balance or principal increases by the amount of the unpaid interest and is divided on a monthly basis. The purpose of this feature is not to increase overall affordability, but to spark advanced cash management and simplify payment flexibility.
Negative amortization also contains a recast period and a recast principal balance cap based on particular state legislation. The recast period tied into negative amortization is typically 60 months or 5 years while the recast principal balance cap is usually up to a 25% increase of the loan balance over the original loan amount. Particular states and lenders may offer products with smaller recast periods and principal balance caps, but may not issue amortization loans that exceed their particular legislated requirements under the penalty of law.

Negative Amortization Circumstances:
All negative amortization home loans will eventually require the full repayment of the interest and principal according to the original terms of the mortgage agreement signed by the borrower. The majority of mortgages or long-term loans will only allow for negative amortization for no more than 5 years; all loans will have terms to recast the payment to a fully functional amortizing schedule if the borrower’s principal exceeds a specified amount.
A negative amortization often occurs when the loan is constructed in high cost areas because the monthly payments will be lower than other types of financing instruments.
A negative amortization loan can be viewed as high risk because these loans are typically safer in a falling rate market and riskier in a rising rate market. 

2 Questions about Equity

2 Questions about EquityWhat is Equity?

The term ‘equity’ refers to interest or the residual claim of a class of investors in assets once all liabilities have been fulfilled.

Equity can be described in the case of home ownership. When an individual purchases a home, they typically finance their purchase with a mortgage. The mortgage, which in essence is a loan offered by a bank or a similar lending institution, represents the percentage ownership of the lender. As the mortgage is paid off, the individual assumes a coordinating percentage ownership of the home. This percentage ownership is referred to as equity. In an accounting context, shareholders’ equity represents the remaining interest in the underlying assets of a company, which is spread among individual shareholders of either common or preferred stock.
In regards to business ownership, an owner (at the starting point of their business operation) will finance the model through financing. This financing creates a liability on the business in the form of capital as the business is a separate legal entity from its ownership. Once the liabilities have been accounted for, the remaining positive balance is regarded as the owner’s interest or equity in the business.
Understanding equity is crucial when evaluating and comprehending the liquidation process of bankruptcy. During its first stage, all of the secured creditors are paid against the proceeds obtained from the assets present. Subsequently, a series of creditors (which are ranked in priority sequence) have the following claim on the residual proceeds. Ownership equity is the last residual claim against the present assets, which are paid only after all of the other creditors are satisfied. In cases where even the creditors could not be reimbursed, nothing is left over to satisfy the owners’ equity. As a result, the owners’ equity is reduced to 0.

What are Equity Investments?
An equity investment refers to the process of buying and holding shares of stocks listed on a market by corporations or individual firms that distribute dividends and capital gains.
An equity investment may also refer to the acquisition of ownership (equity) in a private or Startup Company. When an investment is made in such novel companies, it is referred to as a venture capital investment and is generally regarded as a higher risk investment strategy.
The equities obtained by private investors are often held by mutual funds or other investment companies, many of which are quoted on major exchanges or publications. Such investment strategies enable investors to obtain a mitigated risk through the diversification of various securities. Additionally, such investment companies are run and handled by professional fund managers. An alternative equity investment is employed by private investors and pension funds, where the equities are held directly.
When the owners of equity take the form of shareholders, the interest is typically called shareholders’ equity. In the stock market, the market price per share is not directly related to the equity per share as calculated and offered in accounting statements. Therefore, stock valuations, are often higher and are based on alternative considerations that relate to the business’ operating cash flow, future prospects and profits.

FOREX Market Defined

FOREX Market DefinedWhat is the FOREX Market?

The FOREX Market is the financial realm in which the trade and exchange of foreign currency systems takes place; the purchase(s) or sales of specific currency systems undertaken by individuals are conducted with regard to the fluctuation of respective fluctuation experienced by tradable and exchangeable currency – although its technical name is the ‘Foreign Exchange Market’, a multitude of traders is commonly refer to it as the FOREX Market.

What is the Virtual FOREX Market?



Although the FOREX Market was conceived with regard to a physical setting – prior the advent of applicable technology, the virtual FOREX market was constructed for online and digital use; akin to the physical FOREX Market, the virtual FOREX Market operates with regard to the dynamic of exchange rates, including:
The engagement in the trade and exchange of International currency is exchanged between individuals interested in the monitoring of the behavior of that currency.
The ability to utilize electronic resources in order to investigate the wide variety of observable trends and patterns with regard to the valuation of foreign currency and exchange.

How Does the FOREX Market Work?

Currency Exchange is the process of exchanging – or trading – one type of currency for another. The process of the determination of value with regard to Currency Exchange is a dynamic that varies; the fluctuation of Currency Exchange rates may be dependent on a variety of features:
FOREX Market provides a setting in which the valuation of different currency and monetary systems are subject to fluctuation, which typically illustrates a variance in trends or behaviors in which circulated currency belonging to an individual country or nation may result in a multitude of results.
Although the valuation of certain currency may render financial gain with regard to FOREX Market, currency experiencing severe decreases in valuation may render financial loss upon the decline of currency rates.
FOREX Brokers are financial professionals who participate in the exchange of currency systems within the realm of the FOREX Market, including the analysis of exchange rates, monetary systems, economics, and financial circulationanalysis of currency exchange rates.

FOREX Market Legality

FOREX Market is a highly-specialized financial setting, which is subject to all expressed and applicable legality latent within activities rooted in financial exchanges. Many of both the crimes, as well as the legal statutes implicit within the stock market and investments are applicable to FOREX Market operations:
FOREX Market operations will be subject to any or all financial investigations undertaken by the presiding government of the country or nation; these investigations may take place on a variety of levels with regard to applicable legislature and legal statutes – although the setting of crime may vary, punitive recourse may not.
Individuals interested in engaging in FOREX Market ventures and operations are encouraged to consult with legal professionals specializing in finance and international law; a legal background of this type will allow clientele to be privy to any or all implicit statutes and legal procedures latent within commercial ventures existing on an international level.

Understanding An Amortization Schedule

Understanding An Amortization Schedule

What is an Amortization Schedule?
An amortization schedule is a table, which details the periodic payments on an amortizing loan (typically a mortgage) as it pertains to a coordinating amortization calculator.
The term “amortization” refers to the process of paying off a debt (primarily a loan or a mortgage) over a standardized time through regular payments. A portion of each payment is used to satisfy interest while the remaining amount of the payments is applied towards the principal balance. The percentage of principal versus interest in each payment is thus determined through the amortization schedule.
That being said, a portion of every payment is applied towards both the principal and the interest of the loan; the exact amount applied to the principal will vary each payment—the leftover amounts from the principal payments go towards the fulfillment of the interest. As a result of this relationship, the amortization schedule reveals the specific monetary amount placed towards the interest as well as the specific amount put towards the principal balance. In the beginning payment periods, a large portion of each payment is devoted to interest; however, as the loan matures, larger portions of the amortization schedule go towards paying down the principal. 
An amortization schedule runs in chronological order; the first payment to the schedule takes place one full payment period after the loan was taken out and not on the first day or the amortization date of the loan. The last payment to the amortization schedule will pay off the remainder of the loan; typically the last payment is delivered as a slightly different amount to the preceding payments. 
An amortization schedule, in addition to breaking down each payment into principal and interest portions, will reveal an interest-paid-to-date, a principal-paid-to-date, and the remaining principle balance on each payment.
Types of Amortization Schedules:
    Straight line amortization schedules
    Declining balance
    Bullet (an all at once amortization schedule)
    Increasing balance amortization schedule (a negative amortization schedule)
    Annuity

Amortization table At A Glance

Amortization table At A Glance

What is an Amortization table?
An amortization table is an easy-to-understand graph, which details the periodic payments on an amortizing loan (typically a mortgage or long-term loan).
The amortization table is a product of an amortization calculator. Once an individual inputs the necessary components into an amortization calculator, the individual will be able to view the remaining payments of their loan, how such payments affect the principal balance and interest of their loan and the expected date of maturity.
This product, which is regarded as the amortization table is organized into 4 rows and a number of columns based on the length (in years) of the loan to maturity. The rows are organized based on the payment period of the loan, the interest payments attached to loan; the amount directed towards the principal each payment period and the total remaining balance of the loan. 
The term “amortization” refers to the process of paying off a debt (primarily a loan or a mortgage) over a standardized time through regular payments. A portion of each payment is used to satisfy interest while the remaining amount of the payments is applied towards the principal balance. The percentage of principal versus interest in each payment is thus determined through the amortization table.
That being said, a portion of every payment is applied towards both the principal and the interest of the loan; the exact amount applied to the principal will vary each payment—the leftover amounts from the principal payments go towards the fulfillment of the interest.
As a result of this relationship, the amortization table reveals the specific monetary amount placed towards the interest as well as the specific amount put towards the principal balance. In the beginning payment periods, a large portion of each payment is devoted to interest; however, as the loan matures, larger portions of the amortization table go towards paying down the principal. 
An amortization table runs in chronological order; the first payment to the schedule takes place one full payment period after the loan was taken out and not on the first day or the amortization date of the loan. The last payment to the amortization table will pay off the remainder of the loan; typically the last payment is delivered as a slightly different amount to the preceding payments. 
An amortization table, in addition to breaking down each payment into principal and interest portions, will reveal an interest-paid-to-date, a principal-paid-to-date, and the remaining principle balance on each payment.
Types of Amortization tables:

    Straight line amortization tables
    Declining balance
    Bullet (an all at once amortization table)
    Increasing balance amortization table (a negative amortization table)
    Annuity
Amortization Loans:

When an individual finances a home with an amortization loan they must understand that a substantial allocation of their monthly payments is used towards the interest, especially during the first 18 years of the loan.
Even with decreasing interest rates and a decreasing principal balance, the borrower within an amortization loan can end up paying over 500% of the original loan amount.
The payments on an amortized mortgage remain the same for the entire loan period; regardless of the principal owed, the periodic payments towards fulfilling the obligation will remain the same.

O APR Credit Cards Defined

O APR Credit Cards DefinedWhat does APR Mean?

APR, which stands for annual percentage rate, is an economic variable used to describe the current interest rate for a whole year. The APR is listed as a percentage and typically attached to a credit card to describe the additional payments (used to satisfy the individual’s interest obligation) that the borrower is forced to pay to for the use of credit.

The APR is a finance charge expressed as an annual rate and takes the form of two specific definitions: the nominal APR and the effective APR. The nominal APR is the simplified interest rate delivered as a yearly percentage while the effective APR is the compound interest rate, which includes a fixed fee.

The nominal APR is calculated as the rate delivered for a payment period multiplied by the number of payment periods in that specific year.

The APR is delivered as an annualized rate rather than the monthly fees or rates that are typically applied to mortgages or other long-term loans.

 In regards to credit cards, the APR refers to the amount you will pay in interest per year. The APR on a credit card will fluctuate based on a number of factors and variables, the most critical of which is the holder’s credit history.

Those individuals with higher credit scores will be awarded with a lower APR. The lower APR is awarded to an individual with a higher credit score because of the mitigated risk of default—the issuer of the card views the individual as a safe investment and therefore grants the individual with the ability to possess 0 APR credit cards or credit cards with low APRs. The variables that calculate the APR can fluctuate upwards to 50%, meaning some cards may carry an APR of 50% while others may have an APR of 0.

The APR is only attached to the remaining balance of a credit card. If the individual fails to pay the complete balance owed and opts instead to pay the minimum balance, the APR will be attached to the remaining balance and then carried over to the following month.

What is a 0 APR Credit Card?

When an individual applies for 0 APR credit cards they are looking to obtain a credit line where the attached annual percentage rate is zero. As a result of the 0% APR, the individual can save a substantial amount even if he or she makes minimum payments. That being said, the majority of new credit cards are issued with a fixed timeframe of 0 APR. These cards are used to entice borrowers who are looking to lock-in 0 APR credit cards regardless of the timeframe.

Those lenders that issue 0 APR credit cards for a fixed timeframe typically do so for the borrower’s first year of use. After this time, the APR is adjusted based on the individual’s credit history and finances and is then attached to the remaining balance (if applicable) of the card.

Bailout: What you Must know

Bailout: What you Must know

What is a Bailout?
• In the field of economics, a bailout refers to the act of loaning or injecting capital into an entity, such as a company, an individual or a country, which is in danger of failing. The bailout is a calculated financial maneuver that increases a failing entity’s liquidity profile; the maneuver is undertaken in an attempt to free the struggling entity from insolvency, bankruptcy, total liquidation or ruin. 
• In addition to injecting a dying organization or market with cash, a bailout can also be administered for sheer profit; an example of such a maneuver occurs when a predatory investor resurrects a faltering company by buying its assets or shares at an enormous discount (this occurred when JP Morgan purchased Bear Sterns in 2008). 
• Other reasons for a bailout include: for social improvement or to prevent greater socioeconomic failures. An example of the latter situation can be elucidated by examining the relationship between the United States Federal Government and private transportation companies such as airliners: it is the policy of the US government to protect the biggest transportation companies (petrol companies, airliners etc.) from total failure through the issuance of severely discounted loans and subsidies. 
• Companies, such as airliners or enormous investment banks, are deemed “too big to fail”, because their services and assets under management are considered, by the United States Federal Government, to be constant universal necessities in maintaining the health, welfare and security of the nation. 
Principal Themes of a Bailout:
• Throughout the 20th and 21st centuries, certain principles have emerged that are seemingly consistent with bailouts:
o To initiate a bailout a central bank will typically provide a loan in order to help the system cope with liquidity issues.
o In a number of bailouts, the underlying government has let insolvent institutions (those with insufficient funds to pay-off short-term finances and massive debts) fail in a systematic way. An example of such a maneuver can be found with Lehman Brothers during the financial crisis in 2008. 
o A bailout requires that all struggling organizations make their financial situation 100% transparent. Understanding the true financial position of struggling enterprises or nation’s ensures that the extent of losses and quality of assets are known by the underlying government.
o Those banks deemed healthy enough to survive, in a collapsing market, require a recapitalization, which requires the underlying government to inject funds to the institution, in exchange for preferred stock (receives a cash dividend over time). This cash infusion enables the bank to lend money to other banks or investors.
o The government should take ownership, either through equity or stock, in a struggling company to the extent taxpayer assistance is provided. The government should become the owner so it can later obtain funds by issuing new shares of common stock to the public. 
o In most bailout situations, the interest rate will be slashed to stimulate the economy by enticing individuals to borrow. 
Arguments against a Bailout:
• A bailout signals lower business standards for enormous corporations by incentivizing risky activities; big corporations have a safety net regardless of what they do
• A bailout promotes centralized bureaucracy by enabling government bodies to choose the specific terms of a bailout
• The action instills a corporatist style of government where a failing business can use the government’s power to extract money from taxpaying citizens 
• When capital is injected into a dying corporation, the money supply will invariably rise, sparking inflation.

Understanding Bond Ratings

Understanding Bond RatingsWhat are Bond Ratings?

Bond ratings are grades that are given to bonds to indicate the instrument’s credit quality, meaning their ability to fulfill their obligation to the underlying investor. Bond ratings are given to all types of bands and are supplied by independent rating services such as Moody’s and Fitch and Standard & Poor’s. These companies provide grades to all classes and forms of bonds based on the instrument’s strength and its ability to pay the attached principal and interest in accordance with the maturity schedule.

Bond ratings are analogous to credit ratings for individuals; those bonds that possess a higher rating are valued at a higher rate and viewed as safe investments when compared to bonds with lower ratings.

Credit Rating Agencies:

Credit rating agencies must be registered and labeled as such with the Securities and Exchange Commission. When they are registered, they are labeled as “Nationally Recognized Statistical Rating Organizations.” This status enables these agencies to evaluate the worthiness of bonds and attach their evaluations with an affirmed credit rating. 

According to the Credit Rating Agency Reform Act, a Nationally Recognized Statistical Rating Organization may be registered with respect to up to five distinct classes of credit ratings: 1.0 brokers, dealers and financial institutions; 2.) insurance companies; 4.) issuers of asset-backed securities; 3.) corporate issuers; and 5) issuers of municipal securities, government securities, or securities that are issued by a foreign government.

Credit Rating Tiers:

Bond Rating    Standard & Poor’s    Moody’s
Highest Quality Bonds    AAA    Aaa
High Quality Bonds    AA    Aa
Upper Medium Quality Bonds    A    A
Medium Quality Bonds    BBB    Baa
Somewhat Speculative Bonds    BB    Ba
Low Grade, Speculative Bonds    B    B
Low Grade, Possibility of Default    CCC    Caa
Low Grade, Partial Recovery Possible    CC    Ca
Default, Recovery Unlikely    C    C

The above graph demonstrates the rating system incorporated by the two dominant rating agencies in the United States. The grades are given based on the bond’s credit worthiness and the expected ability of the bond to be repaid in full plus the attached interest payments. Bond ratings are the measure of the quality and security of the underlying bond and are primarily based on the underlying financial condition of the issuer.

In a more specific sense, bond ratings incorporate an evaluation from one of the recognized rating services to indicate the likelihood that a debt issuer will be able to meet the scheduled interest and principal repayments to the investor. Typically, those bonds that are graded as ‘D’ bonds are the lowest quality bonds and are already in default.
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