Credit Card Cash Advances Use Them Wisely Rewards Credit Cards And You Avoiding Bad Credit And Repair Imf Kill Or Cure
Use Your Cash Advances Wisely! Credit card cash advances can provide you with convenient and instant access to cash, but cash advances should be avoided if at all possible.
What is a Cash Advance?
A cash advance is an option cardholders can use to borrow cash against their current balances, as opposed to using the card for a tangible purchase. For most credit card users, the amount of cash available for a cash advance is a small percentage of their overall credit limit.Statements issued by the bank will generally provide two sets of numbers: the credit limit and the cash advance limit.
Your credit card is a powerful tool for the management of your financial life. It can help you to extend the value of the products and services you need by receiving the goods, before paying for it. Your credit card can also reduce the need for cash or check in places far from home, and it can also allow you to conduct personal and professional business by phone, mail, or the Internet.
Like all-powerful tools, though, your credit card needs to be used carefully. This is especially important when using the ultimate power of your credit card: it’s ability to give you immediate cash in large amounts. The two most popular ways of obtaining cash from credit cards are through the ATM machine at your local bank, or by filling out and cashing a check-like document that is often attached to your monthly credit card statement. You can also go inside the bank and fill out forms to receive the money. All of these methods will get you the cash you need however, if you must get an advance, avoid using ATM machines. ATMs charge an additional fee for
advances. This fee is charged by the financial institution that owns the ATM. Each method besides have another huge thing in common which is that no matter what way you take the money, you will instantly be charged interest on the transaction. Cash advances begin accruing interest immediately and, therefore, are not subject to a grace period. Thus, even if you pay your card balance in full when your bill arrives, you will still be accessed a finance charge for any advances.
Last year the amount of cash borrowed from just one major credit card company totaled more than 104 billion dollars. That was an eight percent increase over the previous year, and it tells us that credit card users are increasingly seeing the easy use of plastic as a substitute for the discipline of using banks and credit unions for borrowing.
Credit card companies in turn are increasingly willing to loan cash. It can be a very valuable service for their customers. But credit card companies are also increasing the fees and interest charges for cash advance. Your monthly statement gives you some of the fine print on how those charges are billed, but in most cases it doesn’t tell you what those charges are. If you don’t know it’s always a good idea to call the customer service number on your statement and ask. It’s no different than shopping for the best terms on a loan among banks and credit unions before signing on the dotted line.
The Cost of Buying Cash
When you use your credit card to buy new shoes or the latest CDs those products are yours to keep. You can use them for years to come and pay for them over a few months if you wish. But when you use your credit card for cash advance to pay for daily necessities like groceries and gasoline you will pay much more for that privilege. And you will have to give it all back as quickly as you can.
If you borrow $500 from one of the major credit card companies in the United States at contemporary rates, for example, you will be charged 3. If you determine to pay off the loan in four months your costs in fees and interest for the purchase of $500 will be $35.88 or more than 7 of the loan amount.
But that’s not all. If you read the small print on your statement you will learn that in most cases payments you make to your credit card company will be applied first to lower interest charge purchases before they begin to erase your debt for higher interest borrowing of cash. For example: If your credit card balance of $1000 includes a $500 cash advance and you pay back only $200 per month it will be three months before your payments begin to cover the advance. That’s three more months that the credit card company can charge you 19.9 APR charge for goods and services charge nearly 20 to 4 for an advance, but charges a minimum of $10 regardless of the amount of the advance. Another example would be an issuer that charges x at times, which can quickly swallow up any benefits of a cash advance. Use your credit advance wisely and only borrow enough cash to resolve your financial obligation and make a sincere effort to pay back any cash advance quickly.
There are many different types of credit cards. In this competitive area, many companies are now offering special rewards credit cards to bribe you to use their cards. There are numerous types of rewards credit cards to choose from. It is likely that no matter what your interests are, there is likely a rewards credit card just for you.
One of the most common types of rewards credit cards are the travel rewards cards. Travel rewards credit cards earn points that can be redeemed toward savings on flights, hotels, car rental and sometimes even cruise travel. If you travel allot and use a credit card, perhaps you may want to opt for a credit card that will save you money on travel, and may even earn you some freebies.
Another common type of rewards credit card is the cash back rewards credit cards. These cards offer you cash rewards on a percentage of your total purchases. These cards are also known as cash rebate credit cards. If you are looking to apply for a cash rewards credit card, you will want to pay particular attention to your interest rates. If you commonly have a balance outstanding on your credit card, you will want to make sure that you don’t negate the benefit of a cash back rewards card by paying high interest rates and penalties.
Toady’s world and its soaring gas prices have paved the way for a new type of rewards credit card to gain in popularity. The gas station rewards credit cards came about as a way to encourage customer loyalty and save money on gas at the same time. Often issued in partnership with gas companies, gas rewards credit cards offer you the chance to earn free gas or get discounts on gas. Sometimes, gas rewards also come in the form of a rebate, much like the cash back rewards cards discussed earlier.
Another unique type of rewards card that has come about lately will help parents with college expenses. The Citi
Staying in contact with your payments each month can help you avoid bad credit. If you research the marketplace before coming to a purchasing decision, you are well on your way to avoiding bad credit and repair credit hassles.
You want to consider all applications, including credit cards, student loans, mortgages, and car loans carefully to avoid being overcharged. Making the wise decision ahead of the game is the ultimate solution to maintaining good credit.
Most people when taking out a home mortgage loan are not aware of the options available to them. Many will walk in the bank door, fill out the application, and accept the terms & conditions when offered to them.
If you ever heard the many reports that swept the pages of newspapers, television and other advertising sources…families and individuals are filing bankruptcy because they cannot afford their homes anymore. This is because these people did not take the time to check the marketplace first and searching the options available to them.
As you can see, the millions reported are in debt and searching for a way to repair their credit. The solution then to avoiding bad credit and repair is to research, invest wisely, make good decisions, and budget. Being informed and educated is two of the best tools offered to us.
There are mortgage loans that offer overpayments and underpayments and these loans include vacation packages and lump sum payments to the borrowers. There are also other loans available that offer low mortgage monthly installments and low interest rates with insurance policies attached that will pay your mortgage if you are sick, unemployed, in an accident and so on.
On the other hand, there are mortgage loans that have high interest rates, high mortgages, and balloon payments attached. When balloon payments are attached to home mortgages it is almost guaranteed in a few years you will be searching for a solution to repair your credit.
There are very few home lenders willing to tell you the truth about the variety of home loans available. Most of the lenders are making money and you are a source of income. It is important to scope the terms & agreements carefully as well as reading all fine print on any loan contract before you sign. If you want to avoid bad credit and repair, you want to stay on the right path.
Loans are agreements that are made between two parties and attached are interest rates and other fees. If you are applying for a home loan and want to avoid bad credit, it makes sense to learn what the fees include and how much those fees are.
Anytime you take out a mortgage loan there are upfront fees attached. In some cases, you can get a home for little or no cost. Searching the marketplace can save you time and money.
This was the title of the cover page of the prestigious magazine, “The Economist” in its issue of 10/1/98. The more involved the IMF gets in the world economy – the more controversy surrounds it. Economies in transition, emerging economies, developing countries and, lately, even Asian Tigers all feel the brunt of the IMF recipes. All are not too happy with it, all are loudly complaining. Some economists regard this as a sign of the proper functioning of the International Monetary Fund (IMF) – others spot some justice in some of the complaints.
The IMF was established in 1944 as part of the Bretton Woods agreement. Originally, it was conceived as the monetary arm of the UN, an agency. It encompassed 29 countries but excluded the losers in World War II, Germany and Japan. The exclusion of the losers in the Cold war from the WTO is reminiscent of what happened then: in both cases, the USA called the shots and dictated the composition of the membership of international organization in accordance with its predilections.
Today, the IMF numbers 182 member-countries and boasts “equity” (own financial means) of 200 billion USD (measured by Special Drawing Rights, SDR, pegged at 1.35 USD each). It employs 2600 workers from 110 countries. It is truly international.
The IMF has a few statutory purposes. They are splashed across its Statute and its official publications. The criticism relates to the implementation – not to the noble goals. It also relates to turf occupied by the IMF without any mandate to do so.
The IMF is supposed to:
1.. Promote international monetary cooperation;
2.. Expand international trade (a role which reverted now to the WTO);
3.. Establish a multilateral system of payments;
4.. Assist countries with Balance of Payments (BOP) difficulties under adequate safeguards;
5.. Lessen the duration and the degree of disequilibrium in the international BOPS of member countries;
6.. Promote exchange rate stability, the signing of orderly exchange agreements and the avoidance of competitive exchange depreciation.
The IMF tries to juggle all these goals in the thinning air of the global capital markets. It does so through three types of activities:
The IMF regularly monitors exchange rate policies, the general economic situation and other economic policies. It does so through the (to some countries, ominous) mechanism of “(with the countries’ monetary and fiscal authorities). The famed (and dreaded) World consultation” Economic Outlook (WEO) report amalgamates the individual country results into a coherent picture of multilateral surveillance. Sometimes, countries which have no on-going interaction with the IMF and do not use its assistance do ask it to intervene, at least by way of grading and evaluating their economies. The last decade saw the transformation of the IMF into an unofficial (and, incidentally, non-mandated) country credit rating agency. Its stamp of approval can mean the difference between the availability of credits to a given country – or its absence. At best, a bad review by the IMF imposes financial penalties on the delinquent country in the form of higher interest rates and charges payable on its international borrowings. The Precautionary Agreement is one such rating device. It serves to boost international confidence in an economy. Another contraption is the Monitoring Agreement which sets economic benchmarks (some say, hurdles) under a shadow economic program designed by the IMF. Attaining these benchmarks confers reliability upon the economic policies of the country monitored.
Where surveillance ends, financial assistance begins. It is extended to members with BOP difficulties to support adjustment and reform policies and economic agendas. Through 31/7/97, for instance, the IMF extended 23 billion USD of such help to more than 50 countries and the outstanding credit portfolio stood at 60 billion USD. The surprising thing is that 90% of these amounts were borrowed by relatively well-off countries in the West, contrary to the image of the IMF as a lender of last resort to shabby countries in despair.
Hidden behind a jungle of acronyms, an unprecedented system of international finance evolves relentlessly. They will be reviewed in detail later.
The last type of activity of the IMF is Technical Assistance, mainly in the design and implementation of fiscal and monetary policy and in building the institutions to see them through successfully (e.g., Central Banks). The IMF also teaches the uninitiated how to handle and account for transactions that they are doing with the IMF. Another branch of this activity is the collection of statistical data – where the IMF is forced to rely on mostly inadequate and antiquated systems of data collection and analysis. Lately, the IMF stepped up its activities in the training of government and non-government (NGO) officials. This is in line with the new credo of the World Bank: without the right, functioning, less corrupt institutions – no policy will succeed, no matter how right.
From the narrow point of view of its financial mechanisms (as distinct from its policies) – the IMF is an intriguing and hitherto successful example of international collaboration and crisis prevention or amelioration (=crisis management). The principle is deceptively simple: member countries purchase the currencies of other member countries (USA, Germany, the UK, etc.). Alternatively, the draw SDRs and convert them to the aforementioned “hard” currencies. They pay for all this with their own, local and humble currencies. The catch is that they have to buy their own currencies back from the IMF after a prescribed period of time. As with every bank, they also have to pay charges and commissions related to the withdrawal.
A country can draw up to its “Reserve Tranche Position”. This is the unused part of its quota (every country has a quota which is based on its participation in the equity of the IMF and on its needs). The quota is supposed to be used only in extreme BOP distress. Credits that the country received from the IMF are not deducted from its quota (because, ostensibly, they will be paid back by it to the IMF). But the IMF holds the local currency of the country (given to it in exchange for hard currency or SDRs). These holdings are deducted from the quota because they are not credit to be repaid but the result of an exchange transaction.
A country can draw no more than 25% of its quota in the first tranche of a loan that it receives from the IMF. The first tranche is available to any country which demonstrates efforts to overcome its BOP problems. The language of this requirement is so vague that it renders virtually all the members eligible to receive the first instalment.
Other tranches are more difficult to obtain (as Russia and Zimbabwe can testify): the country must show successful compliance with agreed economic plans and meet performance criteria regarding its budget deficit and monetary gauges (for instance credit ceilings in the economy as a whole). The tranches that follow the first one are also phased. All this (welcome and indispensable) disciplining is waived in case of Emergency Assistance – BOP needs which arise due to natural disasters or as the result of an armed conflict. In such cases, the country can immediately draw up to 25% of its quota subject only to “cooperation” with the IMF – but not subject to meeting performance criteria. The IMF also does not shy away from helping countries meet their debt service obligations. Countries can draw money to retire and reduce burdening old debts or merely to service it.
It is not easy to find a path in the jungle of acronyms which sprouted in the wake of the formation of the IMF. It imposes tough guidelines on those unfortunate enough to require its help: a drastic reduction in inflation, cutting back imports and enhancing exports. The IMF is funded by the rich industrialized countries: the USA alone contributes close to 18% to its resources annually. Following the 1994-5 crisis in Mexico (in which the IMF a crucial healing role) – the USA led a round of increases in the contributions of the well-to-do members (G7) to its coffers. This became known as the Halifax-I round. Halifax-II looks all but inevitable, following the costly turmoil in Southeast Asia. The latter dilapidated the IMF’s resources more than all the previous crises combined.
At first, the Stand By Arrangement (SBA) was set up. It still operates as a short term BOP assistance financing facility designed to offset temporary or cyclical BOP deficits. It is typically available for periods of between 12 to 18 months and released gradually, on a quarterly basis to the recipient member. Its availability depends heavily on the fulfilment of performance conditions and on periodic program reviews. The country must pay back (=repurchase its own currency and pay for it with hard currencies) in 3.25 to 5 years after each original purchase.
This was followed by the General Agreement to Borrow (GAB) – a framework reference for all future facilities and by the CFF (Compensatory Financing Facility). The latter was augmented by loans available to countries to defray the rising costs of basic edibles and foodstuffs (cereals). The two merged to become CCFF (Compensatory and Contingency Financing Facility) – intended to compensate members with shortfalls in export earnings attributable to circumstances beyond their control and to help them to maintain adjustment programs in the face of external shocks. It also helps them to meet the rising costs of cereal imports and other external contingencies (some of them arising from previous IMF lending!). This credit is also available for a period of 3.25 to 5 years.
1971 was an important year in the history of the world’s financial markets. The Bretton Woods Agreements were cancelled but instead of pulling the carpet under the proverbial legs of the IMF – it served to strengthen its position. Under the Smithsonian Agreement, it was put in charge of maintaining the central exchange rates (though inside much wider bands). A committee of 20 members was set up to agree on a new world monetary system (known by its unfortunate acronym, CRIMS). Its recommendations led to the creation of the EFF (extended Financing Facility) which provided, for the first time, MEDIUM term assistance to members with BOP difficulties which resulted from structural or macro-economic (rather than conjectural) economic changes. It served to support medium term (3 years) programs. In other respects, it is a replica of the SBA, except that that the repayment (=the repurchase, in IMF jargon) is in 4.5-10 years.
The 70s witnessed a proliferation of multilateral assistance programs. The IMF set up the SA (Subsidy Account) which assisted members to overcome the two destructive oil price shocks. An oil facility was formed to ameliorate the reverberating economic shock waves. A Trust Fund (TF) extended BOP assistance to developing member countries, utilizing the profits from gold sales. To top all these, an SFF (Supplementary Financing Facility) was established.
During the 1980s, the IMF had a growing role in various adjustment processes and in the financing of payments imbalances. It began to use a basket of 5 major currencies. It began to borrow funds for its purposes – the contributions did not meet its expanding roles.
It got involved in the Latin American Debt Crisis – namely, in problems of debt servicing. It is to this period that we can trace the emergence of the New IMF: invigorated, powerful, omnipresent, omniscient, mildly threatening – the monetary police of the global economic scene.
The SAF (Structural Adjustment Facility) was created. Its role was to provide BOP assistance on concessional terms to low income, developing countries (Macedonia benefited from its successor, ESAF). Five years later, following the now unjustly infamous Louvre Accord which dealt with the stabilization of exchange rates), it was extended to become ESAF (Extended Structural Adjustment Facility). The idea was to support low income members which undertake a strong 3-year macroeconomic and structural program intended to improve their BOP and to foster growth – providing that they are enduring protracted BOP problems. ESAF loans finance 3 year programs with a subsidized symbolic interest rate of 0.5% per annum. The country has 5 years grace and the loan matures in 10 years. The economic assessment of the country is assessed quarterly and biannually. Macedonia is only one of 79 countries eligible to receive ESAF funds.
In 1989, the IMF started linking support for debt reduction strategies of member countries to sustained medium term adjustment programs with strong elements of structural reforms and with access to IMF resources for the express purposes of retiring old debts, reducing outstanding borrowing from foreign sources or otherwise servicing debt without resorting to rescheduling it. To these ends, the IMF created the STF (Systemic Transformation Facility – also used by Macedonia). It was a temporary outfit which expired in April 1995. It provided financial assistance to countries which faced BOP difficulties which arose from a transformation (transition) from planned economies to market ones. Only countries with what were judged by the IMF to have been severe disruptions in trade and payments arrangements benefited from it. It had to be repaid in 4.5-10 years.
In 1994, the Madrid Declaration set different goals for different varieties of economies. Industrial economies were supposed to emphasize sustained growth, reduction in unemployment and the prevention of a resurgence of by now subdued inflation. Developing countries were allocated the role of extending their growth. Countries in transition had to engage in bold stabilization and reform to win the Fund’s approval. A new category was created, in the best of acronym tradition: HIPCs (Heavily Indebted Poor Countries). In 1997 New Arrangements to Borrow (NAB) were set in motion. They became the first and principal recourse in case that IMF supplementary resources were needed. No one imagined how quickly these would be exhausted and how far sighted these arrangement have proven to be. No one predicted the area either: Southeast Asia.
Despite these momentous structural changes in the ways in which the IMF extends its assistance, the details of the decision making processes have not been altered for more than half a century. The IMF has a Board of Governors. It includes 1 Governor (plus 1 Alternative Governor) from every member country (normally, the Minister of Finance or the Governor of the Central Bank of that member). They meet annually (in the autumn) and coordinate their meeting with that of the World Bank.
The Board of Governors oversees the operation of a Board of Executive Directors which looks after the mundane, daily business. It is composed of the Managing Director (Michel Camdessus from 1987) as the Chairman of the Board and 24 Executive Directors appointed or elected by big members or groups of members. There is also an Interim Committee of the International Monetary System.
The members’ voting rights are determined by their quota which (as we said) is determined by their contributions and by their needs. The USA is the biggest gun, followed by Germany, Japan, France and the UK.
There is little dispute that the IMF is a big, indispensable, success. Without it the world monetary system would have entered phases of contraction much more readily. Without the assistance that it extends and the bitter medicines that it administers – many countries would have been in an even worse predicament than they are already. It imposes monetary and fiscal discipline, it forces governments to plan and think, it imposes painful adjustments and reforms. It serves as a convenient scapegoat: the politicians can blame it for the economic woes that their voters (or citizens) endure. It is very useful. Lately, it lends credibility to countries and manages crisis situations (though still not very skilfully).
This scapegoat role constitutes the basis for the first criticism. People the world over tend to hide behind the IMF leaf and blame the results of their incompetence and corruption on it. Where a market economy could have provided a swifter and more resolute adjustment – the diversion of scarce human and financial resources to negotiating with the IMF seems to prolong the agony. The abrogation of responsibility by decision makers poses a moral hazard: if successful – the credit goes to the politicians, if failing – the IMF is always to blame. Rage and other negative feeling which would have normally brought about real, transparent, corruption-free, efficient market economy are vented and deflected. The IMF money encourages corrupt and inefficient spending because it cannot really be controlled and monitored (at least not on a real time basis). Also, the more resources governments have – the more will be lost to corruption and inefficiency. Zimbabwe is a case in point: following a dispute regarding an austerity package dictated by the IMF (the government did not feel like cutting government spending to that extent) – the country was cut off from IMF funding. The results were surprising: with less financing from the IMF (and as a result – from donor countries, as well) – the government was forced to rationalize and to restrict its spending. The IMF would not have achieved these results because its control mechanisms are flawed: they rely to heavily on local, official input and they are remote (from Washington). They are also underfunded.
Despite these shortcomings, the IMF assumed two roles which were not historically identified with it. It became a country credit risk rating agency. The absence of an IMF seal of approval could – and usually does – mean financial suffocation. No banks or donor countries will extend credit to a country lacking the IMF’s endorsement. On the other hand, as authority (to rate) is shifted – so does responsibility. The IMF became a super-guarantor of the debts of both the public and private sectors. This encourages irresponsible lending and investments (why worry, the IMF will bail me out in case of default). This is the “Moral Hazard”: the safety net is fast being transformed into a licence to gamble. The profits accrue to the gambler – the losses to the IMF. This does not encourage prudence or discipline.
The IMF is too restricted both in its ability to operate and in its ability to conceptualize and to innovate. It is too stale: a scroll in the age of the video clip. It, therefore, resorts to prescribing the same medicine of austerity to all the country patients which are suffering from a myriad of economic diseases. No one would call a doctor who uniformly administers penicillin – a good doctor and, yet, this, exactly is what the IMF is doing. And it is doing so with utter disregard and ignorance of the local social, cultural (even economic) realities. Add to this the fact that the IMF’s ability to influence the financial markets in an age of globalization is dubious (to use a gross understatement – the daily turnover in the foreign exchange markets alone is 6 times the total equity of this organization). The result is fiascos like South Korea where a 60 billion USD aid package was consumed in days without providing any discernible betterment of the economic situation. More and more, the IMF looks anachronistic (not to say archaic) and its goals untenable.
The IMF also displays the whole gamut of problems which plague every bureaucratic institution: discrimination (why help Mexico and not Bulgaria – is it because it shares no border with the USA), politicization (South Korean officials complained that the IMF officials were trying to smuggle trade concessions to the USA in an otherwise totally financial package of measures) and too much red tape. But this was to be expected of an organization this size and with so much power.
The medicine is no better than the doctor or, for that matter, than the disease that it is intended to cure.
The IMF forces governments to restrict flows of capital and goods. Reducing budget deficits belongs to the former – reducing balance of payments deficits, to the latter. Consequently, government find themselves between the hard rock of not complying with the IMF performance demands (and criteria) – and the hammer of needing its assistance more and more often, getting hooked on it.
The crusader-economist Michel Chossudowski wrote once that the IMF’s adjustment policies “trigger the destruction of whole economies”. With all due respect (Chossudowski conducted research in 100 countries regarding this issue), this looks a trifle overblown. Overall, the IMF has beneficial accounts which cannot be discounted so off-handedly. But the process that he describes is, to some extent, true:
Devaluation (forced on the country by the IMF in order to encourage its exports and to stabilize its currency) leads to an increase in the general price level (also known as inflation). In other words: immediately after a devaluation, the prices go up (this happened in Macedonia and led to a doubling of the inflation which persisted before the 16% devaluation in July 1997). High prices burden businesses and increase their default rates. The banks increase their interest rates to compensate for the higher risk (=higher default rate) and to claw back part of the inflation (=to maintain the same REAL interest rates as before the increase in inflation). Wages are never fully indexed. The salaries lag after the cost of living and the purchasing power of households is eroded. Taxes fall as a result of a decrease in wages and the collapse of many businesses and either the budget is cruelly cut (austerity and scaling back of social services) or the budget deficit increases (because the government spends more than it collects in taxes). Another bad option (though rarely used) is to raise taxes or improve the collection mechanisms. Rising manufacturing costs (fuel and freight are denominated in foreign currencies and so do many of the tradable inputs) lead to pricing out of many of the local firms (their prices become too high for the local markets to afford). A flood of cheaper imports ensues and the comparative advantages of the country suffer. Finally, the creditors take over the national economic policy (which is reminiscent of darker, colonial times).
And if this sounds familiar it is because this is exactly what is happening in Macedonia today. Communism to some extent was replaced by IMF-ism. In an age of the death of ideologies, this is a poor – and dangerous – choice. The country spends 500 million USD annually on totally unnecessary consumption (cars, jam, detergents). It gets this money from the IMF and from donor countries but an awful price: the loss of its hard earned autonomy and freedom. No country is independent if the strings of its purse are held by others..
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