Savings

Closing Steps: How Closing Costs Effect You

The real estate market will continue to evolve and grow as time progresses. It is vital that one becomes familiar with the latest industry trends and news in order to be successful. For example, closing costs are one aspect of real estate that one cannot afford to ignore.

Real estate transactions can be very expensive. Closing costs will always play a role in the purchase price of a home. They are mandatory additional expenses that will increase the home’s purchase price. Closing costs are charges, expenses and fees attached to real estate transactions. One can be prepared to handle closing costs successfully by simply being informed and prepared.

What are Closing Costs?

Closing costs are miscellaneous fees that are charged by loan officers. Closing costs are affected by your area. They are also affected by the mortgage lender, type of mortgage and the total loan amount.

Let’s take a look at some of the fees that will be included in the closing costs:

-Loan Processing

-Loan Application

-Appraisal

-Attorney’s Service

-Escrow Agent’s Service

Closing Steps, How Closing Costs Affect YouAttain a Written Estimate

HUD requires loan officers to provide borrowers with a standard Good Faith Estimate. The Good Faith Estimate clearly discloses closing costs and key loan terms. This new regulation requires lenders to provide a full disclosure of all costs in the transactions. This also pertains to closing costs.

The Good Faith Estimate protects consumers from scrupulous lenders who have taken advantage of consumers for many years. Loan officers cannot deviate from a documented amount after the estimate is furnished to the buyer. Buyers can use the Good Faith Estimate to find closing costs that will be suitable for their pocketbook.

Shop Around

Shopping around can help one find a lender who is willing to offer reasonable closing costs. Lenders know that the mortgage industry is very competitive. This is the primary reason why many of them are willing to be flexible with their closing costs. One should make an effort to get closing cost estimates from at least five lenders. This can help secure the best deal.

Negotiate

Negotiating is also critical when it comes to getting an exceptional deal for closing costs. Fees for services not rendered by third parties are negotiable. One should always keep this in mind when it comes to applying for the mortgage loan. You should always be willing to negotiate with the prospective lender when it comes to your closing costs. This can help you save anywhere from $200 to $700 at the closing table.

To better understand what charges are from your lender and broker and which are third-party fees, ask your broker or lender directly when hashing out the details. Your GRE will list the fees in a numerical code that usually ranges from 800s to 1300s. Typically the negotiable fees that your lender can waive lay within the 800s. These fees are usually termed origination, broker, loan discount, underwriting, application, commitment, and tax-related service fees.

Finding an Immaculate Home at an Affordable Price

Locating a nice home that fits your price range can be challenging. This is why one should seriously consider working with an experienced real estate team. A highly professional real estate team can help anyone find their ideal home. For example, The Dhanji Team is one real estate team well-known for helping buyers find their dream home within their price range.

Closing costs should always be taken into consideration when it comes to purchasing a home. The keys listed above are designed to help buyers learn more about these extra expenses that take place at the closing table. They can also be used to reduce closing costs significantly.

About the author: A recent college graduate from University of San Francisco, Anica loves dogs, the ocean, and anything outdoor-related. She was raised in a big family, so she’s used to putting things to a vote. Also, cartwheels are her specialty. You can connect with Anica here.

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Financially Safe: 6 Ways to Protect Your Assets in Washington

As a resident of the state of Washington, have you considered what you should do to protect your assets? Assets can be seized in the case of divorce, auto accidents, vicarious liability, debt, medical bills, or foreclosure. Here are some of the top ways to protect what you have from creditors.

Put Your Money in an Irrevocable Trust

If your money is an in an irrevocable trust, meaning one that you don’t have control over and can’t revoke, then your money won’t be considered yours any longer and even if you have debts or are sued, no one will be able to get to the money in order to pay off those debts. By doing this, family members will be able to draw an income from the trust.

Just remember that, since Washington is a community property state, anything your spouse owns, you own, so those who benefit from the trust may need to be distanced from you, such as a sibling or child. Businesses looking to protect assets should look into business entities, which are the equivalent of trusts for businesses.

Buy Insurance

You may want insurance if your job opens you up to the possibility of a lawsuit. Professionals that are more likely to be sued include financial advisors, doctor and real estate agents. By having insurance, such as malpractice insurance for doctors, even if you are sued, the insurance will cover most if not all of the damages.

Outside of professional lawsuits, you’ll want insurance that includes homeowner’s insurance, auto insurance and commercial liability insurance. If you truly want to be careful, consider an umbrella insurance plan that covers what your other insurance policies don’t.

images (1)Have a Retirement Fund

Federal law protects assets found within retirement plans up to $1 million, and Washington protects almost everything that is found in an IRA from creditors, including traditional and Roth IRAs. This makes Washington state a great place to retire.

By moving cash that you don’t need immediately (at least not until age 59.5) to a retirement fund, you’ll be able to protect these assets. Just remember that if you decide to withdraw any of this money before you’ve reached age 59.5, there could be penalties.

Life Insurance Policies

In Washington, residents are able to have an unlimited amount of cash value in life insurance policies, which cannot be reached by creditors. As long as you’re okay with not having the money available to you in this life, which is especially good if you want your children and grandchildren to enjoy it after you’re gone, you can protect that money by using it for life insurance.

Give the Money Away

By giving the money to someone else, it is no longer your property and cannot be seized by creditors. It’s possible to give away up to $13,000 to another person without he or she being liable to pay a gift tax. You should be aware of Washington’s Fraudulent Transfer Act, however, which prohibits giving gifts in order to keep assets out of reach of creditors.

There are certain rules that determine if this is the case, including whether your intent was to avoid paying a creditor, if you pay more for something than it’s worth, or if you retained possession or control of the item.

Place Assets in an LLC

If you place assets in an LLC, you’ll have some protection from creditors accessing those assets to pay debts. This means that only the interest controlled by the LLC’s member that has debt can have it collected by creditors. Unfortunately, there’s less protection from this method within Washington state than by most LLCs formed in other states. If you want help understanding what protection can be provided, you can get the up-to-date Fisher Investment’s address and directions and get the help of one of their financial advisors, located in Camas, Washington.

If you’re worried about protecting your assets, don’t hesitate to get help. With the right guidance, you can make sure you and your family have a bright future without worry of mounting debt.


5 Simple Ways to Pinch and Save Every Month

In a struggling economy, it can be difficult to save extra money when finances are stretched and the bills continue to build. With added debt that has acquired overtime, it can be even more difficult to set aside extra money to save. Although it can feel impossible to save, there are a number of ways to ensure that you make room for extra cash that you may need for a rainy day fund.

1. Cut Coupons

Coupons are essentially free money for items that you may already be purchasing on a consistent basis. For household items and groceries, it’s possible to cut the cost in half by obtaining the right coupons and doubling them. This works well when pairing them with store discounts for a great way to stock up and never buy items for full price.

An increasing number of websites and blogs are becoming popular for ways to stay updated on daily sales, promotions, and coupons currently available. The blogs can easily send you emails on when the highest savings are available and even when certain stores are doubling coupons.

More_money2. Use Cash

Studies have proven that when paying for goods or services with cash, people naturally tend to spend less money because it’s easier to see how much money they really have instead of trying to guess. Handling cash instead of relying on a credit card will make it easy to be more aware of how much money you really have instead of overspending. It will also prevent you from spending more by forcing yourself to only rely on that cash until your next payday.

To ensure that you stay within a budget, use different envelopes to put the cash in and use until you get paid next. You’ll quickly learn how to stretch the money and prevent spending more than you really need. This will also help you to make a list of items you need before visiting the store.

3. Buy in Bulk

Purchasing food, paper items, or household supplies in bulk will ensure that you save more in the long run instead of paying up to double the price for a single item that is sold individually. Buying in bulk from wholesale retailers will ensure that you’re still able to obtain the same types of products without having to compromise on the quality or brand.

4. Buy Generic Brands

Generic brands are a simple and easy way of saving more money for products that use the same ingredients as the big name brands. Generic brands are sold at a fraction of the cost and often work or taste the same. Although the packaging may not be as attractive, it’s worth the savings you’ll obtain for an easy way to save extra money and not pay any more than you really need to.

5. Compare Prices

Whether refinancing your home or shopping for a credit card that has a low interest rate, there are a number of ways to obtain the most affordable services and tools through websites like RateSupermarket.ca. You’ll be able to review the latest products and services, which includes savings accounts, GIC rates, insurance quotes, and mortgage rates for a great way to ensure that you’re consistently getting the best offers available.

It will provide peace of mind by reading a number of different reviews and choosing the right services that fit your financial needs and overall lifestyle. Several different tips and advice is also available for a great way to stay organized and in control of your life with free access to the website.

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Holiday Shopping Apps Everyone Needs

The holiday season has arrived and it’s a festive time of year filled with family, friends, food and holiday shopping.

In this advanced technological day and age, mobile phone apps have become one of the easiest ways to shop savvy during the holiday season. From budget tracking apps to comparison shopping apps, your phone is the most valuable tool you need this holiday shopping season, especially when mobile coupons are available.

The Best Mobile Phone Apps for Holiday Shopping

  • Shop Savvy- ShopSavvy is a barcode scanning app that helps you comparison shop. By quickly scanning the product’s barcode, this app will alert you if there are better prices for the same product either online or at local retailers.

  • BlackFriday.com- What started as a website providing shoppers with up to the minute info on the latest Black Friday sales has now become one of the most popular holiday shopping apps. BlackFriday.com is your one stop shop for all the biggest Black Friday deals, all in one app.

  • Google Wallet- Google’s helpful shopping and budgeting app, Google Wallet allows you to shop, save and pay, all with your mobile phone. The app has the ability to store loyalty card information, locate Google Offers nearby and lets you pay for purchases at major retailers with in-app stored credit cards.

  • Wanelo- A combination of the words “want”, “need” and “love”, Wanelo is an app that provides you with a continuous stream of the hottest, must-have gifts for the holiday season. You can order the goods as you see them, or you can save products to your profile to buy later.

  • Groupon- Utilizing the benefits of group purchasing, this app helps users get discounts on everything from massages to cruises. Available for most metropolitan areas throughout the United States, Groupon is easy to use and allows you to purchase deals directly through the app.7919546470_c385c4e860

  • RedLaser- Created by eBay, this app combines the benefits of weekly circulars, in-store sales and store loyalty cards all in one app. Making shopping easy, efficient and inexpensive, RedLaser also allows users to create and share shopping lists with friends and family.

  • Discount Calculator- That gift you really want is $100 plus tax, but 15% off after checkout. With the discount calculator, you don’t need to worry about keeping track of sale prices while your shopping- the app does it for you! Just enter the price information and the discount and the calculator will keep track of your final total cost while you shop.

  • Shop Nearby- This handy mobile phone app is your best tool for locating that special gift for a loved one this holiday season. By inputting product information, Shop Nearby will help locate stores in your area that have certain products in stock and will even provide you with the retail price for that item at each particular store.

  • Amazon- The world’s largest online retailer, Amazon.com now has an app that allows you to browse merchandise in a wide array of categories and make purchases right from your phone.

  • Fast Mall – Ever spend more time circling a mall parking lot then you actually spent shopping? Fast Mall provides layouts for many popular malls and will even help you find available parking spots at the mall so you don’t waste time looking for a spot.

Don’t spend your holiday season waiting in long lines at the store or shelling at a year’s salary on gifts for those you love. With the help of your mobile phone, you can make shopping this holiday season efficient and affordable. It would be very wise to download these helpful shopping apps today to your smartphone or tablet and start saving money immediately.


Saving For Retirement Invalid Reasons to Avoid Doing It

SavingsWhen it comes to saving for your future, the process may seem overwhelming. After all, in these tough economic times, it’s easy to feel pressure from student loans, mortgage rates, banking fees, creditors, insurance and other expenses. Planning your retirement may seem like the last thing you need to prioritize.

Millennial face the brunt of the retirement woes. According to Forbes, only 29% of millennial in a recent survey said that they used a retirement calculator to see how much income they would need for a healthy retirement, and only 17% said that they were currently on track to meet their retirement goals. In a post recession economy, experts say that now more than ever should young people start planning and saving for retirement.

With that said, many people under thirty still tend to rationalize why they aren’t prioritizing for their future. Here are five of the biggest excuses and justifications people tend to make whenever the topic of “retirement planning” comes up in conversation.

I Don’t Have Enough Income

This is bar none, one of the biggest excuses people like to make and its one of the easiest to dismiss. No matter how small your monthly income is, there are always ways to start budgeting for your future. Even many minimum wage jobs offer some sort of 401(k) retirement plan.

Start small and don’t try to save too much too fast. The younger you are, the less your monthly savings goals should be. As you get older and your income increases, gradually raise your amount taken off every paycheck.

I Don’t Know Where to Begin

This is another excuse that young people tend to make when it comes to saving for retirement. There are a plethora of ways for those in their twenties or thirties to start a retirement savings plan immediately. In addition to withholding partial sums from payroll checks, it’s beneficial to look into Roth IRAs or annuity programs.

Check out annuity assist to find out if annuities are right for you. These financial products allow you to pay your insurance company with either a lump sum or in small chunks. Over time, you’ll see that money return in disbursements while accruing interest. This option is perfect for young people who want to start saving responsibly right away.

I Will Rely on Social Security

Despite what you may think you know about American Social Security, it’s unwise to put all your eggs in one basket. The Social Security Administration was even quoted as saying “don’t count on it” when it comes to relying solely on it for retirement planning. According to an article on Mint.com, a 2010 report from the Social Security and Medicare Board of Trustees states that SS funds may be depleted by 2036.

Experts expect young people will get at least 75% of their Social Security benefits – an estimated credit of $1,269 a month. While Social Security benefits are certainly an asset for retirement planning, it should be used to complement what Americans have after a lifetime of other savings and investments.

I Have Plenty of Time

Most finance experts agree that the earlier you save, the better off you’ll be after retirement. It’s a simple logic really. However, those in their twenties may not realize the importance of saving for a future that’s decades away. The thing most young people seem to forget is that a large portion of money accrued for retirement does not come from what is put into it. A good amount of that nest egg is accrued from decades of gradual interest and wise investments.

For example, a person who invests $15,000 a year for 30 years results in a sum of $450,000 saved. However, thanks to compounding interest, that same total could result in a figure of a couple million dollars. This interest takes years to accumulate though, and those who start earlier will reap the rewards and could earn several thousand if not millions more than those who wait to begin saving and investing.

I Don’t Have Enough Time

While it’s true that many people wait too long to begin saving for retirement, on the flip side, some people may feel that they’ve missed their window of opportunity to get started. While there will have to be some sacrifices made and possibly an extension of your working career, retirement “late bloomers” still have a shot of having a nice savings set aside for their golden years.

Remember, anything you can scrimp and save and set aside will pay dividends if you took the right steps to invest wisely.


Help Your Kids Become Financially Cautious

All of us have to go through some sort of financial crisis, at some point of our lives and it’s better to be familiarized with these kinds of financial crunches well in advance in your life. The sooner you learn to handle such difficulties, the easier it will be to handle such problems. There is no doubt regarding the fact you would like to offer a financially secured future to your children and to ensure this, it is important to generate the awareness among your children. Well, you cannot expect your children to learn all he financial strategies thoroughly as that might seem to be extremely boring to them; As an alternative, parents should come up with some interesting tools using which they can make their kids understand the value of money and the importance of smart saving. Here are some such tools that prove to extremely effective in terms of explaining the value of money and why should they make saving a practice –2978659159_81b24d3a44

  • Create a chart – Remember that parents are the first teachers to their children, and therefore you should be cautious enough regarding your spending habits. If your children see that their parents make it a point to save money religiously, they will also grow a habit of the same. To cultivate this habit from the very childhood, you should create a reference chart mentioning the total amount to be saved. For instance, if there is a parameter of 10% of total earnings to be saved, your children would know that if they get rupees 10, they must save 1 rupee out of that.
  • Put some money into Piggy bank – If your children are too small and it’s not possible make them understand the importance of saving money, it might not be feasible enough to create a bank account for them. Instead, consider creating a savings account for him at home, and the best way to do this is to create a piggy bank. Make sure your child put a certain amount of money in the piggy bank regularly, and count it after a certain period of time. This habit, would eventually help your kid to realize the value of saving. Again, make sure that you keep certain coins handy so that you can give them change if they ask for it in order to put in the piggy bank.
  • Try to Avoid impulsive shopping – Teach your children regarding being patient and ask them not to indulge into impulsive shopping. They must understand that it is not possible to buy everything that they want, right at that moment. Avoid buying them something right when they demand for it. This would give them a scope to reconsider whether they would really need that thing or not. If the kid doesn’t crave for that item anymore, it would mean that he just wanted to have that, and don’t need it that seriously.
  • Take them to the bank – Kids just love to behave like elders and there is no doubt that they would like to visit the bank with you. This would also help them get familiarized with all the formalities.

Save Money And Get The Best From Your Van

If you are a self employed tradesman your van will be an essential function for the smooth-running of your business. You will need your van to transport supplies to and from your jobs, especially if you have heavy goods such as tools, ladders and materials like wood.  Here are a few ways to get the best from your van.

Keep Your Vehicle Running Smoothly

Make sure that you do weekly checks on the tyre pressure. Don’t overload your van too much, and be sure to check the tyre pressures according to the weight of your load as it could affect your steering.

Keep an eye on the oil because depleting levels can be detrimental to the engine. Always top up your washer fluid and check the windscreen wipers so you have optimum visibility.

Make sure your van is serviced regularly and ensure that your MOT and tax is always up to date. If you drive out of the local area and travel quite far to jobs then it is also wise to have breakdown cover. The last thing you want is to be caught off-guard and not be able to get to a job because your vehicle is stuck on the side of the road.

Make Your Van an Advert for Your Business

Your van is also an opportunity to advertise your company with your logo and contact details. A catchy van that is painted in a bright colour and displays your brand logo is an excellent way to attract attention and could increase your customer base.

It may sound like a small thing but it is also important to keep your van clean and tidy – what’s the point of having your logo on the side if it is smeared with mud and grime? This will show your customers that you are a professional company that cares about appearances.

Protect Your Van Inside and Outside

Having the right insurance is also essential because accidents can and do happen, especially if you are driving a considerable amount of mileage. If you a reliant on your van then you need to look after your interests, settling for the lowest band of insurance policy does not necessarily mean that it cost effective long-term. It is advisable to think about how much you could lose if your van was involved in an accident that wasn’t your fault. One Sure Insurance offer a range of deals that can include everything up to and including the contents of your van being covered too.

Keep Your Van Secure

There are many insurance claims related to theft as well as accidents, yet this is something that van owners can sometimes forget about. After a hard day’s work you would be forgiven for leaving your van stocked up with your tools and other materials, the value of which can amount to a significant sum.  Not everyone has garage space to keep their vehicle locked in at night, and those who have to park on the road are instantly more vulnerable to theft.


How To Fill Out Tax Forms To Get The Best Deductions

F.J. Raymond is credited with saying, “Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” While this may be a bit of an exaggeration it is true that a large tax refund can make you feel like Christmas came twice.

Tax formNobody takes great pleasure in filing income tax forms. But if you use discretion and fill those forms out strategically, you could be rewarded with a handsome tax return for your efforts. The first, and most important, step is knowing which tax forms you need to fill out. Many people find these forms intimidating, frustrating, and more difficult to decipher than stereo instructions. But knowledge is power, so let’s take a look at the different tax forms and discuss when it is appropriate to use them.

The Long and Short of It

  • 1040EZ (very short form)

This is by far the shortest and most straightforward of the income tax forms. But don’t allow yourself to be too drawn in by its simplicity – it can only be used by people who fulfill a number of requirements including having less than $100,000 total annual income, less than $1,500 total interest income, under 65 years of age, no income adjustments, and income that stems exclusively from wages, interest, or unemployment. Using 1040EZ also only allows you to claim the standard deductions and the Earned Income Credit. Therefore, this form is short and sweet, but usually won’t maximize your deductions.

  • 1040A (short form)

The vast majority of American taxpayers can use form 1040A. This form still requires that your total annual income be less than $100,000 but all other areas are more flexible than the 1040EZ. For instance, you can be any age, any filing status, have income from a variety of sources like Social Security benefits and IRA, claim certain income adjustments, and claim tax credits such as the child tax credit or education credits. Form 1040A gives you more flexibility in filing. However, it is very important to note that you cannot itemize your deductions in this form.

  • 1040 (long form)

Form 1040 can actually be used by all American taxpayers regardless of their financial circumstances. It is by far the longest tax form, but that also means it is comprehensive and can accommodate any and all tax situations. A big advantage of using 1040 is that you can itemize your deductions, which can help you boost your refund. Although anyone can use it, you must fill out 1040 if you have a total annual income of more than $100,000, want to itemize deductions, have income stemming from a rental or business, receive foreign wages, are claiming other adjustments to income such as tuition, or have sold bonds, stocks, or property. Again, the 1040 takes more time and patience to fill out, but gives you the ability to make itemized deductions.

General Tips for Maximizing Your Refund

  • Increase Your Withholding

This is something you can do well before you have to tackle the aforementioned income tax forms. Generally, you can change the number of exemptions you claim on your W-4 at any time.

  • Deduct Charitable Donations

You can get a huge refund boost by deducting charitable donations including donated property, cash, car mileage, and even tithes for religious institutions.

  • Pad Your IRA

By increasing your contributions to your IRA (Individual Retirement Account), you’ll decrease your total taxable income while helping ensure that you have a financially secure retirement.

  • Consult With a Professional

The most important step in optimizing your deductions and thus the sum of your tax refund is consulting with an expert in the field of taxes. Tax resolution firms that specialize in tax solutions can help you make sense of the often confusing financial jargon and forms to make sure you get the most deductions possible.

By following these tips and soliciting the advice of a tax attorney, you will be able reap the benefits of a better refund.

Written by Randy Otis of Levy Tax Help.


Easy Financial Plans For Newly Weds

If you are just about to get married then your elders might have sat you down and started advising you on effective money management tips. You might not be too interested in listening to the “drab” financial advice a few days before marriage but it is important. You have got to handle both your pre-wedding jitters and financial concerns at the same time. Here are some valuable financial tips that newlyweds can follow:

4133286713_e025108effTo start off with—- brides, who are mulling a change of surname post marriage should visit their respective Public Accountants (Certified).  Once again it might turn out to be one of those “drab” duties before marriage but it’s important to notify the government of a possible surname change as soon as possible so that once the tax season arrives your papers are ready with your changed names. For instance, your Social Security card must reflect your name change. On top of that it’s also important to notify your address change to the concerned authorities in this regard. It is equally important to know that your tax filing status would change post marriage. Joint tax filing is an option often chosen by couples. Please make sure that you are duly discussing with your tax consultant in this regard and remember that if you wait for the last moment for making changes then it would only lead to chaos.

From the complicated to the comparatively easier. You won’t need the help of a financial advisor for following a few simple steps with regard to the management of your personal finance. Post marriage both of you will be earning. But try living on one person’s earning and save the remaining amount. One of your partners might be laid off, he/she might want to quite his/her job and start a business. One of you might even want to get back to school to complete a part-time or a full-time course. Therefore its always advisable to prepare a family budget based on a one salary instead of two.

Consider Purchasing an Insurance Policy. All you newlyweds out there consider securing a life insurance policy. This is one of the most crucial stages to consider an insurance cover. Now one of the major concerns at the back of your mind would be about the future of your spouse in case you die. This makes you more responsible as a financial planner for your family and securing a life insurance for the safe future of your family is the first step towards fulfilling that responsibility. There are a few factors that you should keep in view while availing the policy. You’re earning, debt to income ratio; present volumes of debt are just some of those factors.

Don’t Overspend: Coming back to the basics. Stick to a budget. Don’t overspend. Just because you are newly married there’s no need to splurge on new furniture, dresses and other such gifts. Instead, spend the money for clearing off present debts and bills.

Provide a remarkable start to your married life by following these few tips!


Credit Card Fraud Insurance Debacle Adds to Bank’s PPI Woes

PPI Scandal

This infographic is originally published on Have I Got PPI UK, a CMC based in Manchester, UK.

The United Kingdom’s banking industry is struggling to recover from the aftermath of the payment protection insurance scandal. This disaster has already cost the largest banks more than £10.5 billion over the past two years. The PPI crisis continues to grow each month, but banks may have another problem that they need to deal with. The Financial Conduct Authority has recently announced that a credit card fraud insurance scandal is also starting to plague the industry.

Background of Credit Card Fraud Insurance

The Financial Conduct Authority began an investigation into a firm known as CPP last year. CPP provided credit card fraud insurance to High Street banks between 2006 and 2011. The FCA found that CPP and the banks colluded to trick unwitting customers into purchasing the insurance.

Many customers were misled into believing the insurance would offer more coverage than they already received. The banks told customers that they could use the insurance to protect themselves if someone stole their credit cards and rang up fraudulent purchases. However, the banks already offer this protection so there was no real incentive for customers to buy it.

Structure of the Insurance

Credit card fraud insurance premiums were typically about £120 a year. In exchange, the banks promised customers coverage for up to £100,000 in fraudulent credit card purchases. Customers with the insurance were also deceived into believing they would be insured for up £60,000 in identity theft.

The protection against fraudulent credit card purchases was moot. The Consumer Credit Act of 1974 already requires financial institutions to reimburse card holders for fraudulent purchases. The protection against identity theft may have been beneficial if it actually worked as promised. However, the £60,000 would actually be used to cover administrative costs rather than reimbursing the consumer for their losses.

Financial Scandals Continue to Grow

The PPI and credit card fraud insurance crises are beginning to take their toll on the banks. The new scandal probably won’t have the same impact as the PPI mis-selling debacle. However, the FCA still expects that it will cost the banks approximately £1 billion.

Customers already began to lose faith in the banking system after PPI mis-selling was first exposed. Many customers have worked with a PPI refunds company after they learned they may have been mis-sold the financial product. They will probably file more claims in the future as the problem gains more attention. The new credit card insurance debacle will probably cause them to lose even more faith in the banking industry. Many customers have stated that they will be reluctant to trust the banks again until they have proven that they are changing their practices.


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