Monthly Archives: November 2017

Credit card minimums are legal or not

Credit Card Minimum
It is common to come across handwritten signs and printouts requiring credit card users to buy things worth a minimum of USD 10 in order to have their cards accepted by retailers. However, some customers simply get offended and decide against making a purchase the moment they are asked to spend more than they originally planned for.

Credit card networks unanimously prohibited retail and business organizations from setting any minimums for credit card users until 2010. The objective behind disallowing minimums was to make credit cards as acceptable and easily accessible as cash. However, the restriction imposed on minimum purchases by merchants, set the credit card apart and alienated customers further.

Congress was asked to look into the matter by a coalition of small business owners and retailers, who wanted to legalize the imposition of minimum purchases for credit card users. Their contention being, that the retailer incurred expenses by accepting cards for small transactions. The smaller the purchase of a customer, the more unprofitable it would be for the retailer to accept the credit card. Since, every time a credit card is swiped, the flat fee as well as a part of the customer’s total is deducted from the retailer’s share. So, the retailer gets a lesser percentage as compared to what the customer is spending, because while the issuing bank subtracts an interchange fee, the acquirer deducts a discount fee for every transaction.

This point stands true for small retail and business owners, who do not enjoy a big profit margin, and thus, cannot afford to incur further expenses while accepting credit cards for low purchases, which can be easily paid in cash instead.

Is Credit Card Minimum Legal?
While it is understandable that the customer wouldn’t be too happy to buy more than he bargained for, the fact of the matter is that, the merchant is well within his rights to set a minimum amount. This familiar notice behind cash registers is valid, and has been sanctioned under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which explicitly states on page 698 of the Act that:

”(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION
MINIMUMS OR MAXIMUMS.-
”(A) IN GENERAL.-A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability-
”(i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that –
”(I) such minimum dollar value does not differentiate between issuers or between payment card networks; and
”(II) such minimum dollar value does not exceed $10.00;…”

The Dodd-Frank Act was signed into law in July 2010, and has since then allowed the Federal Reserve to monitor and increase the minimum payment, if needed. The Act made it legal for retailers to set the aforementioned minimum purchase from credit card transactions, as long as it did not exceed USD 10.00.

Finance Budgeting

Need for Financial Budgeting
The need for budgeting arises because of the fact that you are responsible towards yourself. Responsibility towards oneself means, a constant struggle for the better. Thus, the need for personal financial planning is to fulfill the self-actualization need for improvement.

Monthly Financial Budgeting
Make a chart of income and expenditure, which you make all through the month. Based on this you will be able to make successive budgets. Here’s a chart that you can follow.
Net Income
Expenses At Home
Rent/Mortgage
Insurance
Home Repairs
Home Improvements
Electricity
Water
Natural Gas and Oil
Fuel
Telephone
Groceries
Child Support
Health and Fitness
Other Loans
Entertainment
Contingency Fund
Balancing Figure (Difference of income and expenditure)
Once you fill in the details for this chart, you will get a complete picture of what you are earning and how much of it you are spending. Based on this chart, you can make the estimated budget and the actual details will follow as the month progresses.

Yearly Budgets
Now that you have the monthly assessment, of income and expenditure, multiply it by 12 and you will get the yearly account. Yearly budgets will give you targets of the income you need to earn to sustain the lifestyle of your choice. Getting into the habit of following the chart will give every detail of every penny spent.

What Personal Financial Budgeting Does?
Finance and budgeting go hand in hand. You may get ample of finances, but if you don’t have a budget, they will all go haywire. Budgeting will get you into the habit of saving your money for the rainy day. Living from paycheck-to-paycheck will consequently change to living with wise decisions. Budgeting will employ your each dollar for better returns. Most importantly, it will give you a breathing room in case you decide to take some time out from work.

Double Benefits
Summer is here and you want to take a vacation to an exotic destination. Of course, it isn’t possible with meager travel budget to vacation anywhere else other than your couch! Saving an amount will help you create a fund for both the rainy day and the happy days.

The habit of making personal finances budget, should be started early in life. Beginning to plan while you are at college will make you an expert at managing your own finances by the time you begin to earn your money. Financial planning will alleviate problems during the big days of your life, such as marriage. It will give you an edge over the others in planning the wedding budgets for the ceremony, the way you always wanted. So before you get your next paycheck, tie the financial knot for a happy ending!

Economic Problems That Hamper the Growth

The economic challenges and problems prevalent in today’s world revolve around several dynamic aspects of society. The academia of economics, as well as its material behavior, is based around man, society, and institutions. The theories that are used to solve financial problems are usually true, but not always. The faster we grasp the fact that economics is an art that revolves around man, the sooner we will be able to have financial peace. Another truth that we need to accept is that hardships or challenges are always going to be present.

What is an Economic Problem?

In a broad sense, an economic problem can be defined as an abnormal and irrational or irrelevant behavior by socio-economic units and market components. There are innumerable causes for this. Though there is no scale that measures the level of abnormal behavior, a financial problem is said to have arisen when the abnormal behavior by economic components tend to affect several institutions.

In this discussion, market components signify 3 major constituents of the market, namely, demand, supply, and price. Though the magnitude of all the three components is small, it plays a highly influential role at a macro level. The term institute defines individuals, organizations, companies, government, governing bodies, and any unit which is capable of conducting economic activity.

Meaning
There are several definitions that elaborate upon this term. However, the simplest definition that is accepted world wide is that ‘a problem is an abnormality in economic institutions or constituents that in the view of society at large has a negative influence on earning and spending’. Rise in the price of gas by 1 cent is not an economic problem, but a rise by USD 10 is stated to be one.

Scarcity
Classical and neo-classical economists and also their school of though, have presented a very practical explanation of the challenges facing any economy. Human wants are unlimited. However, the volume of available resources that is used to fulfill them is very limited. Even the alternatives that are present are limited. This combination of limited resources and unlimited demands results into problems. This approach is often termed as the scarcity approach. Thus, when you try to find the solution, you will have to focus on unlimited wants and limited resources.
List of Economic Challenges

Here is a small list of economic problems, which is not totally complete and academic arguments to some elements in the list are welcome.
Anti-competitive behavior, laws, and practices
Mass bankruptcy filings and insolvency
Economic bubbles and mass business failure
Child labor and improper child welfare development
Commercial crimes and intentional or planned corporate offenses

Credit cards are a necessity or a luxury

Recently, I tried to mend my shopaholic ways by trying out the ‘100 days shopping ban’ challenge. This meant that I would not shop for anything except for the basic necessities for a 100 days, starting from a certain date. One weekend, I decided that the best thing to do was to hit a mall but carry no cash in order to refrain from spending.

As I was window shopping, my eyes dilated when I saw the ‘perfect pair of shoes’ on the display. This made way for a short-term memory loss and I completely forgot about the challenge. My frugal side tried to stop me from splurging on the pair as it would only mean adding to my self-proclaimed museum of shoes. But my shopaholic side encouraged me to go weak in the knees just this one single time. But I wasn’t carrying any cash. So making a purchase was impossible. Just then, it dawned upon me that I did have the ‘power’ to own the shoes after all. I frantically searched my handbag and got hold of a shiny object which would save the day, and help me pamper myself with some retail therapy. Yes, it was my best shopping pal – my credit card.

Most of us would have at some point in time, used our credit cards to buy stuff which we didn’t really need. Using a credit card always feels good till your eyes pop out at the end of the month when the long bill with an alarming figure reaches you. While some consider credit cards to be an outright extravagance, there are others who think that they are a necessary evil. So, are credit cards a necessity or a luxury?
Credit Cards as a Necessity
Convenience
If you are traveling to a distant place, carrying your credit card instead of cash will be beneficial for you. If you lose your credit card, you can block it immediately before someone else misuses it. Moreover, a credit card helps you to acquire something or make the payment for it even when you do not have cash in hand. This is important in today’s times when the threat of having your cash stolen looms large.

Expense Tracking

If you pay for your transactions in cash, you may not be maintaining a record of the same. Just imagine how difficult it would be for you to keep a track of all your expenditures at the end of the month or for tax purposes. Imagine running from pillar to post trying to get hold of all the receipts at the end of the year. This is when your credit card statement’s year-end summary will help you track all your records.