Since the credit score is generated from a secret formula by FICO, there can only be two kinds of evidence: Statements from FICO themselves.

Experiments done on an individual's credit score using different utilizations.

For the first type, @user662852's answer provides a statement from FICO, in the typically vague way that FICO is known for.

For the second type, @JoeTaxpayer helpfully ran an experiment that he detailed in an answer last year .

In it, he noted a small hit in his score when he went to 0%.

Whenever we talk about credit utilization's affect on credit score, it is important to note that utilization has no history.

It is an instantaneous number, based on your balance at the time of credit reporting for the current month.

Therefore, you could have the worst utilization ratio possible (whatever that is), and if you go to the best utilization ratio possible the next month, last month's utilization has no effect.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

"Better credit rating" unfortunately is too broad of a question.

The possible gains in a numerical FICO score will simply be too minimal to do your study!

Comparing low utilization of 1-2% vs 0% for differences are problematic, as the utilization factor - which is empirically known - stops having a meaningful effect on your scores below 10%.

At least in a way that would alter anybody's behavior.

As such, you will not find empirical evidence for this argument (outside of Fair Isaac saying so themselves).

Now you did ask specifically about credit rating , which I should point out is different than credit score .

You do not need to spend any money to achieve a higher credit score.

So there is your 0% answer.

A credit rating on the other hand, includes spending behaviors that make an institution more likely to extend credit.

An institution is more likely to extend additional credit if they have seen utilization of their credit based financial products.

An institution is less likely to extend additional credit if they see 0% utilization on their credit based financial products.

An institution is more likely to close your credit based account if they see 0% utilization.

Your credit rating - with that institution - is now lower, without any affect on your credit score.

BUT, by having a line of credit unilaterally closed by the institution, now your credit score becomes affected due to possibly lowered Average Age of Accounts, and lower amount of overall credit (increasing the utilization % that you have across other credit lines).

This part isn't "rational", it is cause and effect.

So you want to avoid making situations where your credit lines get cancelled.

Having 0% utilization is one of those exact situations.

If this wasn't satisfactory, due to lack of sources, just make a note of which paragraphs you want citations for.

What does Fair Issac themselves say about it?

In some cases, a low credit utilization ratio will have a more positive impact on your FICO Scores than not using any of your available credit at all.

Experian, the company that provides VantageScore and contributes to FICO scores, has this to say on the subject:

VantageScore recommends an overall utilization rate of no more than 30 percent.

However, the lower your utilization ratio, the better for your credit scores.

That seems to imply that a lower utilization rate is always strictly better than a higher value with no lower bound.

Of course, the formulas aren't published so there is always a chance that they are simplifying the formula for laypeople.

There are plenty of good answers and I don't want to weigh it down with more

but I did have a couple of things that I wanted to say for the record

and so here it is.

Yes the formulas are "secret" and while companies like Fair Isaac (makers of the FICO score) does give special insider seminars where they DO reveal a lot

but unfortunately we are bound by non-disclosure.

Vantage, aka FAKO score, is not commonly used in any significant area of evaluation and can often lead to false sense of how good your credit is because their scores are always at a higher point than FICO.

A Vantage 700+ is worthless compared to 700+ FICO.

However, this much I can confirm, to ensure that you generally fulfill ideal utilization, keep it between 20-30% anything higher and you take a hit, how much is based on the formula but a hit none the less.

The higher, the more insolvent they consider you and a higher risk, hence the lower score.

As to whether or not use at all or use a little.

Keep in mind that if your utilization is below 1% or none, then you are marked in the calculation as "dormant" which means that account won't factor into the calculations because they logic that if you aren't using it but have it, you either can't because you are afraid you can't pay for it, or that you don't properly manage your liabilities.

So it is strongly recommended to keep a utilization of 2-4% where you can pay it off in full and spread the love across all your cards, so none get the dormant status.

Limit your spending on your less desired cards to about $35 on the low end and no more than 5% of the total credit limit on that card.

Also LET THE STATEMENT CLOSE WITH A SMALL BALANCE

BEFORE PAYING IT IN FULL.

This shows the card has activity.

Regardless, follow the golden rule of credit, don't spend more than you have, don't spend more than you can pay off in full, and NEVER EVER pay late or miss a payment.

Question: In North America, it is common advice to make your credit card shows utilization. That is, let some balance remain until the statement issues so that utilization will be reported to the credit agencies. (Of course, pay it off before the due date to avoid interest payments.)  However, is there any evidence that credit scores are actually better for people with a small reported utilization vs people with zero reported utilization all other things being equal?

What evidence that reporting a small utilization (vs no utilization) leads to a better credit rating?

You are less likely to get additional credit if the company sees 0 utilization. They might consider that you don't use it because you are afraid you can't pay for it, or don't properly manage your liabilities.

An institution is less likely to extend additional credit if they see 0% utilization on their credit based financial products. Sometimes a low credit utilization ratio will have a more positive impact on your FICO Scores than not using any of your available credit at all, which implies that a lower utilization rate is strictly better than a higher value where they consider you more insolvent and a higher risk, hence the lower score. But if your utilization is below 1% or zero, then you will be as "dormant". To fulfil ideal utilization, keep it between 20-30%, pay it off in full and spread over several cards, anything higher and you take a hit, which is based on a formula. The golden rule of credit is, don't spend more than you have and don't spend more than you can pay off in full, and ensure that you never pay late or miss a payment.

Whenever we talk about credit utilization's affect on credit score, it is important to note that utilization has no history.  Comparing low utilization of 1-2% vs 0% for differences are problematic, as the utilization factor - which is empirically known - stops having a meaningful effect on your scores below 10%. You do not need to spend any money to achieve a higher credit score.

S10: An institution is less likely to extend additional credit if they see 0% utilization on their credit based financial products. Sometimes a low credit utilization ratio will have a more positive impact on your FICO Scores than not using any of your available credit at all, which implies that a lower utilization rate is strictly better than a higher value where they consider you more insolvent and a higher risk, hence the lower score. But if your utilization is below 1% or zero, then you will be as "dormant".

To fulfill ideal utilization, keep it between 20-30%, pay it off in full and spread over several cards, anything higher and you take a hit, which is based on a formula.

So it is strongly recommended to keep a utilization of 2-4% where you can pay it off in full and spread the love across all your cards, so none get the dormant status.


The IRS provides a little more information on the subject on this FAQ: Will I be charged interest and penalties for filing and paying my taxes late?

: If you did not pay your tax on time, you will generally have to pay a late-payment penalty, which is also called a failure to pay penalty.

You will not have to pay the penalty if you can show reasonable cause for the failure to pay on time.

Some guidance on what constitutes "reasonable cause" is found on the IRS page Penalty Relief Due to Reasonable Cause : The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due.

Sound reasons, if established, include: Fire, casualty, natural disaster or other disturbances Inability to obtain records Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so

Note:

A lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time.

However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty.

In this article from U.S. News and World Report , it is suggested that the IRS will generally waive the penalty one time, if you have a clean tax history and ask for the penalty to be waived.

It is definitely worth asking them to waive the penalty.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

I just got hit with the late payment penalty due to a bug in the H&R Block tax program.

The underpayment was only $2 and the penalty was a whopping 1 cent.

The letter that informed me of the error also said that they did not consider the $2.01 worth collecting, the amount owed had been zeroed.

Assuming US/IRS: If you filed on time and paid what you believed was the correct amount, they might be kind and let it go.

But don't assume they will.

If you can't file on time, you are supposed to file estimated taxes before the deadline, and to make that payment large enough to cover what you are likely to owe them.

If there is excess, you get it back when you file the actual forms.

If there is a shortfall, you may be charged fees, essentially interest on the money you still owe them calculated from the submission due date.

If you fail to file anything before the due date, then the fees/interest surcharge is calculated on the entire amount still due; effectively the same as if you had filled an estimated return erroneously claiming you owed nothing.

Note that since the penalty scales with the amount still due, large errors do cost you more than small ones.

And before anyone asks: no, the IRS doesn't pay interest if you submit the forms early and they owe you money.

I've sometimes wondered whether they're missing a bet there, and if it would be worth rewarding people to file earlier in order to spread out the work a bit better, but until someone sells them on that idea...

In practice the IRS seems to apply the late payment penalty when they issue a written paper notice.

Those notices typically have a pay-by date where no additional penalty applies.

The IRS will often waive penalties, but not interest or tax due, if the taxpayer presses the issue.

Years ago I mailed my personal tax return one day after the due date, and my check was deposited as normal, and I never heard anything about it.

As an employer, I once sent in my employee's withheld federal taxes one day after the due date, and I later received a letter stating my penalty for being late worked out to be around $600.

The letter stated that since this was my first time being late they would waive the fee.

In both cases, they could have charged me a late fee if they wanted to.

Question: IRS Topic 301  states   You will owe interest on any past-due tax and you may be subject to a late-payment penalty if the payment of tax is not made by the original due date of your return.   The wording of  may be subject to  had me wondering,  under what circumstances does the IRS choose to charge or not charge the late-payment penalty ?  For the purposes of the question let's assume there are no estimated tax payments due.

Under what circumstance will the IRS charge you a late-payment penalty for taxes?

The IRS seems to apply late payment when they issue a paper notice. There is also "reasonable cause" that they will consider for why you didn't file a tax return. They will often waive the penalty if you have a clean tax record.

The IRS seems to apply the late payment penalty when they issue a written paper notice.  If you do not pay your tax on time, you will usually have to pay a late-payment penalty. The fees/interest surcharge is calculated on the entire amount due. If you filed on time and paid what you believed was the correct amount, they may waive the charges once, especially if you have a clean tax history and request this. The IRS also have guidance on what they consider to be “reasonable cause” for failing to file a tax return or pay when due.

The IRS seemsto apply the late payment penalty when they issue a written paper notice.


Two options you can try: Go to the store and ask them to refund the difference.

They might not, but it doesn't hurt to ask.

Often stores will do this if you are within the return window because it saves them some hassle over you returning the used item and then buying a new item at the lower price.

Buy the identical item again at the new price, then return it using the old receipt.

I do not recommend any cheating or fraud.

Please let me explain further what you might do.

First, attempt #1 above.

It is very common for stores to give you a refund shortly after the purchase.

Why?

Because this is an easier and better option for everyone than any of the other options.

The store wants to keep its customers happy; that is why it has the generous return policy in the first place.

If the store employee doesn't go for this, (perhaps he doesn't know how to properly enter this into the register), tell him that you would like to buy the item today at the new price and return it at the old price with your old receipt.

This may not have occurred to the employee as an option, and it might help the employee figure out how to enter this transaction and give you your refund.

If the store employee doesn't like this, tell him that you are planning on purchasing the new item today and returning the old item tomorrow.

At this point, the store employee might realize that the store is better off keeping their new item on the shelf than they are exchanging a new item for a used item, and allow you to do the second option right there.

It's possible that they won't go for this either.

Now, if you purchase the new item, you'll have a decision to make.

You need to return one of the items with packaging using one of the receipts.

If the store is logging serial numbers on the receipt, it may not be an option to return the new item with the old receipt.

If the receipt does not contain the serial number, I would argue that there is no fraud or cheating going on by returning the new item with the old receipt.

If the receipt does contain the serial number but the packaging does not, then you should be able to use the new packaging to return the old item.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

Depending on how you paid for the item, some credit cards have price protection insurance.

There are always minimums (e.g. Must be more than 10% or €150 whichever is greater) and paperwork, and processing time, but it does not involve the retailer agreeing to your request.

Ultimately this is just bad luck.

Prices change, especially for things like computers which become obsolete in a short time.

At the end of the day a cutting edge PC is only cutting edge for about 6 months and will be old hat in 2 years, so there is bound to be some point where the price drops.

After all, putting things on sale at the end of a season is pretty standard practice in retail.

Ethically your best bet is to go to the store and explain your position, they may offer you a goodwill gesture

but they haven't really behaved unreasonably.

If I was the store manager I might be tempted to offer you an extended warranty or offer a discount voucher for peripherals as a goodwill gesture but I wouldn't; expect anything with real tangible value.

As mentioned in comments, if you thought it was a fair price when you bought it you haven't really lost anything.

In the US, you must rely on seller policies and manufacturer guarantees [citation needed].

In Europe, you additionally have certain buyer's rights which are very significant and virtually always preferred over the former.

Since this is in Europe, let us first make a distinction between buying offline at a physical store, and remotely (e.g. online or via telephone).

In the offline case, you have to rely on store policy.

If they offer returns, you can try and ask them nicely.

Since stores compete with online merchants, it's likely they'll go the extra mile and let you return it or offer the price difference in cash or store credit to make you a happy and loyal offline customer.

On the other hand, if you bought it remotely, there are pretty customer-friendly regulations in place.

You're allowed to return such an item bought for any reason within 14 days , paying only the return shipping costs (not for the initial shipping!).

That is, minus a usage fee, if (and only if) the item lost value greater than its packaging cost, e.g. if you scratched it, and does not always apply to digital or digitalizable goods, and never to organic or similar goods.

Of course, sellers will be glad to refund price differences to avoid returns.

That customer-friendly law is also a reason why prices here are generally a bit higher :) If the item were damaged or faulty at the time of purchase (not later!), they must accept its return (after repairing it up to two times, if they chose so) under general warranty in the EU, regardless if you bought it on- or offline.

This topic is a bit complex in itself, with a 0.5 and a 2 year time period of importance, but I won't go into it as it is not applicable to your case.

Some retailers like Amazon will give you back the price difference if you are within the return window of the product.

I've done this a couple of times and there seems to be no issue about it - they pretty much prefer giving you back a few dollars than having the product returned used.

You should just ask the retailer for the refund of the difference.

Question: I bought a PC for € 2199 (about $2500 USD) 8 days ago. Today I saw that the same store where I purchased it sells the same product for € 130 less. Unfortunately, I can't just bring it back* and re-buy it because I have already littered the packaging. What can I do in order not to have paid too much?  * The market claims that you can give a product with packaging back without providing a reason.

The price dropped on an item I purchased 8 days ago. What can I do?

You should go back to the store and ask them to refund the difference. You are allowed to return an item for any reason within 14 days. They want to keep their customers happy so they may offer you a goodwill gesture. You could also try buying the item again at the new price and returning it using the old receipt.

You could go to the store and ask them to refund the difference. Or they may offer you a goodwill gesture as they want to keep their customers happy. Depending on how you paid for it, some credit cards have price protection insurance. In Europe, there exist buyer's rights. You are allowed to return an item bought for any reason within  14 days , paying only the return shipping costs if applicable.

Alternatively, you could buy the identical item again at the new price, then return it using the old receipt. If the packaging does not have the serial number on it, then you should be able to use the new packaging to return the old item.


The difference between the two numbers is that the market size of a particular product is expressed as an annual number ($10 million per year , in your example).

The market cap of a stock, on the other hand, is a long-term valuation of the company.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

First read mhoran's answer, Then

this - If the company sold nothing but refrigerators, and had 40% market share, that's $4M

/yr in sales.

If they have a 30% profit margin, $1.2M in profit each year.

A P/E of 10 would give a stock value totaling $12M, more than the market size.

The numbers are related, of course, but one isn't the maximum of the other.

money.stackexchange.com/users/187/JTP - Apologise to Monica

If you are calculating: the market size as the annual sales of all refrigerators at $10 million; and the market cap as the value of Company A's shares times the number of shares being equal to $20 million; keep in mind that company A probably also sells washers, dryers, stoves, dish washers....

Each of which has their own market size.

Also remember that people pay X times the value of earnings per share, so the value depends not on sales but on earnings, and expected growth.

The quickest way to approach this question is to first understand that it compares flows vs. levels.

Market size is usually stated as an annual or other period figure, e.g. "The market size of refrigerators will be $10mn in 2019."

This is a flow figure.

Market capitalization is a level figure at any given point in time, e.g. "The market cap of the company was $20 million at the end of its last fiscal quarter."

Confusion sometimes occurs when levels and flows are used loosely for comparisons.

It is common for media to make statements such as "Joe Billionaire is worth more than the GDP of Roselandia."

That is comparing a current level (net worth) with an annual flow (GDP).

With this in mind, there are a variety of conditions where a company's equity market value will exceed its market size.

The most extreme example is an innovating, development-stage enterprise, say, a biotech company, developing a new market for a new product; the current market size may be nil while the enterprise is worth something greater.

The primary reason however for situations where a company's equity market cap is greater than its market size is usually that the financial market expects the enterprise (and oftentimes its market, though this isn't necessary) to grow substantially over time and hence the discounted value of the company may be greater than the current or near future market size.

A final example: US annual GDP (which comprises of much more than corporate incomes and profits) for 2014 was about $17.4tn while the nation's total equity market value in 2014 was $25.1tn, both according to the World Bank.

That latter figure also doesn't include the trillions of corporate debts these companies have issued so the total market cap of US, Inc. is substantially greater than $25.1tn.

It is ALWAYS possible for a company's valuation in the market to be larger than the market it serves, and in fact it is not uncommon.

There's valid argument that Uber would be a good example of this, with a market cap of more than $60 billion.

Market cap is the total value of all shares outstanding.

Keep in mind that what a company's shares trade for is less a reflection of its past (or, to some degree, even present) revenue activity and more of a speculative bet on what the company will do in the future.

A company's valuation includes its assets, in addition to projected earnings.

Aside from the obvious issue that "projected earnings" can be wildly inaccurate or speculative (as in the case of startups and fast-moving industries like technology), a company's assets are not necessarily tied to the market the company is in.

For the sake of illustration, say the government were to ban fast food tomorrow, and the market for that were to go all the way to zero.

McDonald's would still have almost 30 billion dollars worth of real estate holdings that would surely make the company worth something, even though it would have to stop selling its products.

Similarly, Apple is sitting on approximately $200 billion dollars in cash and securities in overseas subsidiaries.

Even if they never make another cent selling iPhones and such, the company is still worth a lot because of those holdings.

" Corporate raiders " back in the 70's and 80's made massive personal fortunes exploiting this disconnect in undervalued companies that had more assets than their market cap, by getting enough ownership to liquidate the company's assets.

Oliver Stone even made a movie about the phenomenon .

So yes, it's certainly possible for a company to be worth more than the size of the market for its products.

You are comparing two things that are not comparable.

The "market size" would be the total annual revenue in one market, in this year.

The "market cap” of a company is the number of shares multiplied by the share price.

This should be equal to the total profit that the company is going to make through its life time, taking into account that you would get interest on an investment, so future profits have to be counted less accordingly.

So if the "market size" is ten million dollars, and a company has four million revenue in that market with one million profit, and everyone thinks that company will continue making that profit for the next fifty years, then surely one million a year for the next 50 years is worth more than ten million.

That's if the market stands still.

If the "market size" is ten million, and we expect that market size to double for the next three years, then the market size is still ten million, but a company having a 40% share of a market growing at that speed is going to be worth a lot more!

Question: Let's say for example, the refrigerator market is sized at 10 million dollars (hypothetical example), if the market cap of a company is, say, 20 million, is it worth investing in the stock? Can it ever happen that a company's market cap exceeds the total market size (or say addressable market size)?

What does it mean for a company to have its market cap larger than the market size?

The market value of a stock is a long-term valuation of the company. It is the number of shares multiplied by the share price. Market size is expressed as a period figure. It would be the total annual revenue in one period.

First you should understand that this compares flows with levels.  The market cap of a company is the number of shares multiplied by the share price and is a long-term valuation of the company.Market size is the total annual revenue in one market, in one year.

First you should understand that this compares flows vs. levels.


Typically you can use credit card balance transfers to consolidate some, or all, of your other loan balances in one place.

The interest rate might be lower.

Some prefer to make one payment rather than multiple payments.

There is typically a fee that is imposed by the card that is originating or creating the loan.

This would be the credit card you are transferring the balances.

That fee is typically in the 3% to 5% range.

While tempting and attractive on the surface, this plan typically leads to a worse situation then you are now.

It's a "tough pill to swallow", but your problem is that you spend too much money.

Transferring money will not change this problem, it is your behavior that has to change in order to not accumulate more debt.

It has to change further if you want to get rid of the debt in a timely fashion.

You would be far better served to forget about this transfer and get your life into control.

Spend a lot less, earn more.

Pay off the cards you have now and cut them up.

Make a goal to be done in a year and figure out how to earn enough money to make that happen.

BTW

I am a reformed over-spender that now owes nothing.

Yep my house, cars, and rental property are all paid for.

You can get there too.

Since you are not paying the full balance off each month you are carrying a balance from month to month.

That balance is being charged some interest rate X. With a balance transfer, the new credit card pays off that balance.

As a result you now have a balance of the same amount (plus any processing charges) on the new credit card.

Hence the balance has transferred from the old to the new.

And you now pay the new credit card.

Ideally you do this because the new credit card is offering a reduced interest rate, saving you money.

Though be warned often that transfer rate is a limited time deal and any left over after the window expires will be charged the higher rate.

Note: the question is tagged united kingdom, this is a UK focussed answer practices elsewhere

may be different).

A balance transfer moves your debt from one credit card to another.

This can be a good way to get a debt onto a lower (often zero) interest rate.

There will usually be a transfer fee but with a good balance transfer deal the effective interest rate

even after taking the fee into account can be very good and there are even some deals with 0% interest and no fee.

Indeed if you keep on top of things credit cards are often the cheapest way to borrow.

Normally a balance transfer is done to a new card that is applied for specifically for the purpose but sometimes it can make sense to transfer a balance to an existing card.

However to take advantage of this you need discipline.

You need to make absoloutely sure that you fully comply with the rules of the deal and in particular that you pay at least the minimum payment on time.

You should also be aware that the rate will usually jump up at the end of the interest free period, you could do another balance transfer but assuming you will be able to do that is risky as it depends on what market conditions and your credit rating look like at the time.

Ideally you should have a plan for paying off the card before the interest free period expires.

In general you should be aiming to pay down your debts.

Living beyond your means is very bad and carrying debt long term should only be done if you have an extremely good reason.

You should regard the balance transfer as a tool to help you clear your debts quicker, not as a way to avoid paying them.

If you go on a spending spree after your balance transfer you will just have dug yourself deeper in debt.

See

http://www.moneysavingexpert.com/credit-cards/balance-transfer-credit-cards for more on the techniques and the current best cards.

A balance transfer is paying one debt instrument with another.

While this is typically seen in credit card offers it isn't necessarily confined to credit cards.

Obviously the only reason to do this is refinancing debt to a lower interest rate.

You need to watch for loads on the incoming money, there may be an upwards of 5% fee.

This calculation is materially different than your APR.

Monthly interest charges can be estimated by taking your APR divided by 12 times your balance.

So a 15% APR will have a rough monthly interest charge of 1.25%.

The 5% balance transfer fee is 4x your normal interest charge.

That fee is added to your balance and now you pay interest on the whole amount.

You need to ensure the new rate is low enough to actually benefit you after the incoming fee.

From the card issuer's point of view, the purpose of balance transfers is very simple.

A credit card company wants you to owe them more money, so they will make more profit getting more interest payments from you.

To do that, they will offer an (apparently) good deal to transfer the debt that you owe to other companies onto their card.

The deal may superficially look good to you , because it offers a low interest rate for a limited time period, etc.

But never forget that its real purpose is to be a good deal for the card company, not for you.

Of course, credit card companies target these deals at their "typical" customers.

They have to tolerate a few "smart" customers who actually make them no money at all, by always paying off their card balance before any interest is due, never using their card to draw cash from an ATM (which has no interest-free loan period), never using their card for overseas transactions that incur fees and/or poor currency exchange rates, etc.

Your financial objective should be to make yourself one of the customers the card company doesn't want - but "only paying off the minimum balance every month" is exactly the wrong way to do that!

Question: I know very little about my credit cards, all I know is that I make sure to do the minimum payments on time. Some suggested that I do balance transfer?What is that suppose to mean?Can someone pay all my debts from different credits cards and I should pay them monthly instead of paying different credit cards issuers?Who will charge me for that? both sides?

In layman's terms, what is balance transfer?

A balance transfer moves your debt from one credit card to another. The reason for doing this would be for a better interest rate.

A balance transfer moves your debt from one credit card to another.  Although this is typically seen in credit card offers it is not only confined to credit cards. You are basically paying off one debt with another. Normally a balance transfer is to a new credit card specifically obtained for the purpose, but sometimes it can also make sense to transfer a balance to an existing card.

This will usually incur a transfer fee but there are often good deals to be had. The main reason to do this would be to refinance a debt to a lower interest rate.


It's important to understand that, in general, security transactions involve you and a relatively unknown entity with your broker standing in the middle.

When you sell through Schwab, Schwab needs to receive the funds from the other side of the transaction.

If Schwab gave you access to the funds immediately, it would essentially be a loan until the transaction settles after funds and securities change hands.

If Schwab made funds available to you as soon as they were received, it might still be two days until the money is received; because the other side also has three days.

Guaranteed one day settlement would have to include receipt of funds from the buyer in one day and Schwab can't control that.

You need to remember this transaction likely includes at least one party in addition to you and Schwab.

Here's the SEC page related to the three day settlement period, About Settling Trades in Three Days: T+3

Another explanation is that they keep your money three days to make money with it, because they can .

The other reasons might have been valid 100 years ago, and no bank would voluntarily cut that down until forced by law.

Example: In Europe, bank to bank transfers used to take three days, until a law forced them to give next day, and suddenly it was possible.

quid's answer explains the settlement period well.

However, it should be noted that you can avoid the settlement period by opening a margin account.

Any specific broker like Schwab may or may not offer margin accounts.

Margin accounts allow you to borrow money to avoid the settlement period or to buy more securities than you can actually afford.

Note that if you buy more securities than you can afford using margin, you expose yourself to losses potentially larger than your initial investment.

If you fund your account with $50,000 and use margin to purchase $80,000 of stock which then drops in value by 80% you will have lost $64,000 and owe the broker $14,000 plus fees.

That is the standard set by most securities exchanges: T+3 : trades complete three days after the bargain has been struck.

TLDR:

Why can't banks give me my money?

We don't have your money.

Who has my money? About half a dozen different people all over the world.

And we need to coordinate with them and their banks to get you your money.

I love how everyone seems to think that the securities industry has super powers.

Believe me, even with T+3, you won't believe how many trades fail to settle properly.

Yes, your trade is pretty simple.

But Cash Equity trades in general can be very complicated (for the layman).

Your sell order will have been pushed onto an algorithmic platform, aggregated with other sell order, and crossed with internal buy orders.

The surplus would then be split out by the algo to try and get the best price based on "orders" on the market.

Finally the "fills" are used in settlement, which could potentially have been filled in multiple trades against multiple counterparties.

In order to guarantee that the money can be in your account, we need 3 days.

Also remember, we aren't JUST looking at your transaction.

Each bank is looking to square off all the different trades between all their counter parties over a single day.

Thousands of transactions/fills may have to be processed just for a single name.

Finally because, there a many many transactions that do not settle automatically, our settlements team needs to co-ordinate with the other bank to make sure that you get your money.

Bear in mind, banks being banks, we are working with systems that are older than I am.

And all of the above is the "simplest" case, I haven't even factored in Dark Pools/Block trades, auctions, pre/post-market trading sessions, Foreign Exchange, Derivatives, KYC/AML.

They're taking advantage of float .

Like so many things in the financial world today, this practice is a (strictly legal) fraud.

When you make the transaction, the money is available immediately, for reasons that should be intuitively obvious to anyone who's ever used PayPal.

It doesn't take 3 minutes for the broker to get that money, let alone 3 days.

But if they can hold on to that money instead of turning it over to you, they can make money from it for themselves, putting money that rightfully belongs to you to work for them instead, earning interest on short-term loans, money market accounts, etc.

The SEC mandates that this money must be turned over to you within 3 days so it should not surprise anyone that that's exactly how long the "we have to wait for it to clear" scam runs for.

Even if it doesn't seem like very much money per transaction, for a large brokerage with hundreds of thousands of clients, all the little bits add up very quickly.

This is why they feel no need to compete by offering better service: offering poor service

is making them a lot of money that they would lose by offering better service.

Question: Whenever I sell stocks with Charles Schwab, I cannot access the cash for 3 days after the day I make the sale. A coworker told me that this was called a "mandatory settlement period".   I was unable to determine the reason for this - is this a restriction just in Charles Schwab that other institutions do not have, and if it is, what is the justification for it? Is this a government regulation, and if it is, what is the justification for it?

Why does Charles Schwab have a Mandatory Settlement Period after selling stocks?

Trades complete 3 days after. If Schwab gave you access to the funds immediately, this would essentially be a loan. They can also use that money for themselves during that period.

This is the standard time set by most securities exchanges. If Schwab made funds available to you as soon as they were received, it might still be two days until the money is received as the other side also takes three days, so three days are required to guarantee the money being in your account. It could be argued that they are keeping your money for three days to make money with it by earning interest on short-term loans or in money market accounts for example. The settlement period can be avoided by opening a margin account.

Some would say that they are keeping your money for three days to make money with it by earning interest on short-term loans or in money market accounts for example.


It is not unusual for the acquiring company's stock to fall in any time of merger announcement.

Some of it has to do with the fact the acquirer is going to either take on new debt to pay for the cost of the acquisition or they will need to issue new shares.

Either is dilutive to shareholder value, so this is "baked into" the process.

In the instant case, I'm not sure AT & T is making the right move.

Because of its acquisition of DirecTV several years ago, there's little question it will have to shed assets in order to satisfy regulators, and there's a high probability that competitors will move to block the merger for obvious reasons.

There is also the distinct possibility that regulators (either U.S. or European) may block the merger altogether, in which case there's undoubtedly a provision in the merger agreement requiring AT & T to pay a substantial fee to Time Warner.

There's a great deal of uncertainty surrounding acquisitions like this.

After all, it wasn't helpful to Time Warner when it merged with AOL, and there's no assurance this merger will work out any better.

The long and short of it is that nobody knows how this merger will play out, and the amount of attention and resources necessary to complete it will be an enormous drain and distraction to AT & T, so there's the possibility its businesses may suffer somewhat.

Since nobody knows the extent of divestitures AT & T will have to make, it creates uncertainty.

This is what you're seeing in their stock price.

Markets are generally skeptical of the benefits of mergers.

History shows that the benefits of merger claimed by the company doing the purchase rarely materialise.

If on the day prior to the announcement the markets value company A as 50 billion and company B as 20 billion, then the market values the combined company at 50 + 20 = 70 billion if they see no benefit in merger.

Therefore, if company A is willing to pay a premium of, say, 5 billion for company B, then the market will mark down company A by about the same amount in order to maintain a combined value of 70 billion.

Of course this assumes that the markets see no real benefit in merging the two companies.

This is not always the case.

Typically, stocks are falling because more people try to sell than to buy.

Why they try to sell is anyone's guess.

In this case, it seems that not everybody shares your optimism; you might not have all the info, or you are evaluating the data differently than others.

"Buy the rumor, sell the news".

That's often a good strategy, since most people tend to be optimists rather than pessimists, and reality turns out to be worse than they hoped for.

It's also a good strategy, because if the majority of other investors think it's a good strategy, the price will rise when they all try to buy, and fall when they all try to sell.

It's a material change to the company's financials, why wouldn't there be a change in the company's value?

In general the company being acquired sees a value increase.

This happens for a variety of reasons, most obviously the concept that a premium on the value will ensure shareholder approval of the acquisition.

In general the company making the acquisition sees a decline in value.

This happens because of a usually material change in the financials.

Maybe a big spend down of cash, maybe a big issuance of new shares, maybe a new debt obligation, maybe the company being acquired has new liabilities etc.

Usually companies are valued based on some multiple of forward earnings and a big change in the financial situation of the company will change

it's forward net earnings.

Question: Why does the stock price decline when a seemingly promising acquisition is announced & agreed on?

Why is AT&T's stock price declining, during the days that they announced the acquisition of Time Warner inc.?

It is not unusual for stock to fall after a merger announcement. Markets are generally sceptical about mergers. People try to sell their stocks more than buy them so the value drops.

Markets are generally skeptical of the benefits of mergers. Stocks usually fall, because more people try to sell than to buy. The acquirer will either take on new debt to pay for the cost of the acquisition or they will need to issue new shares. So it is not unusual for an acquiring company's stock to fall at the time of a merger announcement, because it is a material change to the company's financial situation.

It is not unusual for an acquiring company's stock to fall at the time of a merger announcement, because it is a material change to the company's financial situation.

Some of it relates to the fact the acquirer will either take on new debt to pay for the cost of the acquisition or they will need to issue new shares.


This is a scam.

Do not give them any money.

A quick search on this site will yield many examples of this scam.

How can I say this more clearly?

SCAM, SCAM, SCAM !

This is another one of the oldest scams out there, where you've won a prize or an inheritance

has come in, and all you have to do is pay the taxes on it to claim it.

Don't be a sucker !

Ask yourself why the government couldn't (and wouldn't) just take the taxes due out of the funds they have and give the rest to the person they belong to?

Wouldn't that be the smartest and easiest thing to do?

As an example, let's say that you have $1,000 that belongs to me, and I owe you $100.

Would you tell me to pay you the $100

and then you'll give me the $1,000 or

would you take the $100 I owe you out of the $1,000 and give me the remaining $900?

The fact this is someone you know from the internet and they want your "help" to claim their money should tell you how much of a scam this is.

Stop talking to this person, and don't tell them anything personal about you .

They are scam artists, and whatever you tell them could be used to steal your identity or take your money.

Be careful, my friend!

Think about it...

If the government has the money why would the government need more money to cover the tax on the money that the government already has?

Couldn't the government just withhold 109,500 from the 1,900,000 it's holding already?

This is a scam.

There is no soldier, no money ...

This is a story to gain sympathy and make one part with Bank account and other details so that the scammer can make away with your money.

There is no doubt that this is a scam (you ask a British solicitor for help with this sort of problem, not an American friend) but it's not as obvious as some answers seem to assume.

Inheritance taxes always have to be paid before legacies can be received, and the funds are part of the estate not "in the hands of the government".

There are certainly ways round the problem (which vary by country), but if the facts were as the asker sets out, this would be a reasonable request.

You can bet they aren't and it isn't.

Question: Please help me. I'm in contact with someone who is an American soldier. He said that UK HM Revenue & Customs asked him to pay a large amount to recover the funds of his dead father. The total amount is £1,900,000 and the total tax is £109,500.Is it true that the UK is asking him to pay the taxes to recover the fund?

Someone asking money for help to pay taxes of kin claiming fund in UK

This is a scam. A quick search will yield many examples.

This is a well-known scam. A quick search online will yield many examples of this scam. It is one version of the oldest scams out there, where they state have won a prize or an inheritance. This is a story to gain sympathy and encourage you part with bank account and other details so that the scammer can steal your money.

This is a well-known scam. A quick search online will yield many examples of this scam. It is one version of the oldest scams out there, where they tell you you have won a prize or an inheritance.


The Federal Reserve website notes that creditors must accept cash for debts on services already rendered, but that businesses may refuse cash for services not yet rendered unless prohibited by local law.

The Treasury website includes examples of businesses limiting what cash they will accept: For example, a bus line may prohibit payment of fares in pennies or dollar bills.

In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

money.stackexchange.com/users/12089/NL - Apologize to Monica

You have to take legal tender to settle a debt.

If your business model doesn't involve the customer incurring a debt that is then settled, you don't have to take cash.

For example, in a restaurant where you pay after eating, you can insist on paying cash, because you're settling a debt.

But in McDonald's they can refuse your cash at the counter, because you've not received your food yet

and so no debt has been incurred.

They don't have to take cash if they reasonably told you in advance they don't take cash, because they made fair effort to prevent you from incurring a debt.

They don't have to take cash if the transaction hasn't yet happened (not a debt) or if it can be easily undone at no cost to either party - such as a newspaper subscription they can just stop delivering.

Both of these reasons are limited by the rules against discrimination, see below.

They don't have to take cash if it's impracticable .

For instance a transit bus when fares first went to $1.00, it took years to fund new fareboxes able to take paper money.

You don't have to take a mortgage payment in pennies.

Liquor stores don't have to take $100 bills.

(it requires them to keep too much change in the till, which makes them a robbery target).

Trouble arises when it appears there's an ulterior motive for the rule.

Suppose a Landlord Jim requires rent to be paid with EFT.

Rent-controlled Marcie tells the judge "It's a scheme to oust me, he knows I'm unbanked".

Jim counters "No.

I got mugged last month because criminals know when I collect cash rents."

It will turn on whether Jim can show good-faith effort to work with his unbanked tenants to find other ways to pay.

If Jim does a particularly bad job of this, he could find himself paying Marcie's legal bills!

Even worse if the ulterior motive is discrimination .

Chet the plumber hates Muslims.

Alice the feed supplier hates the Amish.

So they decide to take credit cards only, knowing those people's religions don't allow them.

Their goose is cooked once they can't show any other reasonable reason to refuse cash.

money.stackexchange.com/users/44366/Harper - Reinstate Monica

Apartment complexes have had a long history of not accepting cash for payment of rent.

This eliminates the problem of robbery and strongly reduces the risks of embezzlement.

THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE Article 1, Section 10 of the US Constitution states:

No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts

Previous editions of banknotes stated that the notes were redeemable in gold or in lawful money.

The Mint Act of 1792 set gold and silver as legal currency (and that one did not have to accept "base metal coins" for more than $10 which is why coin rolls only go up to $10).

The Coinage Act of 1873 dropped silver and made gold the legal standard for currency.

In 1933, the "redeemable in gold" was changed by federal statute and the legend you mention was added.

Prior to 1933, someone could demand that you pay them in gold and not with a bank note.

Legislation in 1933 ended that.

This clause in the Constitution leads some political groups to wish to return to a gold standard.

I recommend reading the book Greenback as it describes how our currency got the way it did and why that clause appears on currency.

A business can refuse cash (paper currency) payment pretty much in all cases

provided it's a reasonable policy and/or

notified during/in advance of contracting.

Details in this link .

"all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor.

There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services."

Even if the payment is being made to settle a debt or other obligation, the creditor may refuse payment if their rationale is reasonable (as determined by the courts).

Question: Printed on US currency you will find "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE". Some businesses have refused to accept larger bills for a long time, as other forms of payment have become more popular, some refuse cash completely. In what cases can a business refuse to accept cash?

In what cases can a business refuse to take cash?

money.stackexchange.com/users/12089/NL - Apologize to Monica

Creditors may accept cash for services already rendered, but for services not yet rendered they may refuse it. Any legal tender can be used to settle a debt. If you were told in advance then they can refuse to take cash.

Creditors have to take legal tender to settle a debt, but businesses may refuse cash for services not yet rendered unless local law prohibits this. If your business model doesn't involve the customer incurring a debt you don't have to take cash. You also don't have to take cash if you inform people clearly in advance that you do not accept this. You are also not obliged to accept cash if it's impracticable. Additionally, some places may refuse to accept large denomination currency as a matter of policy.


I assume this happens to everyone in the US, and I believe the reason is simply due to competition.

Here are my data points:

I was with Allstate for 17 years, and the rates were pretty consistent for a long time, then about 6 years ago every 6 months my rate would go up slightly.

After 2-3 years of that I called and I asked why?

I was told it was due to the average rates in my area increasing, etc.

I pointed out how loyal of a customer I was, and nothing helped.

So I got a quote from Geico which was $130 lower per 6 months.

I called AllState and asked them to match it

or I'm leaving.

They wouldn't.

So I switched to Geico.

1 month later my Allstate agent called me and told me she could match (or beat) the rate I had with Geico if I came back.

I said no. 2 years with Geico and my rates started inching up.

After 18 months of increases I went through the shockingly identical process, and ended up switching to StateFarm.

Now I've been with StateFarm for coming up on 2 years and it's happening again.

Note

I have never had a claim or a ticket in over 15 years.

My conclusion is that (all?)

car insurance companies in the US lose money on new customers, and they are willing to do that just to get the customer.

Slowly they raise rates to price them to where they should be.

The only way to get the lower rate is to switch companies every few years.

Part of auto insurance is your potential liability cost.

I'm personally in the same boat as you, no infractions, same car, and my insurance went up (though less than yours).

I live in California, in an area where I'm likely to hit a Mercedes (or some other luxury thing) if I hit anything.

Lots of people in my area buy expensive cars and as a result I pay significantly more for the same liability coverage as I would in a lot of other zip codes.

Add to that normal inflationary pressure on auto-body repair shops and you have increases even if you, personally, don't present any new risk.

In response to the discussion below

I'm revising this point.

There are loads of factors insurers consider beyond your claims history, driving record and good student status.

Maybe a lot of people in your neighborhood are buying Mercedes or some other expensive vehicles.

Maybe your newly attained age triggers a different risk evaluation in their models.

Any number of criteria related to you could have changed apart from your personal driving record.

The carrier has a pool of people and the ability to price certain criteria related to you.

The insurer's overall pool needs to be profitable and sometimes that means higher risk people are subsidizing the cost of lower-risk people, and sometimes the opposite can be true.

Every part of the risk spectrum will generate claims, claim expenses aren't exclusive to the high risk segment of the pool.

When an insurer increases it's prices that means that relative to the expected claims of the pool, or some piece of your specific underwriting classification, it's not generating enough top-line revenue.

Maybe this price increase hits everyone in the pool, maybe it's only the higher-risk or the lower-risk people, maybe it's only the folks with big limit coverage, maybe the student discount gets smaller.

No matter the adjustment, the carrier has determined that it either can or should generate more revenue and/or shed some individuals from some facet of its pool.

No matter your personal driving record and perceived risk category, if you get an 8% increase you should go shopping.

It's likely that some other carrier wants someone in your underwriting category more than your current carrier does.

An 8% increase from your current carrier indicates they expect some number of people like you to leave.

Because it's profitable Insurance companies have found that if you raise peoples' premiums by 5%, a few of them will switch, but most of them either won't notice, or won't want to deal with the hassle and admin of switching in order to save a few %.

Net Result?

They have (a few) fewer customers = fewer payouts, and more revenue.

Hence more profits.

So they keep doing it.

If they lost more in revenue than they gained in higher premiums, they would stop doing it overnight.

But they don't, so they don't.

The same dynamics happen in (almost all) recurring-subscription service industries where people expect the prices to vary: Car insurance (in fact, most insurance), mobile phone contracts, rent, leases etc.

The only way to avoid it is to keep an eye on your bills and shop around as soon as they start going up.

Depending on where you live local regulations allow insurers to rate you based on many factors besides the type of car and how many accidents/tickets you've had historically.

Your rates might go up if you have recently moved, if your credit score has taken a hit, if you've become divorced, or if they have concluded that they have to raise all of their policies in your area by a fixed percentage due to a higher number of claims from your neighbors.

money.stackexchange.com/users/12089/NL - Apologize to Monica

As with many other industries, they are betting you will not consider the cost increase is worth the hassle of switching.

Loyal customers and well off customers are easy targets.

If they try to increase too high, you may be willing to switch.

If they increase too low, then they miss out on potential profits.

They probably have tested various amount increases and found a happy medium.

If you live in New York, and you took a driver safety course over three years ago , you can expect to lose the 10% mandatory car insurance discount that you would have been receiving.

Other states may have other discounts , I don't know all the details.

Question: I have just received a new auto insurance bill for the next six months for my comprehensive insurance. It is about 8% higher than the previous six months whereas I have had no new moving infractions and the vehicle is the same as before, meaning older, meaning costing less to replace.  What actuarial reasoning could explain this increase?

Auto premium increasing with aging vehicle and no new tickets

There are other factors that go into making up the price. They might increase everyone in your pool if there have been a lot of recent claims. It could also be to do with age or if your personal situation has changed.

Auto insurance includes your potential liability cost and many factors are considered in addition to claims history, driving record and good student status. For example, your age may trigger a different risk evaluation in their models. When insurers increase their prices it means they are not generating enough top-line revenue relative to the expected claims of the pool. This price increase may have affected everyone in the pool, or maybe only the higher-risk people. Your rates might also go up if you have recently moved, if your credit score has taken a hit, if you have recently divorced, or due to a higher number of claims by your neighbours. Add to that normal inflationary pressure on auto-body repair shops and you have increases even if you, personally, don't present any new risk.  Regardless of your personal driving record and perceived risk category, if you get an 8% increase you should shop around for a better deal. Insurance companies have found that if they raise premiums by 5%, a few customers will switch, but most either won't notice, or won't want the hassle and admin of switching just to save a few %.  The only way to get lower rates is to switch companies every few years.


Would a rose smell as sweet if you called it a stench blossom?

Excerpt on gifts from

an LBMC article : The payment must be in the nature of “something for nothing.”

It is not a gift if the payment is a reward for services rendered.

With regard to payments made by an individual to a service provider, it is difficult to argue that such payments constitute gifts, even when the amounts are paid at the holidays.

You can pretend it's a gift, but if you got it at your place of work after performing a service for the patron, it's a tip.

Q: If I call a tail a leg, then how many legs does a dog have?

A: 4.

You can call it whatever you want, it's still a tail.

The scenario is nonsense.

There is a quid pro quo, the waitress served the customer and he tipped her.

A $7 tip on a $24.47 check.

He was generous, but misguided if he thought that this note would let the tip go untaxed.

And even though the article you link is fresh, the author has the gift threshold incorrect.

This year it's $14,000, and has been so since 2013.

A cute story, and unlikely to be an issue for $7, but the IRS would take notice if this idea gained any traction.

Two references -

If Gifts Are Not Income, Why Tax Gratuities?

From the Tax Court Files

: Is That Money a Gift or Income?

money.stackexchange.com/users/187/JTP - Apologise to Monica

I worked in the service industry for over 10 years and this came up every now and again.

Mostly in hypothetical situations.

I'm not a tax expert, but my general understanding is that it is viewed as income by the IRS if you performed a service of any kind in exchange for the money.

In other words, if you waited on the table, and they left you a gift for doing so, it is taxable.

You'll probably also find that if you pool tips with other employees or have to tip out the bartenders, cooks or dishwashers, they'll generally agree with the IRS that you clearly received a tip and want their fair share.

While the concept of "gifting" money to others in a situation like this is intriguing, especially in the service industry, it really doesn't meet the definition of a gift in the eyes of the IRS.

For it to truly be a gift, the person would have had to intend to gift you the money even if they hadn't come into your restaurant at all that night.

That clearly is not the case here.

Here's my obligatory contrarian answer...

No, the way the note was written, it wouldn't stand up to IRS scrutiny.

Libertarians need to get a little more creative if they want to skirt the laws and make up a credible story about why it is a gift: Thanks for chatting with me at dinner tonight, I feel like we're becoming fast friends.

I'm sorry you weren't able to sit down and eat with me, so here are a few bucks to buy you dinner/dessert when your shift ends.

It's not a tip; your service was lousy!

I'm still doubtful that this would stand up to scrutiny, but unlike the note that was left in the picture, it actually does have a chance.

money.stackexchange.com/users/12089/NL - Apologize to Monica

Imagine two restaurants.

One has prices 15% higher than the other, and the owner pays this 15% to his wait staff in the form of higher wages.

The other has lower prices, but the average customer gifts 15% to their waiter.

Clearly, in the first restaurant, the 15% the wait staff receives is taxable income.

It is traditional salary.

What legitimate, economic justification is their for treating the second restaurant any differently?

Imagine a grocery store in a small town that offered long-time customers a "pay nothing" option but made it clear that they'd be subject to social ostracism and no longer welcome in the store if they didn't gift 85% of the usual cost of the items.

The customers would save on sales tax and the grocer would argue that all that money was gifts, not income.

Of course this doesn't work.

The IRS, and the laws, don't care very much about what you call things.

They care about the underlying economic reality.

If the money was part of the payment for the services rendered, regardless of how it was delivered, what the parties called it, or whether the obligation to pay was legal or social, it's still a payment for the service and it's still taxable.

You would have to be able to argue to the IRS that it really was a gift and wasn't any form of payment for the service received.

Otherwise, it's just a scheme to evade taxes.

One way to possibly disambiguate it from a tip is to receive it outside of your service context.

If there really is a relationship, and they want to show appreciation or help you out financially, the "gift" could be given outside of the restaurant.

Otherwise, I agree that it seems like tax evasion.

The purpose of the money was to compensate for services rendered, which is income, not a gift.

If it's just a random stranger, then I'd have a hard time arguing that the purpose was pure altruism versus socially-mandated tipping.

Why can't I just have my employer just give me a "gift" every Christmas instead of a bonus?

Or just reduce by salary by $18k and give me a $1,500 "gift" every month?

Question: As a waiter/waitress, if I received money from a customer and he/she specifically said that this is  not  a tip, but a gift , do I need to report it at the end of the night to the restaurant? Do I need to report it on my tax return?   According to the article "An Internal Revenue Service (IRS) spokesperson conceded that he'd never heard of such a situation..."

Reporting monetary gifts as a waiter/waitress?

It is difficult to argue that this constitutes a gift if it was a reward for services, especially as it was at your place of work.

It is  not a gift if the payment is a reward for services rendered and it is  difficult to argue that such payments constitute gifts. If you received it at your place of work after performing a service, for example waiting on the table, it is classed as a tip and subsequently taxable. You may also find that if you pool tips with other employees, they may argue that you clearly received a tip and want their fair share. For it to truly be classed as a gift, the person would have had to intend to gift you the money even if they hadn't come into your restaurant at all that night and you will need to be able to argue that it wasn't any form of payment for the service received. One way to remove doubt would be to receive it outside of your service context.


I think the biggest reason is price ; it's a lot cheaper now than it was to offer these.

That's because for the most part, when you get a credit score for free, you're not getting a true FICO score.

You're getting instead a VantageScore.

VantageScore was created by the three credit bureaus , and as such they can offer it without paying Fair Isaac a licensing fee.

That makes it a lot cheaper to offer, and while it's not absolutely identical to FICO (or more accurately to any of the FICO provided scores)

it's close enough for most peoples' purpose.

And of course undoubtedly Fair Isaac has some price pressure on their side now that Vantage is big enough that many people see them as fungible.

As such they've had to make it easier, or they'd lose business - no longer being a monopolist.

The other relevant piece here is that probably in many of these cases they're really just offering you what Experian would give you directly -

so it's just a cross-marketing thing (where Experian, or perhaps another bureau, gets access to you as a customer so they can up-sell you ID theft insurance and whatnot, while the bank gets to offer the free score).

Why are banks all of a sudden providing people their credit scores for free?

Because it is a really good idea.

On an ABC Bank website, it has:

"Check your credit score for free" button.

You click it.

Not only will it come up with a credit score, but it could also trigger a marketing workflow.

If it is direct mail, email, or a phone call a banker could contact you for help with a debt product.

This marketing could also be targeted, say a person with a high score could be targeted for a mortgage.

A person with a low or medium score could be targeted for ways and products to improve their score.

Now if you run XYZ bank and not do the same, you are losing a competitive advantage to banks that offer this.

Not only will your customers be less happy, but you will lose a great marketing opportunities.

Face it, the only people that worry about their credit score are people that are in the market to borrow.

Which again, is more information.

If you have someone that never checks their credit score, or has their credit frozen, then it is wise not to market to them debt products.

Two possible reasons: The banks are already soft pulling your credit every month to see what sort of pre-approved offers they want to present you.

Since they already have the information they are providing it to you as an additional feature.

The bank wants to know your credit score, and waits for you to initiate by viewing your credit score through their website.

As soon as you initiate it, they make the soft pull and now they have the information also.

You can tell which scenario it is based on the credit history they provide you.

If you look at the history and they show you your scores for each month, even though you didn't initiate it, then they are auto checking it each month.

If the historical dates are only on the dates you clicked on the button, they are only checking when you manually click on it.

As for the why they provide it, a few years back it was a desirable feature.

Now they all do it just to keep pace with everyone else.

Note that most banks only provide a single scoring model from one bureau (but different banks use different bureaus).

It's the inevitable result of the Fair, Isaac Company deciding to sell access to credit scores to the general public: some marketing dude at one of the banks thought, "Wouldn't it be a great idea if we could use 'free' access to FICO scores as a differentiator for our CCs?"

And, because most humans play follow the leader, soon enough, other banks were paying FICO a license to present FICO scores to their card holders.

An alternative take on the "why" is that most people's credit is better than they think, and all of these banks offer credit products.

Put a "good credit" badge next to an ad for a shiny new card or auto refi, and it's just good business.

Question: It used to be that you had to pay to see your credit score and that credit scores were kept a "secret" so you'd never know what it was when you went to apply for a loan. However, now, almost every bank is offering people their credit scores for free (even if you aren't a customer of that bank). Why are banks all of a sudden providing people their credit scores for free?

Why are banks providing credit scores for free?

It's a lot cheaper now to offer credit checks. If it's a free score, then it's often not accurate. The banks are also soft pulling credit scores to see what they can offer you, so it's easy for them to offer you a free credit check.

One of the reasons is that it is a lot cheaper now than it used to be to offer these. Plus, when you get a credit score for free, you're not getting a true FICO score. In addition to offering a credit score, it may also trigger marketing workflow and the bank gets to see your what sort of pre-approved offers they want to send you.


How would gold have protected you during the 2007/8 crisis?

In no way, shape or form.

The ways to protect yourself at any time are: A reasonable debt/salary ratio:

In other words, don't over-extend yourself on the mortgage, how much the mortgage broker says you can buy with 0% down.

Ditto on the cars you buy.

A healthy emergency fund.

Diversified investments Don't follow investment fads

If you really think that the bubble is going to pop soon, shift more into bonds.

(They recover quicker.)

Don't buy gold and silver.

(Hard to pay for groceries with it.)

Minimal CC debt.

Boring, huh?

Those ‘crises’ are only an issue if you need your savings during the time of crisis.

If you have time to sit it out, you should just do that, and come out of the crisis with a gain.

People that lose money during a crisis lose it because they sell their investments during the crisis, either because they had to or because they thought they should.

If you look at historic values of investments, the market overall always recovers and goes over the orignal value some time after the crisis.

Investing even more right in the crisisis the best way to make a lot of money.

Your asset mix should reflect your own risk tolerance.

Whatever the ideal answer to your question, it requires you to have good timing, not once, but twice.

Let me offer a personal example.

In 2007, the S&P hit its short term peak at 1550 or so.

As it tanked in the crisis, a coworker shared with me that he went to cash, on the way down, selling out at about 1100.

At the bottom, 670 or so, I congratulated his brilliance (sarcasm here) and as it passed 1300 just 2 years later, again mentions how he must be thrilled he doubled his money.

He admitted he was still in cash.

Done with stocks.

So he was worse off than had he held on to his pre-crash assets.

For sake of disclosure, my own mix at the time was 100% stock.

That's not a recommendation, just a reflection of how my wife and I were invested.

We retired early, and after the 2013 excellent year, moved to a mix closer to 75/25.

At any time, a crisis hits, and we have 5-6 years spending money to let the market recover.

If a Japanesque long term decline occurs, Social Security kicks in for us in 8 years.

If my intent wasn't 100% clear, I'm suggesting your long term investing should always reflect your own risk tolerance, not some short term gut feel that disaster is around the corner.

money.stackexchange.com/users/187/JTP - Apologise to Monica

In the 2008 housing crash, cash was king.

Cash can make your mortgage payment, buy groceries, utilities, etc.

Great deals on bank owned properties were available for those with cash.

Getting a mortgage in 2008-2011 was tough.

If you are worried about stock market crashing, then diversification is key.

Don't have all your investments in one mutual fund or sector.

Gold and precious metals have a place in one's portfolio, say 5-10 percent as an insurance policy.

The days of using a Gold Double Eagle to pay the property taxes are largely gone, although Utah does allow it.

The biggest lesson I took from the crash is you cant have too much cash saved.

Build up the rainy day fund.

There are a 2 questions you need to ask yourself.

When do you want to "retire" and what will that look like?

Will you be working?

What risks will derail your plan?

At some point, you'll either need to stop working or be forced to stop working.

It's at that point when you'll need your savings.

So what you're really worried about is - when you'll need to use your savings.

The most common and dangerous risk people face is losing their job and being unemployable or having a health issue.

These are "internal risks" that you need to deal with through mitigation (eating healthy, improving your job skills) and risk transference (insurance).

Don't worry about predicting the future.

You're making an assumption that there will be another financial crisis in your lifetime, which may be wrong.

We could also have a long bull market as well.

There's no way of predicting external risks, so don't worry about it.

Your investment strategy should focus on the easy things to control - diversification and asset allocation.

A somewhat provocative (but not unserious) proposal: Rent, don't buy a house to live in.

In 2007/8, the thing that got many people in deep trouble is their mortgage.

It's not a productive investment but a speculative bet on what was in fact a bubble and a class of assets that is notoriously slow to recover after a slump.

Before thinking about your savings or buying into silly ideas about gold, you should realise that as a middle class worker, the biggest risk after a crisis is losing your job.

Renting your accommodation means being able to downgrade or move very quickly and not being forced to sell a house at the worse possible time.

If you really do need to liquidate some of your investments at a bad time, having a more diversified portfolio means that you are not losing everything to meet some short-term obligations.

Assuming you're in the US, this means forgoing some nice tax advantages that might be too tempting to resist

(I'm not

so I am basing this on what I read on this site)

but, bubbles aside, there is nothing that makes real estate a particularly good investment as such, especially if you also live in the house you're buying.

You might very well come out on top but you expose yourself to several risks and are less prepared to face a crisis.

Question: Last financial crisis happened 10 years ago - there is the risk of another one some time in the future. I am middle class worker with an average savings. I know that investing in gold should be safe to minimise damages from the next potential financial crisis. Which other investment strategy should I choose if I want to prepare?

How should I prepare for the next financial crisis?

You should have a reasonable debt/salary ratio to begin with. The biggest risk in a crisis is losing your job. You should make sure you have cash to make your payments.

The ways to protect yourself at any time are by having a reasonable debt/salary ratio. Before thinking of investing or buying gold, you should realise that the biggest risk after a crisis is losing your job. Those crises only become an issue if you need  your savings during the time of crisis. Those people who lost money during a crisis lost it because they sold their investments during the crisis for whatever reason. In the 2008 housing crash, cash was king. With cash, you can make your mortgage payment, buy groceries, utilities, etc. During a crisis you can’t have too much cash saved.


It's worth noting that Warren Buffet is a value investor, not a trader.

As such, it doesn't tell you much about technical analysis or trend following.

Instead, he's implying that when the market gets overly excited (overvalued) or panics (undervalued), there are opportunities for long-term profits, assuming you do your due diligence and have an opinion of what the fair value should be.

Note that it's difficult, if not impossible, to consistently time and beat the market and that the costs incurred by frequent trading eat away at your profits.

I believe you are confused by the vague language.

Trading is a process where smart money and institutions take money from the public.

Consider the concept of "market cycle".

Institutions start a trend, buying in at the bottom, and only then it gets the public's attention and they start buying in higher, chasing the price.

When the public is at peak euphoria, feeling so smart, institutions start "distributing" their position to this panic-buying and soon to be bagholding public.

This is the market cycle phase known as distribution.

After institutions dump their position on the public the market starts contracting as the public sells lower and lower than they bought in.

When the public is at peak panic, the "accumulation" phase happens where institutions buy positions from the public at the bottom.

Warren Buffet says to buy when "everyone" is selling, and sell when "everyone" is buying.

When he says "everyone" he is talking about the public, Joe Sixpack.

To rephrase, what he means is "Be like institutions, accumulate during peak public panic and distribute during peak public euphoria".

Being a long term value investor, he is speaking in terms of timing trades with the broad market cycles.

This is not daytrading advice.

Don't get confused and think this should be applied to every technical signal, blindly doing the opposite of what they say.

It does not mean to buy when moving averages cross down, or to sell when macd cross up.

It certainly does not mean to sell above support and buy below resistance.

Not at all.

The time period where everyone is selling a stock and when everyone is buying a stock may be years apart.

The exact dynamics of what's happening precisely when you buy and precisely when you sell won't significantly affect the profit or loss you take on a trade.

What will, however, is whether you bought or traded the right stock, and that's what Buffet's advice is intended to help you do.

If everyone is buying a stock, that likely means its price is higher than its value.

That's makes it a good stock to sell.

If everyone is selling a stock, that pushes its price below its value.

That makes it a good stock to buy.

Like others have said, Warren is a value investor.

He is not really interested in technical analysis or trend spotting.

He buys a company that he has determined is undervalued, and waits for it to be overvalued.

He has a quick way of checking the fundamentals and presumably puts the company through a model that in a few minutes, will tell him whether the firm is undervalued.

Here is what I wrote for another question similar in nature: Value investing involves looking at a firm's fundamentals and coming up with an "intrinsic value" per share.

From there, you determine if the stock is under or over valued relative to market share price.

A disciplined value investor will sell when their models say that the stock is no longer undervalued.

Any interest in that company after that is not value investing and is simply betting on the stock.

Of course an investor will update models and change them appropriately throughout the investment period to make sure their models reflect current conditions.

There is no average or expected time it takes for an undervalued stock to appreciate.

The idea with value investing is that the market will correct "mistakes" made in undervaluing a company.

It could also be that the firm's fundamentals point towards a strong outlook (typically 10 years) and the market has yet to realize this.

Hope

this helps you make sense of things!

The theory couldn't be more straightforward.

You sell when you find better things to do with your money.

Either sitting on your current account or other investments.

It follows that that's the same reason to buy, ie because your money will be more productive allocated in an investment.

In the meantime -most of the time-

the investment is left alone either compounding or generating cash via dividends which you have to allocate in turn or, in some cases (pure value investing), eventually realizing its fair value.

Allocating capital is simply done after an estimation of future returns of all the universe of possible investments at any given time for a somewhat arbitrary long period into the future.

Support and resistance levels is just witchcraft lingo.

Investors and traders have different perspectives on markets.

If a security's price falls further from an initial buy, a trader may have a stop loss or just sell because the trend is downward, while a long-term investor would view that price fall as a buying opportunity.

A value investor's time frame is typically much longer than a trader's time frame (years vs. months), so you can't really compare what Buffett says to a short time frame.

When Buffett says to buy low, sell high, buy in panic, sell in optimism, his price to buy is with respect to his evaluation of intrinsic value, not to technical patterns.

Usually, short-term price movements are of no concern to value investors, unless a price move reflects new information that has a big impact on the investors' appraisal of value.

Question: Warren Buffet says buy when everyone is selling and sell when everyone is buying. Taking into consideration the support and resistance levels, everyone is selling near the resistance level and everyone is buying near the support levels. If we follow Buffet's advice, aren't we going to incur loss in every trade?

Paradox - When to buy & when to sell a share?

What he means is to buy up stocks cheaply during a panic and sell off at a high price when things calm down. His price to buy is with respect to his evaluation of intrinsic value.

When Buffett says to buy low, sell high, buy in panic, sell in optimism, this relates to his own evaluation of intrinsic value, rather than technical patterns. He means act like institutions, accumulate during peak public panic and distribute during peak public euphoria. Investors and traders have different perspectives on markets. Also, the time periods where everyone is selling or buying a stock may be years apart. You should probably sell when you find better things to do with your money. When everyone is buying a stock, that probably means its price is higher than its value.


Real estate can be rented out (or otherwise "used"), so it "produces" income.

He's not solely investing in real estate in the hopes the value increases, he's saying it's a better investment because it produces income whether or not the value increases.

Gold is a commodity.

If I have some gold, my gold is exactly the same as someone else’s gold.

I have absolutely no control over the value, and when I go to sell it, my price is completely dependent on what everyone else in the market is doing.

I compete with every other seller on price alone; there is no other way to differentiate my product.

For real estate, there are no two parcels alike.

For starters, location, which is a huge factor in the value, is different for every piece of land.

Real estate can be developed to increase the value, and developments on land affect the value of others nearby.

Real estate can be used for many things to generate income, such as running a business or renting to someone else.

money.stackexchange.com/users/10997/Ben Miller - Remember Monica

Isn't real estate's price increase only driven by other people's demand

Yes, that's what makes it productive.

Productive assets, in general, have prices that are largely based on their ability to produce income.

If you are putting money into real estate hoping to make money from price increases, you aren't treating real estate as a productive asset, but instead as a speculative asset.

If you aren't expecting to make money from price increases, but are instead expecting to make money from rent or other value produced, then you are treating it as a productive asset.

I fail to see how real estate produce periodic profit like farms or business.

I fail to see how you could fail to see that.

Real estate generally produces rent.

It can also produce income from economic activity taking place on it.

A farm is itself partially real estate; you can't have a farm without land.

Simplified calcualtion:If you buy a flat for $100k and rent it out for $500/Month: $500*12 / $100,000 = 6% ROI Try that with Gold ....

You have an idea to manufacture and sell widgets.

At first, you and your partner, let's call him Woz, make widgets in the garage at your home.

Eventually, the demand for your widgets grows and you need more space for widget making machines, raw materials and new employees.

You find and rent a small building in a nearby industrial park.

The owner of the land collects rent from his productive asset.

Eventually, you need even more space and, after making a cost-benefit analysis, decide that it is more efficient to buy your own land and build your own building.

It is a wonderful day when the doors open below the sign, "Patrix Widget Company."

In this way, the land, the building, the machinery, the raw materials, the invested capital and the employees are all part of the process to build and sell widgets.

Remove the land and building from the equation and there are no widgets produced.

Real estate, in this way, is a productive asset.

Question: In  Berkshire Hathaway 2011 letter , Buffet said that:   My own preference – and you knew this was coming – is our third category: investment in productive  assets, whether businesses, farms, or real estate.   I fail to see how real estate produce periodic profit like farms or business. Isn't real estate's price increase only driven by other people's demand? How does it differ from gold, which he considers as  unproductive ?

Why does Warren Buffet consider real estate as productive asset?

Real estate can produce income from rental or development so it's a better investment because it produces income whether or not the value increases.

Real estate can be rented out or used for other purposes so it produces income or rent. So with real estate you are not only investing in real estate in the hopes the value increases, but it is also a better investment because it produces income whether or not the value increases. Real estate can be developed to increase its value, and developments on land also affect the value of others nearby. It can also be used for many things to generate income, such as running a business or renting to someone else.

Real estate can be developed to increase its value, and developments on land affect the value of others nearby.It can also be used for many things to generate income, such as running a business or renting to someone else.


Most mortgages (in the US) accrue interest on a monthly basis, and in that case it doesn't matter on what day(s)

you make your payment.

4 times per month or once per month will be identical if the totals are equal.

It's rare, but some mortgages accrue interest daily (like a credit card) and in that case it would help to make earlier payments if possible.

Also, (mentioned in D Stanley's comment), $500/week does not equal $2000/month.

It would have to be $2166.67 per month to be (almost) equal.

As a side note, your idea would help for paying off a credit card that is accruing interest on a daily basis.

Ask the mortgage company.

Some people do this.

If you do this you will be making 13 monthly payments a year.

If they credit is correctly that will shorten the length of the mortgage and save you interest.

What you want to avoid is having to pay a fee for this.

In the past some companies would charge a setup fee to allow you to make mortgage payments every two weeks, thus getting 13 monthly payments in the year.

The setup fee limited the benefit.

For most regular mortgages, pay a week or two early or pay up to the day before a late fee, and there is no difference in accrued interest.

Most banks will not accept partial payments, but will put them aside until a full payment is pending.

That said, I’d put aside whatever money you wish, and send it once a month with the regular payment.

If you intended to go bi-weekly, you’ll just have extra money 2 times per year, and it’s the same as making 13 full payments per year.

I’d add, make sure you are depositing the maximum to your retirement accounts, have no other debt, and have an emergency fund before prepaying the mortgage.

Paying down a 4% mortgage is smart, when the alternative is a .01% checking account.

Not so good when you are skipping the match on your 401(k) or paying 18% on a credit card.

money.stackexchange.com/users/187/JTP - Apologise to Monica

As others have noted, mortgage interest usually accrues monthly, so this would make no difference at all.

Even if the interest accrues daily or weekly, it would make only a modest difference.

If your mortgage is 5%, I estimate this would save you $6 per month in interest.

(Depending on exact dates of deposit, etc.) If you're driving to the bank, you could be paying more for gas, parking, whatever than you'll save.

Even if you're walking past the bank anyway

so it's just a matter of turning and walking in, is it worth your time for $6?

I guess $6 is not totally trivial, but probably not going to change your life, either.

General opinion seems to be that paying $500 weekly, vs. $2k or so monthly won't make any difference to the overall interest you pay (because it usually accrues monthly).

However, I think there is another aspect to consider...

I get the feeling that " I have extra cash flow on a weekly basis

" implies your income is somewhat variable and some weeks you have an extra $500 or more "disposable" income to "get rid of", and two options are to pay $500 any week

this happens to your mortgage, or leave it in your bank and pay an extra $2,000 at the end of the month (assuming you've had enough "good" weeks).

If that is right, then one potential advantage of choosing to make weekly payments is that by (almost) immediately committing it to the mortgage, there is less temptation/opportunity for you to spend the money on something else.

You won't pay the mortgage off any quicker than reliably paying $2k or so extra per month, but you might find you are more reliably making the extra payments.

The above assumes, as JoeTaxpayer notes in his answer , that you have sufficient in an emergency fund (e.g. to cover weeks where you don't make extra) and don't have higher-priority uses for the money (e.g. CC pay-down).

Question: I have a branch where my mortgage is held, very close proximity to my house.  I have extra cash flow on a weekly basis.  If I make an extra $500 dollars a week, vs paying $2,000 at the end of the month, will this be reduce my mortgage faster?

What about paying extra principal on a weekly basis?

Most mortgages accrue interest on a monthly basis so this wouldn't make a difference.

Most mortgage companies accrue interest monthly so paying weekly or bi-weekly would make no difference. Although it is rare, some mortgages so accrue interest daily and in such cases it would help to make earlier payments.  In the end it is probably best to ask the mortgage company themselves for advice on this.