A friend told me that the bank in America have an unfair practice to levy the overdraft fee on many transactions during a month.
For example, if the customer has a few transactions that may result in an overdraft, the bank will debit the largest transaction first to cause the account to be overdrawn. All subsequent transactions will be overdraft and each will attract an overdrawn fee. It may result in the fee being applied to many transactions in a month.
The US Congress is passing a law to disallow a bank from this kind of practice and to require the bank to debit the transactions in the chronological order that they have been received.
I find this type of practice to be dishonest. However, the bank seems to be able to get away with it, and a new law has to be passed to stop them from continuing with it. It seems that the standard of honesty has dropped to a low level and that bankers need a law to tell them what is honesty.
Saturday, November 14, 2009
Cap on interest rate and bank charges
Should the government set a cap on loan interest rate and other bank charges?
At one time, it was argued that these matters should be left to the free market. Consumers can make their choice and avoid the banks that have high charges. In reality, consumers are not aware about these charges. The ignorance allows the banks to make billions of dollars in high charges and fees.
The US Congress is now considering passing laws to make it mandatory for consumers to be informed about the charges and to opt in. Some people think that this does not go far enough, and that it is better for the Government to set limits on the interest rates and charges.
Many decades ago, there was a law to limit the interest rate that can be charged by money lenders. This law was necessary to prevent consumers from being exploited by money lenders. The same reasoning can be applied to the lending by banks, especially if they behave just as bad as the money lenders.
The general argument is that the level of interest rate should depend on the market and cannot be set by law. I do not agree with this argument, especially if we look at what has happened in many countries. It is better for the government to set these caps on fees and loan interest rate, and to revise them when necessary due to changes in the market conditions.
Tan Kin Lian
At one time, it was argued that these matters should be left to the free market. Consumers can make their choice and avoid the banks that have high charges. In reality, consumers are not aware about these charges. The ignorance allows the banks to make billions of dollars in high charges and fees.
The US Congress is now considering passing laws to make it mandatory for consumers to be informed about the charges and to opt in. Some people think that this does not go far enough, and that it is better for the Government to set limits on the interest rates and charges.
Many decades ago, there was a law to limit the interest rate that can be charged by money lenders. This law was necessary to prevent consumers from being exploited by money lenders. The same reasoning can be applied to the lending by banks, especially if they behave just as bad as the money lenders.
The general argument is that the level of interest rate should depend on the market and cannot be set by law. I do not agree with this argument, especially if we look at what has happened in many countries. It is better for the government to set these caps on fees and loan interest rate, and to revise them when necessary due to changes in the market conditions.
Tan Kin Lian
Overdraft protection
What is overdraft protection? It is a nice name for fleecing the bank customer.
Low interest rate - the underlying cause
Why is interest rate so low? The simple answer is there is a big supply of money and insufficient demand for money. What cause this imbalance?
The low demand for money is caused by low consumption. The low consumption is caused by low wages and high unemployment, which has affected a large part of the population, and brought out a large disparity in income distribution in recent decades. The lower and middle class people have to work harder to earn enough to survive. They have fewer children, which also contributed to the drop in demand over the years.
The supply of money has also been increased by governments through their monetary policy and recently, through stimulus spending. With so much money in the economy and little demand, interest rate is likely to remain low for a long time.
This is bad news to retirees who have to depend on their investment income to live on. With low income from their savings, they have to spend their capital sum, which will deplete over the years.
What can retirees do? They have to invest in equities to earn a higher return. Although equities have a higher level of risk, it can be mitigated by investing in a low cost fund, such as an exchange traded fund. The return on equities is likely to be around 5% to 7%, which is much better than 2% on government bonds.
In the past two decades, there was demand for money but they were used to create asset bubbles, especially in housing. This helped to boost the world economy for some time. The recent collapse of the asset bubbles brought about the economic downturn. However, the asset bubble is being revived, but this is not a long term solution.
In my view, the solution is to generate demand by giving people a chance to work and enjoy fair wages, so that they can feel secure about their future, raise a family and spend time on leisure. With a sound economy, there will be a demand for money which will give a fair return on their savings.
Tan Kin Lian
The low demand for money is caused by low consumption. The low consumption is caused by low wages and high unemployment, which has affected a large part of the population, and brought out a large disparity in income distribution in recent decades. The lower and middle class people have to work harder to earn enough to survive. They have fewer children, which also contributed to the drop in demand over the years.
The supply of money has also been increased by governments through their monetary policy and recently, through stimulus spending. With so much money in the economy and little demand, interest rate is likely to remain low for a long time.
This is bad news to retirees who have to depend on their investment income to live on. With low income from their savings, they have to spend their capital sum, which will deplete over the years.
What can retirees do? They have to invest in equities to earn a higher return. Although equities have a higher level of risk, it can be mitigated by investing in a low cost fund, such as an exchange traded fund. The return on equities is likely to be around 5% to 7%, which is much better than 2% on government bonds.
In the past two decades, there was demand for money but they were used to create asset bubbles, especially in housing. This helped to boost the world economy for some time. The recent collapse of the asset bubbles brought about the economic downturn. However, the asset bubble is being revived, but this is not a long term solution.
In my view, the solution is to generate demand by giving people a chance to work and enjoy fair wages, so that they can feel secure about their future, raise a family and spend time on leisure. With a sound economy, there will be a demand for money which will give a fair return on their savings.
Tan Kin Lian
A recovery for some
This article explains that the economy recovery in America benefits only the elites who has stock portfolios. It did not benefit the many people who are still unemployed. The same comments would probably apply to many other countries, including Singapore.
Experience with locator torchlight
I have been using the torchlight (with locator turned on) each night for the past two weeks. I found it to be useful. It is easy to locate the torchlight. I have now made it a habit to use the torchlight instead of the main light at night.
This torchlight is available at $6.50, compared to $27.20 for a branded torchlight with similar functions.
This torchlight is available at $6.50, compared to $27.20 for a branded torchlight with similar functions.
Friday, November 13, 2009
Battle of Pay TV Operators (2)
There is a big battle between SingTel and Starhub over PayTV. SingTel has won the rights to boradcast the English Premier League (EPL) matches in 2010. Consumers have to switch set top boxes to SingTel to watch these matches. If they wish to watch programmes from both operators, they need two set top boxes and two sets of wiring in their home.
This is time for the regulator (i.e Media Development Authority) to come in and require the PayTV operators to separate the two operations, namely to operate a platform and to provide the contents. There will be a separate charge for using the platform and subscribing to the content. Each platform operator is required to carry the content of any approved provider.
This will give the best choice to consumers. There is competition between the platform operators in pricing and service. There is also a free choice of contents.
The content should not be bundled up with the platform.
There is also a need for the Competition Commission to come in and give a ruling. The Commission is required to ensure that there is free competition in Singapore to give choice to consumers. The bundling of platform and content is monopolistic and bad for consumers. I hope that the Commission will also have a say on this matter.
Tan Kin Lian
This is time for the regulator (i.e Media Development Authority) to come in and require the PayTV operators to separate the two operations, namely to operate a platform and to provide the contents. There will be a separate charge for using the platform and subscribing to the content. Each platform operator is required to carry the content of any approved provider.
This will give the best choice to consumers. There is competition between the platform operators in pricing and service. There is also a free choice of contents.
The content should not be bundled up with the platform.
There is also a need for the Competition Commission to come in and give a ruling. The Commission is required to ensure that there is free competition in Singapore to give choice to consumers. The bundling of platform and content is monopolistic and bad for consumers. I hope that the Commission will also have a say on this matter.
Tan Kin Lian
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