LHCU News - Interoffice Circulation and Bulletin Boards
The interest rate situation, dictated by Federal Policy, is not realistic. On one hand short term rates continue to be at a record low, while on the other, long-term loan rates remain at the 6-7% level. The Govt. supported net-spread is a bonanza for financial institutions. We have to give credit to the Fed since through their aggressive stimulus they thwarted off a full blown recession and avoided a total financial collapse.
Our challenge is to find the right timing for our investments, thus minimizing inherent interest rate risk. Right now we have a liquid position of about $ 7.0 million earning less than 0.25%. For this reason, we have limited deposits to our money market accounts to maximum of $50,000.00 per month. Time deposits and IRA rollovers are not subject to this dollar limit.
We all know that the low level of federal funds will eventually come to an end, but when? A snap back, with an ongoing climb in rates, might bring us back to an 8% prime rate.
In the third quarter we have distributed some of the one-time windfall earnings with rates which were substantially above market. At this time it is too early to promise the same return for the fourth quarter.
Again and again we see loan applications to pay off credit card balances with 20% + interest rates. Please give it some thought before you fall for the come-on advertising or the so called cash return or low entry teaser rates. You should avoid these cards if you are not able to pay the balance in full each month. Yes, it only makes sense, for example if you buy a large item for several hundred dollars and you receive a 10% rebate on the merchandise, but if you do not pay the credit card bill in full on the first due date you have gained nothing and lose the 10%! And if you do not have the discipline to close the account and cut up the card, you not only affect your credit rating, but also fall into the interest trap.
Congress is presently clipping the wings of card issuers practice to charge higher rates when you become delinquent on another credit card, or when your credit score changes.
The credit union has never adopted this predatory practice and will not do so in the future, our rate remains the same.
Looking forward to year end, we will close 2009 with a surplus, the majority of which we will use to cope with future uncertainties.
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