[EDITOR, in the 2 comments I made, I did not include the amount of the 14-day post dated check. If you can insert the words "for $115" after the "14-day post-dated check ...", I would appreciate it .. and the sentence would support the calculations that follow.
Your site is currently the 14th (out of thousands)in Google's search for "President's Advisory Council on Financial Literacy."
Thank You!!! A F "Bob" Blair Jr.]
A F "Bob" Blair Jrof LA2:01AM January 15, 2009
Yes, this can be a complex subject, but you can keep yourself out of trouble with just some basic math skills, i.e. addition and subtraction. Total up what you make and then resolve to live within that sum. Credit is for absolute essentials, the big screen tv and other toys can wait until you can pay cash. I like having one major credit card for emergencies, to be paid off at the end of the month if at all possible. The best course is to keep out a percentage of each check for a rainy day fund, then you will not need the card. I know this all sounds un-american , but you will sleep much better... I cannot accept that someone would 'not know how a credit card works'; anyone with an 8th grade education can figure that one out rather quickly.
Glenn Phillipsof FL8:32AM November 07, 2008
What a beautiful name, the “President’s Advisory Council of Financial Literacy”, which should imbue confidence that the public will know the Truth in Lending. Unfortunately, the PACFL will not address the fact that the Truth in Lending Act uses an antiquated method of calculating the Annual Percentage Rate … the simple interest rate. That was fine when the act was passed in 1968 when payment periods were monthly and yearly rates were low. Now with short payment periods and high yearly rates the difference between the simple-interest (Nominal) APR and the mathematically true (Effective) APR can be astronomically different. The calculation of the simple interest (Nominal) APR is the rate for a payment period multiplied by the number of payment periods in a year. The calculation for the mathematically-true (Nominal) APR is the rate for a payment period compounded for the number of payment periods in a year. In 1968 calculators with compounding were main-frame behemoths in air-conditioned isolated back rooms. Now, compounding functions are on $5 hand-held calculators,
An extreme example would be a Pay-Day loan, where a 14-day post-dated check is given to receive $100. The Nominal APR is 391.071% ((115/100)-1)*365/14. The mathematically-true, Effective APR is 3723.661% (115/100)^(365/14)-1.
TILA allows for an inaccuracy of one 1/8th percent (0.125%). The difference in the Effective APR and the Nominal APR is 26,660 1/8ths difference.
The PACFL allows for written comments, but no oral testimony. All of the member of the PACFL seem obligated by donation from financial institutions to ignore any admission that would be a detriment to the donors.
A F Blairof LA2:27AM September 14, 2008
Knowing that what you borrow must be paid and with interest and that CREDIT CARD ISSUERS have their interest at heart and not yours! It should follow that a minimum payment leaves more for the CREDITOR to COMPUND its interest and not out of kindness! So, for every debt you may have , pay as much each month that you are able and BUY WHAT IS NECESSARY WITH CASH! "I FOLLOWED THIS RULE AS MUCH AS POSSIBLE AND SEVERAL CREDITORS SENT ME DUNNING LETTERS INDICATING IF I DIDN'T USE MY CREDIT CARD MORE FREQUENTLY THAT THEY WOULD CANCEL MY CARD----TOO BAD"
There are so many of these credit card pushers sending mail that they appear as snake oil salesmen!
JOSEPH i VARGAof NY11:02AM August 19, 2008
Financial literacy is simple.Live within your means.If you pay off your crdit card each month in full,you have zero interest and have all you income to spend..If you dont pay off your debt each month you have less income to spend.Millions of americans dont seem to understand that credit card debt lowers the amount they have to spend.
Problem. Don't make enough money on day time job.
Solution.Work another part time job in the evenings.
Want to make $100/Hour.Call home owners to get appointments for estimates by contractors for home repairs(10% commisson) Contractors pay you less than phone company ada.
Contactor pays you $20-$25 for each appointment.Contractor gets at least two jobs for 10 appointments,you get 10%. After 1st 10 appointments you drop the appointment fee.If contractor gets Zero jobs, you drop contractor.
JOHN woodsof CA6:57PM July 14, 2008
The President charged the President's Advisory Council on Financial Literacy to eliminate "deceptive practices". Well, the calculation of the Annual Percentage Rate is an antiquated, mathematically-untrue method adopted when the Act was passed in 1968 as part of the Consumer Credit Protection Act. The then Under Secretary of the Treasury, Joseph Barr, told the Subcommitte hearing the proposed act that the Actuarial method was used in the financial industry and was confirmed by the U S Supreme Court in 1839. That is true. Then, there were no ubiquitous machines that had compounding ... necessary to determine the mathematically-true, Effective APR. The case to which he referred was about a debt owed and the calculation method was a minor, if not obfuscated, issue.
You tell me if the follwing is deceptive:
On a payday loan where a 14-day post dated check is given for the borrower to receive $100, the current mathematically-untrue method of calculating the APR is the Actuarial method, popularly called the Nominal (or simple interest) APR ... "used for comparison". The APR using that method is 391.071% ((15/100)*(365/14)). [Three decimal points are used becaused on this closed-end loan, the tolerance of accuracy is 1/8th of a percent (0.125%)].
The mathematically-true, Effective APR is 3723.661% (((15/100)+1)^(365/14))-1).
Therefore the mathematically-true APR is 26,660 1/8ths ((3723.661-391.071)/0.125) from the mathematically-untrue, Nominal APR. {The symbol "^", the caret, is use in spreadsheet to compound the statement immetiately following.
26,660 1/8ths is shockingly greater than 1 1/8th.
The law is easly made truthful by changing the method of calculating the APR in section 226.14 of the act from, "... multiplied ... by ...." to "... compounded ... for ...." where it appears 9 times.
A F "Bob" Blair Jrof LA6:47AM July 06, 2008
downey is wayyyy better thatn warren at everything we also smoke warren at sports
idkof CA9:27PM June 03, 2008
Sure Ernesto. That statistic came from the Charles Schwab company, which does regular surveys on consumers and money.
Kimberly Palmerof 2:41PM May 27, 2008
Hello,
I am an AP Statistics student at Warren High School in Downey, CA. My class is doing a project and I have to survey a claim. I was reading this article and I found a claim written in the article very interesting. The claim was "In fact, 60 percent of teenage respondents cited learning about money management as a top priority."
I would really appreciate more information on this claim. Thank you for your time and thank you in advance for any information that could be sent to me.
Sincerely,
Ernesto Montoya
Ernesto Montoyaof CA1:42PM May 23, 2008
At one time, it was easier for an unemployed student to get a credit card than for an employed, divorced woman. Why was that? I think that the lenders have been playing games with the young financial illiterates for a long time.
We have required subjects in High Schools ( English for one). However, we have been aware for decades that many graduates do not know how to ballance a check book.
I realize that parents have a responsibility, but does that responsibility end at the schoolhouse door? And, does the blame also reside with the Teacher's Unions?
One of my pet peeves has to do with savings. We have been told for ages that citizens in this country do not save enough. Yet, the politicians in Washington have worked to reduce or eliminate the Capital Gains taxes, while leaving small time investors to pay a good portion of their savings to the IRS.
Reader Comments
Back to article
A F "Bob" Blair Jr of LA 2:01AM January 15, 2009
Glenn Phillips of FL 8:32AM November 07, 2008
A F Blair of LA 2:27AM September 14, 2008
JOSEPH i VARGA of NY 11:02AM August 19, 2008
JOHN woods of CA 6:57PM July 14, 2008
A F "Bob" Blair Jr of LA 6:47AM July 06, 2008
idk of CA 9:27PM June 03, 2008
Kimberly Palmer of 2:41PM May 27, 2008
Ernesto Montoya of CA 1:42PM May 23, 2008
Frank of CA 6:23PM May 15, 2008