REASONS WHY BANKS WON’T HONOUR YOUR CHEQUE

A cheque is a written document instructing a bank to debit your account and pay someone. While writing a cheque is quite simple, cashing a cheque can sometime be a nightmare. This write up provide the following as as some of the reasons why a bank will not honour your cheque.

·         You don’t have means of identification (valid I.D Card); Banks have to protect themselves against cheque fraud. Without proper proof of identity, banks can refuse to honour a cheque writing in your name. Always carry valid means of identification such as driving license, national i.d card, passport or voter’s card, when cashing a cheque.

·         Cheque conversion; Bank will not honour a cheque presented by a wrong person. Ensure that the payee on the cheque is the same person that presents it at the counter or the same as the name on the cheque deposit slip. The payee must be the owner of the account into which the cheque is paid. Where the payee is different from the account owner, a proper endorsement must be obtained.

·         The bank branch can’t handle a large transaction without prior notice. Not all banks can handle large cash transactions without prior notice. Smaller branch of a Bank may not have all the necessary cash to clear a very large cheque. Some branches are so small that they cannot keep cash above their limit.  When you have a cheque for a very large amount, call the Manager of the bank branch you intend to visit in advance. The bank Manager can give you proper advice.

·         Stale Cheque. The life span of a cheque is six month from the date it is drawn. If you wait too long to cash a cheque and it is over six months old, a bank can refuse to pay it. Some banks may decide to pay it anyway as a favour to long-time customers, but it is at the discretion of the bank.

·         Crossing a cheque. When two transverse lines are drawn across the face of a cheque with or without the word & co. the cheque has been ‘crossed’. For any crossed cheque to be paid across the counter it must be opened by counter signature across the traverse lines. A bank can dishonor your cheque if it is crossed.

·         Drawer attention requires. A cheque issued to a third party may not be paid by bank if the amount in words and figures are not correct and the same. If the cheque is not sign by drawer or if there is any alteration.

·         Other reasons are; cheque not dated, cheque not properly drawn and if there is notice of drawer’s bankruptcy or liquidation.

FINANCIAL PLANINIG, ANOTHER WAY TO MANAGE YOUR EXPENSES

Money is difficult to earn but it can also speedily disappear if expenses are not managed wisely.

For people who are living independently for the first time, the responsibility of paying for their utilities aside their personal expenses can be burdensome if not managed appropriately.

Professional say the effect of inadequate financial planning may not be felt immediately, but later when there is no steady source of income. They note that understanding how to manage finance will not only help people out personally, but can be of benefit when it comes to business success as well.

A proper financial understanding, according to expert, also helps in setting goal as well as creating fundamental skills in planning and decision making.

Learn financial management.

Every business owner must have at click of mouse, his company’s key financial data such as value of receivable, current inventory level, monthly revenue, monthly profitability, business net asset and balance sheet among others. He says if you are a business owner and you cannot provide these data about your company in minutes, then you have some work to do. ‘Even if you decide to employ an Accountant or Outsource the finance function, it is still essential for business owner to have fair knowledge of finance.’

Stick to your budget

Expert says budgeting is a means of balancing expenses with income. To make it work, they advise that a realistic budget should be developed. According to them, budgeting can be best achieved by tracking how well it is being adhered to each month, which means a continuous tracking of your monthly expenses, coupled with your day- to-day spending.

As part of an effort to adhere strictly to the budget, they advise that people should think in term of their overall accomplishment rather than something that will give them temporary satisfaction.

Control impulsive spending

Impulsive spending according to experts is an act of spending money on items that were not in the original budget. Experts say people who are in the habit of overspending on items or making late payment for the items bought, frequently borrow money from friends and buy things they don’t really need.

Financial advisors also say stress often leads to impulsive spending. Therefore, they recommend ways of reducing stress as a remedy to impulsive spending.

Have an emergency fund.

A specific amount should be set aside for emergency situations because it is when unforeseen expenses or emergencies arise that people tend to spend out of their budget. This can be inform of budget out of  the monthly paycheck for deposit into a savings account, ideally at least 10 percent of each month wages, including extra money earned.

The advantages of doing this is to prevent the necessity of going into debit, it provide peace of mind and freedom of choice.

Explore insurance policies.

Insurance is an important tool for protecting against financial hardships, and the premium paid maybe one of the top household expenses. Interested parties should seek a provider to be sure  they have the appropriate level of protection- that way they will prevent exorbitant payment for coverage. Insurance policies include life and non life insurance. The details of these policies will be discussed in my subsequent posts.

Have a retirement plan.

Having a solid retirement plan, can erase worries and fear related to old age, and keep people in control of their life and their finances. They say it is an act of preparing now in order to enjoy later.

The retirement plan should include social security, medical insurance, pension scheme and good life style choice.

WHY YOU NEED FIXED DEPOSIT

In my last write up, I made comparison between Fixed Deposit and Treasury bills. Though I am yet to receive any comment or question on the post but today I want to explain further why you need fixed deposit account.

 Not too many bank customers have a fixed deposit account. As a matter of fact many people only heard of the fixed deposit account when they were in secondary school. Study have shown that over 75 percent of bank customers operate savings and current accounts, while only about 25 percent do fixed deposit. This implies that so many bank customers are missing out on the benefits of fixed deposit accounts. This is because a fixed deposit account is more of an investment than just running a bank account.

To start with, a fixed deposit account is a financial instrument where an investor gives a certain sum of money to a bank or financial institution and the entity pays interest for the duration of the deposit. A fixed deposit account is an account in which the money is deposited in the beginning of the period and interest is accrued on it, credited and redeemed after the completion of the said period.

It is similar to a savings account. It is a very simple account in which the account holder needs to only invest money one time and get returns for what the account has been opened for. The rate of interest paid varies depending on the amount and tenure. Investors, especially conservative investors, prefer to open fixed deposit accounts as it is a safe investment option and it can be opened easily and quickly.

Encourage savings habit

Fixed deposit accounts require you to keep an amount for a certain period to accumulate the agree interest amount. This encourages a savings habit by an individual, as he will not be tempted to spend the money and find a way to manage his finance more efficiently.

Higher rate of return

The interest rates offers on fixed deposits are higher than that on savings accounts. It is also a safe form of investment where returns are guaranteed.

Guaranteed returns

Unlike investment in stock market or commodity market, fixed deposit are not risky investments as they do not depend on fluctuating market rates. Investors can rest assured that their investments are safe and they will be getting back a guaranteed amount at the end of the investment.

It can be withdrawn easily.

The amount that invested in a fixed deposit account can be withdrawn at any time for small penalty. The investor may have a financial emergency to meet like marriages, illness or when his business is in a loss. The penalty is less than that of selling stocks or real estate as the asset cannot be sold easily because of its high value and if you are in a distressed situation, you will sell it for a much lower rate. Whereas, fixed deposit can be withdrawn at any time and all you lose is a certain interest income.

Flexible in nature

Fixed deposit accounts can be taking for a tenure of one month, three months, six months , one year, two years or even ten years based on your requirement and for whatever amount that you can invest. Fixed deposits can be invested for tenure of your choice. If you have planned for a big event in five years, then you can have a fixed deposit kept for five years to meet your financial needs. You can have various fixed deposits accounts to save for different goals. Some banks provide flexible fixed deposit schemes.

Flexible interest rate pay-outs

Interest rate can be paid at different interval depending on the term you choose.

Disadvantages of fixed deposit accounts

·         Inflation rate of a country may affect return on fixed deposit account. As the price of products are increasing in the market, the inflation rate is also increasing, which does not support the increase in higher interest rates.

·         In most countries, the taxation on fixed account is done as normal taxation and no other benefits are allowed.

·         The benefit of diversification is not available as all the money is invested in one account only, ruling out opportunity to invest in stock market or other instruments.

                                                                                                  

GETTING PERSONAL LOAN FROM YOUR BANK.

You may want to start a home business, or you may want to borrow for a vacation, or you may have some other use for the money. Whatever the reason is, getting a personal loan can give you the money you need. A personal loan, usually unsecured, can provide you with a little extra cash to help you meet your goals.

Actually securing that personal loan can be a bit difficult though. Many people find the process scary, and they don’t know where to begin.

Here are few ways on how to get our personal loan approved.

·         Before you start your loan process, make sure you understand how personal loans work. There are two main type of personal loans; secured and unsecured. A secured loan will usually give you lower interest rates, but you have to put something up as collateral for the loan, which means that if you don’t pay back the loan, they take your collateral. Unsecured loan, don’t require any collateral, but will have higher interest rates.

·         Loan can only be taking on current account except on special consideration by the bank.

·         The other basic thing to know about personal loan is what you will need to get one. The information you will need will vary depending on which technique you use to get loan.

·         You will also need your employment information like your work history and pay slip to verify your income. You will need to provide other source of income.

·         Depending on the loan type and loan amount, the lender may ask for other information and documents.

·         The interest rate on a personal loan at a bank that value you as a customer is usually quite low compare to the alternatives.

·         You must be operating your account for the period not less than six months, depending on your bank’s policy.

·         Your total account turnover within a stated period will determine the amount of money you are qualified to obtain as loan.

SALARY ADVANCE; THE PROCESS OF GETTING IT IN YOUR BANK.

Some banks allow some of their customers to obtain salary advance if their salaries are paid through the bank.

However bank will look at some things such as the kind of organization the individual customer works for and how regular the salary is paid. For a Government worker, the process of taking salary advance is easy as long as the account of the person is domicile to the bank. A customer can walk into the bank and asks for salary advance, but may need to approach his employer to know if he can get the loan request approved.

If you need a few extra naira for an unexpected emergency, there is one source you may not have considered: Your future salary. Depending on where you work, you may be able to get an advance on your salary. Since any loan is really borrowing on future money, this method simply cuts out an expensive middle man; the lender.

Organizations having policy on short-term loans are becoming more common. With salary advance you repay it either out of your next salary or over an agreed time span. Unlike other form of loans, this one requires permission from your employer. Some companies restrict the circumstances under which they will allow such. The most important thing for people to understand is these are real loans. Like a bank or card loan, they have to be paid back on schedule. It is not like borrowing from a friend or family member: saying ‘I will pay you when I can’.

If for whatever reason, you part way with your employer, you will be expected to repay the balance in full when you leave. Before you decide, ask if you need salary advance. Can I pay it back? And what in my financial situation is the real reason I am considering this? Before you take it find out if it is even an option where you work.

Some employers post their pay-advance guidelines on their sites. But if your employer does not, then your next step is the human resource department. Gather information without putting your boss or yourself on the sport before deciding if this is something you want. Expect a little paper work; like fill forms and signing document to acknowledge the loan, specifying the amount and the date you received it and spelling out the payback schedule.

In the event that you terminate your appointment with your employer, and have a severance package or back pay, an employer may simply deduct the reminder of the loan balance from that final cheque. Stick to repayment plan. Nothing will get you sideways with your employer faster than asking for an advance, not being able to pay back and asking for another advance. Send your comment and questions.

INVESTMENT; TREASURY BILLS OR FIXED DEPOSIT, WHICH IS BETTER?

Several people tend to be confused on which of the Investment (treasury bills or fixed deposit) to put their money for maximum interest. To answer the above question, while both are very good, ways to invest your money there have similarities and differences.

When you buy treasury bills you are basically lending money to the Government (through Central Bank of Nigeria) with promise to pay back over 91 days, 182 days or 364 days. With fixed deposit however, you are lending to a bank or investment house with a promise to repay you at the expiration of the tenor (usually between one to twelve months). So, if you do not like to lend money to the government then fixed deposit is better.

What is the risk?

Treasury Bills are backed by the full faith and credit of the government and as such they are seen as almost risk free because it is very unlikely that a government can go bankrupt and not able to pay its loans. Beside the government has a tax revenue stream it can use to repay its borrowings.  I have never heard the CBN defaulted.

Fixed deposit is backed by the credit rating of the bank. Unlike when you borrow from the bank, the bank does not give you any collateral when borrow from you. However, it is obligated to pay you your interest and Principal when it falls due. They can however default when it goes bust as we have seen over in the years past. When a bank fails, depositors may lose all or part of their money, including fixed deposits. If you are weary of the risk the Treasury bills is best for you.

Who gives a better interest rate?

The higher the risk the higher the reward is how financial markets play and as such one will expect Treasure bills rate to be lower than fixed deposit rates. However, other factors do come into play that makes it change. Currently, Treasure bills post a better rate than average fixed deposit in Nigeria despite the latter being the riskier of the two.

How do I get paid interest?

Some banks pay you interest at the end of the period along with the principal. Some also pay interest upfront depending on what you negotiate. Interest on Treasury bills are paid upfront only when the principal comes at the end of the Tenor.

Which one pays the most taxes?

Treasury bills are exempted from taxes, so taxes are not deducted from your interest payments. However, you are likely to pay a fee to the bank for rendering the service on your behalf. The fees are very small and almost negligible. Interest on fixed deposit attract withholding tax rate of 10 percent deductible at source by the banks and to be remitted to the relevant tax authority. If you don’t want to be taxed the treasure bills is it.

Can I roll over my investments (interest and principal)?

Fixed deposits can be rolled over by banks. You simply instruct your bank to roll over the interest and principal when its mature giving you the benefit of compounding interest. It’s also a default way of saving and investing all rolled up one. Treasury bills cannot be rolled over by default. Once the investment matures the CBN pays the money straight into your bank account.

If you are therefore looking for investment you can roll over with ease, I suggest you go for fixed deposit.

Can I get my cash anytime I want?

You can get your cash anytime you want with fixed deposits by liquidating your account ahead of its maturity. All you need to do is to tell your bankers or investment house that you wish to cash in on your deposits. They will however pay you interest for the period that the money was with them instead of the full tenor if you had waited till maturity. You may also incur an early withdrawal charge.

Treasury bills on the other hand are not flexible as fixed deposits. If you wish to cash in on your treasury bills ahead of its schedule tenor, you will have to sell the rights to the treasury bills to the bank or to a willing buyer. The buyer will deduct the portion of the interest remaining for the period between when you terminated the investment and when it matures from your principal.

Basically, you can collect your cash in both instances except that it is perhaps faster and easier with banks.

Can I use it as collateral?              

Treasury bills by their nature can be used as collateral to collect loan from a bank.  This is because it is seen as a near risk free as asset by lenders and is also quasi cash.

Fixed deposit can also be used as collateral however the credit rating of the bank that is holding the deposit may affect the strength of it in the eye of another lender. Some banks may not accept fixed deposit in another bank as full collateral because they don’t consider the bank a strong bank.

If you are looking for investment to use your money as cash collateral, then Treasury bills are more suitable.

Have you invested in either treasury bills or fixed deposits?  What is your experience? Send me your comment.

Tips for minimizing ATM cash dispense errors and protecting your debit cards

There are a number of ways customers can minimize the chances of encountering the ATM dispense error. While the ATM dispense errors are not 100 percent preventable, there a few guide that can help you minimize the rate at which you get caught. Below are some simple tips to do so:

·         Always use a bank’s payment card on its machine, except if absolutely impossible. This help minimize the chances of falling a victim to ATM dispense error.

·         Always check your account balance first before making withdrawals from the machine. This helps you to be aware of possible link problems.

·         Follow on screen instructions well as these will guide you properly.

·         Don’t rush to insert your payment card when you notice that the machine is experiencing network fluctuation on a particular machine.

·         It has been noticed that the ATM dispense error occurs when some ATM runs out of cash. Therefore you may sometimes need to ask bank security operatives which of the ATMs are dispensing cash among the one in the gallery.

·         Sometimes ATMs malfunction and the only way you can know is to ask the bank security personnel on guard.

Protecting your debit cards

Recent enhancements have put the Automated Teller Machine and debit cards in nearly everyone’s wallet. Today, most debit cards have the Visa or MasterCard logo and can be used at millions of locations with a personal identification number.

A purchase at many stores may be like a trip to the bank or the ATM, with PIN pads allowing consumers to make purchases. To avoid becoming a victim of debit card fraud, the following tips will assist you.

·         Check your bank statements immediately after every withdrawal or purchases. Make sure all payments are yours.

·         Periodically, check your account balance and transactions, by utilizing online banking, by telephone alert or by printing interim statements at the ATM.

·         Contact your bank immediately if your card is lost, stolen or subject to fraudulent use.

·         Keep a record of card numbers, PINs, expiration dates for bank so you can contact the issuing bank easily in case of theft.

·         Memorize your PIN. Do not use your date of birth, address, telephone number or social security number.

·         Never put your PIN number and Card together and do not make it available to others.

·         If your receipts have your account number, tear it up or shred it before throwing it away.

·         Knowing your limits. Many banks limit daily purchases and withdrawals for your protection.

·          Do not use an ATM if it looks suspicious, it could be a skimming device.

·         Be wary of those trying to help you, especially when an ATM swallow your card, they may be trying to steal your card number and PIN.

·         Do not give your PIN to anyone over the Telephone,