Small investors benefit with Bush N.J. Visa card issuer changes terms

February 02, 1992|By Glenn Burkins | Glenn Burkins,Knight-Ridder News Service

As President Bush delivered his State of the Union address Tuesday, he might have heard thunderous applause from the nation's small investors.

During Mr. Bush's three years in office, individual investors have had a total return averaging 33.7 percent, according to Money magazine's Small Investor Index. That equals about 11.2 percent a year, more than two percentage points above the historical rate of 9 percent.

As interest rates have fallen, investors have pumped more money into stocks and bonds, and that has pushed up the prices of both.

All of this has happened despite the fact that Mr. Bush has presided over the most sluggish economic growth of any three-year period since World War II. As measured by the inflation-adjusted gross national product, the economy has sputtered along at a 1.6 percent annual growth rate since January 1989. That's the slowest three-year pace since 1945.

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If you carry a Visa Gold card issued by Commerce Bank in Cherry Hill, N.J., there is good news and bad news.

First the good news: The bank announced this week that it would lower the annual interest rate to 13.9 percent from 16 percent, effective March 5.

Now the bad news: It also is eliminating your 25-day grace period. That's the period during which no interest is charged on credit card purchases. The elimination of the grace period means that interest charges will begin accruing almost immediately, and that's bad news for cardholders who like to pay off their balances before interest charges are tacked on.

According to a Commerce official, about 40 percent of the bank's Visa Gold carriers pay in full during the grace period. The national average is closer to 28 percent.

Experts say several other U.S. banks have made similar moves, and more are expected to follow. If your bank does this, you may need to look for a new plate, depending on your credit card payment habits.

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If you put money into an Individual Retirement Account, here's some advice to make your nest egg grow:

Make IRA contributions as early in the year as possible. It could substantially raise your IRA earnings over the years.

Many people wait until December to make annual deposits. Some delay until April 15 the next year, just in time for the federal tax deadline.

By making early deposits, you can get closer to a full year's

worth of tax-deferred growth. (The money your IRA earns is not taxed until you withdraw it, presumably at retirement.) If you wait until later to make your contribution, you lose some of that advantage.

Over 30 years, the difference between investing $2,000 a year Jan. 1 and investing it Dec. 31 could add up to nearly $58,000, assuming an annual growth rate of 12 percent. The difference between investing Jan. 1 and investing April 1 of the following year would be more than $75,000.

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The IRS has finally caught up with the economic times. In response to falling interest rates, the agency has lowered its rates for the first quarter of 1992.

The interest rates on tax deficiencies decreased to 9 percent from 10 percent. The new rate applies to estimated tax under payments for the first quarter of 1992 and for the first 15 days of April.

Interest on refunds decreased to 8 percent from 9 percent. Interest is paid on refunds if the refund is not made within 45 days of the due date of your return or 45 days after you file, whichever is later.

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Let's face it. These are tough financial times. Unemployment is the economy is down, and a buck doesn't go as far as it used to. If you need professional help, the Institute of Certified Financial Planners has a free brochure called "Selecting a

Qualified Financial Planning Professional: Twelve Questions to Consider." To order a copy, call (800) 282-7526, or write to: ICFP, 7600 E. Eastman Ave., Suite 301, Denver, Colo. 80231.

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