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Gold Delta SkyMiles Credit Card

Fixed rate of 9.99% for the life of the balance on Balance Transfer requests submitted with the application.
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Your Delta Frequent Flyer number is printed on your Card
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Earn one SkyMile® for every eligible dollar spent
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Get 10,000 Bonus SkyMiles® with your first purchase
Your frequent flyer number is conveniently printed on your Card.
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$85 Annual Fee
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DID YOU KNOW?

	It is not everyday that people get something for free. That is why whenever there are some freebies or rewards, the common tendency is to grab the opportunity. This is particularly regular in the credit card industry. In fact, it is for this reason why most credit card companies offer different credit card rewards. They know that people will be enticed to sign up for a credit card not just because they need it but also because they want the rewards. Credit card rewards are already accepted by the public as part of the credit cards. It is, basically, the greatest marketing tool of every credit card company in order to entice people to sign up. With a growing fierce competition among the card businesses, offering some rewards is the only way to persuade a consumer to use a particular credit card instead of the other one. In turn, there are many rewards as there are many credit cards in the market today that people do not even realize that many of them are not actually necessary. Hence, it is important to analyze first the rewards being offered by the card company before signing up. The problem with most people is that just because a particular credit card offers many rewards they tend to get one even if they had enough. No wonder why the average American household had been reported to have 7 to 10 credit cards in a 2002 survey. Indeed, nobody can ever question the proliferation of rewards in the credit card industry. It is the credit card company’s way of getting a sale, so it should be left that way. What should be done is for the consumers to know and analyze the kind of rewards they really need. Here is a list of some rewards that people should learn to evaluate if they really need them on their credit cards. 1. Cash back rewards Many credit card companies offer cash back rewards. These companies insist that they can give their costumers free cash just by using their credit cards every time the customers purchase something. It sounds like a good idea, but one should bear in mind that most credit card companies could only give “1% cash back.” In addition, not all purchases have cash backs. In reality, the company will only give cash back to some particular transactions, not all. What is even worse, some companies give the rewards annually, usually within the date the card has been activated. That would mean a long time to wait for incentives. 2. Freebies Most credit card companies will offer freebies to their customers. These freebies are usually redeemed once the user was able to accumulate the necessary points. These points are accrued every time the consumers use their credit card for purchases. After building up some points, the consumers can exchange these for some free items. These things can be pretty useful especially if a person has some need for the item he or she had received. However, people should keep in mind that freebies and reward points may vary from company to the other. Hence, it is important to evaluate this kind of reward as well. 3. Airline Miles Some credit card companies offer “airline miles” every time the credit card holder makes a purchase. Accumulated airline miles can be exchanged for some airline tickets. This kind of reward can be very useful especially if the credit card holder travels a lot. Otherwise, it would not do anything much as a reward. These are just a few of the many rewards that credit cards offer. All of them can be very beneficial; there is no doubt about it. The only drawback is when the customer has no use for it. Therefore, it can be concluded that credit card rewards are only true to those who can benefit from it. Otherwise, rewards are not rewards but plain marketing strategy on the run.

We’ve all been taught by our parents, grandparents, and conventional wisdom that we should pay off our home mortgages so we can own our home free and clear. So that the bank can never take our home from us. I’m going to show why that thinking is outdated and present some new ideas on using mortgages as a tool to increase wealth.

Depression-Era Thinking

During the early part of the 20th century, loans and specifically home mortgages were written very differently from the way they’re written today. The main difference for our purposes concerns the bank’s ability to “call”, or request full payment on, a mortgage at any time. This became a huge problem during the Depression. Like many crises in history, the Depression started out small and snowballed into a full-blown financial crisis, the likes of which our country had never seen before and hopefully will never see again. But this isn’t a history lesson, so let me share the pertinent facts.

First, as the economy slowed and unemployment increased, the feeling of unease spread and people started to doubt the wisdom of keeping their savings in the bank. As more and more people withdrew their money, the banks were soon out of reserves and were scrambling for ways to repay depositor’s funds. In desperation, they began to call in home mortgages, essentially telling homeowners they had 30 days to pay off their mortgage in full or the bank would foreclose on the home. Hundreds of thousands of people lost their homes and were financially ruined. These dark economic times led to a deep distrust of banks and mortgages, so much so that everyone agreed the best way to ensure your financial security was to pay off your mortgage and own your home free and clear, so the bank could never take your home away from you.

The good news is that this is no longer the case! There are a few reasons for this, three of which I’m going to cover in this article.

To protect the consumer, a shift in the way mortgages are written took place. It is no longer legal for banks to write mortgages requiring a mortgage to be paid in full with no reason. The new protections go further still – federal law requires a drawn-out foreclosure process that means not only does it take at least 3-4 months to foreclose on you if you just stop making your payments, but you have many opportunities along the way to redeem yourself by bringing the mortgage current and bring yourself out of foreclosure. It is now extremely difficult for a mortgage lender to take your home away from you if you really want to keep it.

Another reason why the reasoning behind paying off one’s mortgage is less applicable now is that we’re a much more mobile society than we were in the early 20th century. Back then, most people would stay in the same town where they were born and a vast majority of people lived in the same house for their entire lives, and probably even gave the house to their kids when they passed on! Now, very rarely as adults do we end up living in the house we grew up in. Not only that, as technology increases and the Internet makes our world smaller, it’s less and less necessary to live in a specific area. We can move wherever we want to without giving up much, and many people are taking advantage of this new-found freedom. The average time someone holds a mortgage now is 3.3 years!

Finally, the government has provided us with some very strong incentives to have a mortgage, the main one being the mortgage interest deduction. Every person in the United States who owns a home and has a mortgage can take the mortgage interest they pay each year and deduct it from their taxable income. This results in tens of thousands of savings every single year for every person who owns a home! Once your home is paid off completely, you may still deduct the property taxes from your income but you no longer have a mortgage interest deduction. The government is essentially rewarding you for having a mortgage.

So, if the Depression-era wisdom of paying off one’s mortgage and owning a home mortgage-free no longer applies, what’s the alternative and what are the best ways to take advantage of this brave new world? In two words: cash flow.

The great majority of wealth in property is built not by paying down the principle on a loan, but through appreciation. If you’ve owned a home for at least five years, think back to when you bought your home. Is the majority of your equity due to paying down the principle on your loan, or due to appreciation in the property? Except in very rare cases in markets with little or no appreciation, growth in equity comes primarily through appreciation. This being the case, the way to build wealth is to control real estate that is appreciating, and the way to control property is by controlling the mortgage.

If you’re still with me, let’s take this concept a step further. If the way to control appreciating real estate is by controlling the mortgage, it really doesn’t matter if we’re paying down the principle or not. In fact, it would be to our benefit to control the property with the lowest payment possible. This way, we’re maximizing our monthly cash flow. Cash flow becomes extremely important for one simple reason – it’s what allows us to control our property. The bank isn’t going to take our house away if we run out of equity, as long as we continue to make the payments. As long as our monthly cash flow is enough to cover the mortgage payments, we have nothing to worry about.

Two of the best ways to control real estate with the lowest monthly payments are through interest-only loans and PayOption ARM loans. An interest-only loan is one in which you are required to pay only the interest that accrues each month and you pay no principle. A PayOption ARM gives you three payment options each month – a principle and interest payment, an interest-only payment, and a minimum payment that actually allows you to borrow against your equity and pay less than the interest that accrues each month. In essence, you’re using a little bit of your equity each month to keep your mortgage payments as low as possible and maximize your cash flow.

I hope this article has given you a fresh point of view on mortgage financing and some ways to maximize your wealth by using mortgages as a tool. Consulting with a trusted mortgage planner, someone who knows your situation and is experienced with these kinds of mortgage products, is highly recommended and will ensure that you’re on the right track.

In Part II of this article, I will discuss what you might do with the money that you’re saving by not paying off the principle on your mortgage.