« »

Wednesday, February 23, 2011

A guide to bank card numbers

Bank card numbers
Bank card numbers provide one layer of consumer protection
Bank cards include automated teller machine (ATM) cards, debit cards and credit cards. The use of the word bankcard in this article refers to one or more of the above types of cards. In some cases additional cards may be considered bankcards such as employee pay cards and unemployment insurance (UI) debit cards.

In all these cases, the cards have numbers on them that are used for a number of banking purposes including user identification, purchase security, protected use, and internal issuer classification(s). This article will discuss the types of bankcard numbers and their different uses.

Types of bank card numbers

1. Complete card number: The complete bankcard number itself is divided into number groupings that include the issuer number, the algorithm validity number and  the security check number. (merriampark.com)

2.  Account number: The account number on a bank card is usually around 9 digits in length. However, the length can vary between different cards or card types. The reason(s) for this variation in length include number of clients, issuer security standards, and varying internal codes and number classifications.

3.  Issuer number: The first digits in the card that typically 6 in number on the credit card identifies the bank or card issuer.

4.  Algorithm number: The numbers after the issuer number and before the last number that are used in verification of the card. This algorithm is used to prevent fraudulent creation of card numbers and often follows a simple key where every second number starting at the end of the number is doubled with the new number or 2 digit sum thereof placed beside the numbers that are not doubled. (theartofmakingmoney.com)

5. Check number: The last number of the card used to validate the card number via algorithm.

6.  Card Security Code(s) (CVC): The security code on some bankcards are numbers on the back or front of a card that add a layer of protection for the consumer. Security codes provide protection in cases where the numbers other than the card security code have been stolen. (securebmtmicro.com)

7.  Expiration date: Expiration date is simply the date in terms of day, month and year at which the card becomes invalid and cannot be used. Expiration dates can be 1 or 2 years from the date of issue and vary depending on the bank's policy. Expiration dates are used because

Bank card number applications

Bankcard number security is very important in protecting consumers and the economy. The combinations of card numbers and features help ensure theft and fraud are reduced byincreasing the amount of information a potential thief would have to obtain, complicating the creation of bankcard numbers, and matching and confirming identity of user, account holder and issuer. As mentioned previously, there are several specific uses for bankcard numbers.

User identification: The specific account number is unique to the account holder and thus helps identify and match the card number to the account holder.

Issuer identification: Bank card numbers also identify where the card account was originated. For example, the bank itself.

Purchase security: To assist the account holder, bank card numbers help prevent theft via 1) number of card number combinations, and 2) additional security code.

Fraud protection: Card issuers also protect themselves from fraud by using a specific number algorithm and number combination.

Bankcard number tips

Bankcard numbers involve more than just the numbers on the card. For the most part the bankcard numbers are for security and identification. To protect these numbers from theft or misuse it can be a good idea to practice a few methods of precaution, some of which are listed below. Bankcard theft, identity theft and bankcard fraud are all serious problems that can cause a lot of trouble if they occur. Taking the correct preventative steps help prevent these things from happening.

• Utilize secure websites for online purchases: Some websites do less to protect purchasers than others. Websites that use secure online purchasing will indicate this on their website.

• Separate numbers: Always keep pin numbers separate from the bankcard; card issuers repeatedly mention this with pin statements and new card information guides.

• Store number in a safe place: It goes without saying a bankcard should be stored in a place only accessible to its user. Otherwise theft of the card is easier for would be thieves.

• Shred statements and documentation: When documentation with card numbers and information are no longer needed, dispose of them safely by shredding them.


1. http://www.thetaoofmakingmoney.com/2007/04/12/324.html
2. http://www.merriampark.com/anatomycc.htm#Account
3. https://secure.bmtmicro.com/resources/info/CVV.html

Image license: Consumerist.com, CC BY 2.0

Tuesday, February 22, 2011

How construction loans work

Construction loans are issued for the time period in which construction is to take place. Since most buildings don't take 15 years or longer to construct, the monthly payments can be higher for construction loans if they are not financed in such a way as to either delay payments until completion of construction or after becoming non-construction permanent loans.

How to get a construction loan

Construction loans require construction loan applications that require information and documentation pertaining to the borrowers financial profile, project feasibility and legitimacy and builder related data. For example, in the case of a construction loan obtained from a bank, information about the builder, contractors, site location and details, in addition to the borrower(s) financial profile can be required.

The following link is a sample individual construction loan checklist that illustrates some of the documents required by construction loan lenders. In the case of businesses applying for construction loans, documents and information relating to the businesses' financial profile are included in the application. As with mortgages, many documents may be requested by the loan officer or the application. Some of the items a lender may look at are listed as follows:
Building related information:

• Construction permit
• Builder references, licenses, insurance and contracts
• Contractor references, licenses, insurance and agreements
• Professional appraisal of construction costs
• Liens on property if any
• Materials and labor cost details
• Land zoning authorization

Individual information:

• Tax filings from previous years
• Pay stubs and employer information
• Assets and liabilities documents
• Credit report and score
• Personal identification
• Cosigner documentation if joint

Construction loan tips

Since construction loans are complicated and involve a lot of details, patience and dedication to properly completing the loan application process is useful not only in protecting the lender, but the borrower from wrongful practices. The construction loan application can assist with reviewing and rethinking the construction, its terms, costs and potential pitfalls.

• Acquire three references from each builder and contractor
• Utilize a building appraiser who is not connected to the builder
• Obtain multiple bids on building contracts and sub-contracts
• Finance through the builder at low rates
• Agree to terms that pay only in accordance with project completion
• Try to get a transition loan that converts to a mortgage after completion
• Establish an escrow account early for construction-mortgage conversion costs

Where to get a construction loan

Construction loans can be obtained from either builders, developers or financial institutions. Not all banks offer construction loans so locating a financial institution that offers construction loans is an essential step in acquiring one. Shopping around for construction loan lenders that have a variety of construction loan products and services and low rates and mortgage lending may be advantageous as a full service construction loan lender could save a lot of headaches associated with obtaining the loan.

Advantages and disadvantages of construction loans

As with many ventures, there are advantages and disadvantages to construction loans. The dream of building a self-designed property can be a nice one and may pay off in the end, but there are many areas where complications can arise and costs can surpass expectations. Being aware of the advantages and disadvantages of construction loans can be helpful.


• Cost of building may be cheaper than purchasing new
• Design specifications can be customized
• Equity may be built into property during or soon after construction
• Location of home can be chosen in accordance with land zoning
• Sales tax on building materials is deductible on IRS Form 1040, Schedule A
• Interest on the construction loan may also be tax deductible


• Builder may file for bankruptcy
• Monthly payments can be higher
• More documentation is required than a mortgage
• Annual Percentage Rates can average higher than mortgages
• Strong collaboration is needed to facilitate the building
• A land loan may also be required
• Income may vanish leading to delinquency

Construction loans are used to finance construction projects such as homes, warehouses, and office space. These types of loans may be converted into permanent loans upon completion of construction and if done, a new application procedure can be bypassed. There are many details involved with construction and consequently, when applying for a construction loan from a bank, the bank will want to know a lot of these details. Some builders offer financing themselves. This simplifies the process but may or may not cost more. As with many things, the pros and cons of construction loans might be best considered carefully and patiently.


1. http://www.bankrate.com/brm/news/mtg/20020515c.asp
2. http://www.ownerbuilder.com/ConstructionLoan.shtml
3. http://www.ent.com/rates/ratecategoryoverview.asp?id=14
4. http://www.myownhomebuilder.com/tax-benefits-building-your-own-home/
5. http://www.bankrate.com/brm/news/mtg/20020515h.asp

Financial software: 'Stuff every investor should know'

Financial software
Financial software analysis tools help securities traders made financial decisions
'Stuff that every investor should know' by Geoffrey Considine is an informative glance at the world of 'Quantext Portfolio Planning' (QPP). Quantext Portfolio Planning is an investment management software developed by Geoffrey Considine of Quantext Inc., who believes it to be a financial software application that investors should know about.

Geofrrey Considine is a financial writer at seekingalpha.com and touts his financial analysis software as helping to improve asset allocations within an investment portfolio for more optimal money management. This article will discuss Considine's portfolio management software in terms of what it does, its validity and performance. Moreover, this article will review what Geoffrey Considine believes every investor should know. (1) in terms of defining Quantext Portfolio Planning and its effectiveness as a risk management software application.

Investing with Considne's 'Quantext'

Quantext Inc., has two portfolio planning software applications, one for retirement planning and one for portfolio planning. These two software packages called Quantext Portfolio Planner (QPP) and Retirement Portfolio Planner (QRP), run between $104-$184 and have detailed outlines that are available through Quantext Inc. for free prior to purchase. It is evident from the software description in the 'Personal Portfolio Management' section of the Considine's software that it is fundamentally centered around risk management. Thus, the software might be most useful as a tool for investors with specific investment and risk criteria.

The Personal Porfolio Management Software information downloads by Quantext illustrate the statistical techniques and models used by the software to assess portfolio asset allocations. Of particular emphasis is what is Considine's adaptation of the 'Monte Carlo simulation' that assess possible portfolio outcomes using 'realistic' numerical portfolio performance inputs such as yield and volatility. This is explained on page 26 of Quantexts PPM user guide available at its website.

When the Quantext software objectives are clearly defined, and accepted statistical and quantitative inputs are entered into the model, the output becomes an investment report that illustrates expected returns for given portfolio allocations, time-lines, risk levels etc. One of the goals of QPP is to minimize risk while maximizing earnings, thereby creating a positive relationships between investment risk and reward.

Quantext validity and performance

An investor only needs to look at the performance of portfolios that properly use QPP to see how well quantitative investing does. The fact of the matter is the market is not 100% quantitative, so quantitative asset management is a tool only and not a solution. Having said that, Considine's Quantext makes use of and relies on determining statistical probability using three well known variables i.e. Standard deviation, beta, and R squared.

It also uses what Considine refers to as Monte Carlo Modeling, which uses assumed market volatility trends to assist in forecasting a portfolio's performance. In other words, given a certain range of input variables regarding market performance, QPP measures individual portfolios against such for more optimal yields. Considine explains his methods in the following linked to article about Monte Carlo Simulation. Some of the variables used in Quantext's portfolio planning are the following:

• Probability metrics
• Investment risk calculations
• Beta correlations
• Standard deviation
• Monte Carlo Simulation
According to the software validation tests performed by Quantext, a testing of Quantext Portfolio Planner led to a 180 basis point advantage per year over what is described as 'naive diversification'. The benefits of using the software are thus advantageous in the long run and more evident with larger valued portfolios. Quantext software may be particular useful for fund managers, financial advising firms, and financial services companies seeking to enhance and fine tune their bottom lines with competitive performance.

Investors should also know there are free risk probability calculator(s) and Monte Carlo simulators are available on the internet and other software applications such as with a Microsoft Excel add in. These financial calculators may be just as helpful as Quantext's software for a fraction of the price or no cost. It is important to realize how valuable risk assessment in investment management actually is. Additionally, some fund managers oversee asset allocations that specifically make use of, and are designed around quantitative investment selections. One such group of funds is appropriately called 'Quant Funds' ,

Quantitative risk assessment tools refine and narrow risk probabilities to fine tune's one portfolio for a more statistically predictable retirement income and/or portfolio performance. This can be helpful if one is looking for this kind of preciseness. However, if the software does not contain realistic inputs that match market trends and volatility, output numbers will be less useful. Thus, knowing which input variables are used in Monte Carlo simulations are just as important as other variables such as time, monthly and annual investment contributions.


1. http://www.quantext.com
2. http://www.amazon.com/review/R28RBY66KQ1GVH

Image license: SEOPlanter, CC BY 2.0

Mutual Fund Reviews: Ave Maria Bond Fund

Ava Maria Bond Fund
The Ava Maira Bond Fund seeks to be socially responsible
The Ave Maria Bond Fund comes in two classes, I and R. The ticker symbols are AVEFX, and AVEHX. Except for the initial minimum investment required, fund capitalization and return, the two funds are quite similar in scope, objective and investment and are considered the same mutual fund. Moreover, the Ave Maria Bond Fund is a socially conscious, low risk mutual fund that was initiated in 2003 and has since provided yearly positive returns for its investors.

In so far as mutual funds go, the Ave Maria Bond Fund is relatively small with $45.9 million in assets according to its 2009, Q1 report. The AVEFX fund has a minimum initial investment of $1000.00, is strongly advised by Schwartz Investment Counsel, Inc. and only invests in companies that promote Catholic principles and/or beliefs. Investments held by the Ave Maria Bond Fund include companies such as Kellog, United Tech Corp. and Treasury Inflation Protected Securities (TIPS). (AVEFX Q1 Summary)

The largest amount of the Ave Maria Bond Fund portfolio's bond investments are in A rated bonds with the remainder in higher rated bonds except for a limited percentage in BBB rated bonds. A significant cash position is held in the fund along with common stock and investment in U.S. Agencies. The fund has a small dividend

Ave Maria Bond Fund performance

This fund is relatively safe, low risk, liquid and provides a small return after inflation and the .7 % expense ratio is calculated in. The funds value per share has ranged approximately between $9-10.50 since the fund's inception and at the time this article was written in 2009. Additionally, the fund is no load and as mentioned has never produced a negative average annual return to date.

MorningStar rates the Ave Maria Bond Fund with 3 out of 5 stars whereas Lipper rates the fund with its highest score for performance in several categories including tax efficiency, expense management, total return, preservation of capital and consistent returns. (lipperweb.com). The fund also won the 2009 Lipper award.

A point of note regarding the Ave Maria Bond Fund is its low turnover ratio in comparison to the category of mutual funds in which it operates. This and other qualities of sound management appear to be what the Lipper ratings system looks for whereas the MorningStar ratings may place more emphasis on total returns in comparison to other mutual funds in the same category.

Competitive positioning of the Ave Maria Bond Fund

Despite the Ave Maria Bond Fund's high marks from Lipper, the fund's returns leave more to be desired as evident with the funds ranking against similar funds within the same category and in comparison to the applicable bond index. Moreover, there are currently 1180 similar or competing funds, approximately 33% of which have higher returns both at present and historically. (finance.yahoo.com)

However, the 67th percentile ranking given to the fund is also its second highest in its history from a low of 27%. This is also in accordance with the MorningStar 3 star ranking which places the fund between the 32.5th-67.5th percentile of which the Ave Maria Fund scores close to a 4 star rating. Although the fund has consistently provided a positive return, it has also consistently performed below, until recently, the Barclays Capital Intermediate Gov/Credit Index according to the Ave Maria Bond Fund Q1 2009 report. (avemariafund.com)

The Ave Maria Bond Fund AVEFX and AVEHX is an average performing, low risk, minimal expense mutual fund. The fund advocates Catholic values and socially conscience investing and is heavily invested in U.S. Government financial instruments, such as bonds and treasury inflation protected securities.

Other positions the portfolio takes are corporate bonds, and corporate equity. There are some differences between the two classes of Ave Maria Bond Funds including a .29% difference in 5 year return, a $9,000.00 difference in minimum initial investment and a few hundred million dollars in capitalization.

The fund appears to be well managed, and both fiscally and socially responsible. In light of this and the fund's low risk nature, this fund may be a better place to store money than under a mattress. It has consistently returned more than inflation and the expense costs of managing the fund. However, the Ave Maria Bond Fund's performance is low compared to top performing financial instruments in its class and other potential investments. For those seeking more responsible investing and low risk with fair return, the Ava Maria Bond Fund may be worth considering.


1. http://www.avemariafund.com/home.htm
2. http://finance.yahoo.com/q/pr?s=AVEFX
3. http://www.avemariafund.com/home.htm

Originally written 06/17/2009

Image license: Alastair/Openclipart, US-PD