Actual finance blog

When it comes to rebuilding American cities, there are two basic approaches: Big, sweeping visions. Or block-by-block rebirth.

And the conflict between those two ideas sits at the heart of the debate over Paul McKee’s plan to rebuild 1,500 acres of St. Louis’ north side.

Is the $8 billion vision — of job centers, and housing, new streets and parks — the kind of plan that St. Louis needs to become a new, more vibrant city? Or is it the top-down imposition of one man’s vision upon its citizens, bound to destroy even as it creates. Is it a shot for the moon? Or too big to succeed?

These are the questions city leaders and residents will be asking over the next few months as they consider McKee’s NorthSide proposal and his unprecedented request for $205 million in city backing and countless other incentives. And as they do, they’ll enter a debate between big and small that has existed in urban planning for generations.

A century ago, the great architect Daniel Burnham urged Chicago to "Make no little plans. They have no magic to stir men’s blood." He then authored a massive plan to rebuild downtown Chicago. It helped transform the city.

Fifty years later, famed urbanist Jane Jacobs urged the organic, block-by-block rebirth of

urban neighborhoods, and warned against ripping out the old to make everything shiny and new. She helped fight off plans to clear Greenwich Village for a highway.

Here in St. Louis, efforts at so-called "urban renewal" cleared the Mill Creek Valley to build Highway 40, then built the doomed Pruitt-Igoe housing complex. More recently, city neighborhoods such as Tower Grove South and Benton Park have revived themselves on a diet of small-scale rehabs, even as downtown silver bullets like Ballpark Village and the Bottle District remain just dreams.

"The areas that have fared best have really been driven by that block-by-block mentality," said Claralyn Bollinger, president of ReVitalize St. Louis, a coalition of neighborhood activists. "It takes a whole community to make projects happen that make a neighborhood strong.

SILVER CANNONBALL

McKee’s plan is much grander than those — perhaps the biggest ever proposed in St. Louis. It’s more like a silver cannonball than a silver bullet. To make it work, he pledges to combine the best of both approaches — the diverse urbanity of Jacobs with the inspiring scale of Burnham.

"You have to engulf that whole huge area with a new sense of belief," he said.

It’s a project on the kind of scope the government used to do, several local planners noted, back in urban renewal days. They didn’t always work out as planned.

Mill Creek, for instance, still generates resentment, said veteran St. Louis architect Andy Trivers, over the thousands of people displaced to build a highway.

"It was a different world," Trivers said. "And that was OK then ‘for the greater good.’ But it really wasn’t good."

Inevitably, there was a backlash. Citizen activists fought off big projects, and the government gradually took a more hands-off approach. Neighborhood-run development groups came into vogue, and public-private partnerships replaced big government projects.

That’s especially true in St. Louis, said Sarah Coffin, a professor of urban planning at St. Louis University. The city has taken a light touch to planning, especially at the neighborhood level. Coupled with a weak real estate market, that opened a window for a developer like McKee to create his own vision.

"The city’s not going to lead," she said. "So the private sector will."

REACHING OUT

And while private development may be more efficient, it raises its own set of thorny issues — like public involvement.

The sharpest criticism of McKee comes from those who say his plan is too top-down, that he hasn’t done enough to engage a community that feels alienated by his five years of silent land-buying instant cash loans.

But McKee, chairman of McEagle Properties in O’Fallon, Mo., is a private developer. Until now, he hasn’t had to engage the public, notes Todd Swanstrom, a professor of public policy at the University of Missouri—St. Louis. But he wants the city’s approval for $410 million in infrastructure financing — and its agreement to pay back half that sum if the project can’t — and that will force it into the public realm.

"He’s going to have to be very public," Swanstrom said. "There can’t be too much consultation."

Still, more consultation from the start would have been better, said Bollinger.

Most of the small local groups that have worked to turn around neighborhoods across the city in recent years have focused on community involvement, she said. They’ve woven rehabs and new businesses into the existing fabric.

"And I’m not convinced that putting down a huge-scale development like this is going to be a panacea," Bollinger said.

A DIFFERENT WAY

Just across Florissant Avenue from the footprint of McKee’s project, sits a contrast to that huge scale development — Old North St. Louis.

That neighborhood has seen a wave of rehabs and new homes built in recent years, and the nonprofit Old North St. Louis Restoration Group will finish a 27-building, $35 million redevelopment of the 14th Street pedestrian mall. The once nearly empty plaza will soon house shops and businesses on the street level, with 80 apartments above.

Local residents have driven nearly all these efforts, said Sean Thomas, the group’s executive director. And they’ve focused on building from existing assets of the neighborhood. It takes a long time, though.

"One of the great challenges is we have to do it piece by piece. We just don’t have the resources to do everything," Thomas said. "But it happens at a pace that people can adjust."

Farther west, where McKee is working, there’s less fabric to build on and fewer residents. McEagle’s request for city financing says 44 percent of the 1,500-acre redevelopment area is either vacant land or vacant buildings. About 8,900 people live there, many in apartment complexes or developments that would stay put. And McKee says he wants to build around and include existing residents.

TOO BIG TO FAIL?

While some observers blame McKee for helping tear down that fabric and drive down the population as he has bought land in recent years, others note that the near north side has long been troubled.

"It’s the scar of 50 years of disinvestment," said Rick Bonasch, a veteran of St. Louis community development who has launched a blog that follows NorthSide. "And it’s big.

So big, McKee argues, that the area needs a really big plan if it will ever turn around. Nothing small will do the trick.

"We’re trying to affect something in a big way," McKee said.

That’s why he bought as much land as he could, where he did, he said. And it’s why he’s asking the city for more: To create jobs and build new neighborhoods in a place that’s seen too little organic growth for too long.

It’ll take a lot of land. McKee’s already got some. And that speaks to another truth of really big plans, Bonasch noted. In a sense, they’re too big to fail.

"We all kind of have a stake in him being a success here," he said. "He controls a lot of land, and I don’t think he’s going away."

Source

Chrysler’s bankruptcy lasted just six weeks, but its next test — operating as a Fiat SpA-controlled company — arguably will last longer.

The road ahead for Chrysler Group LLC remains a rocky one, analysts say, despite being saved from liquidation by Fiat of Italy.

Benefits of the partnership, such as sharing vehicle platforms and dealership networks, won’t surface until mid-2011, when the first vehicles using Fiat platforms arrive at U.S. dealerships, according to one analyst’s timeline.

Until then, the alliance must figure out how to endure a dire market without a strong portfolio of new products. It also must implement its plans to make and sell Fiat vehicles in the U.S.

"The next couple of years are going to be about figuring out the difference between the idea and reality," said Stephanie Brinley, a Troy, Mich.-based analyst for auto consulting firm AutoPacific.

Already, the automaker has taken sweeping steps: It laid off workers, cut production and announced plant closures — including both assembly plants in Fenton — to restructure and survive. It has a new leader, Fiat Chief Executive Sergio Marchionne, who spearheaded a turnaround at the Italian automaker in recent years.

But Marchionne and Chrysler still face worrying obstacles:

— Tumbling sales caused by the global recession and tight credit.

— Consumers’ negative perception of a bankrupt company.

— An aging product line with few new products in the pipeline until the Fiat-based vehicles arrive.

Those issues will push Chrysler’s U.S. market share below 5 percent in the next 12 to 15 months, predicted Erich Merkle, president of Autoconomy.com in Grand Rapids, Mich.

Chrysler had a 13.6 percent market share in 2005 and was the No. 3 automaker in terms of U.S. market share, according to data from J.D. Power and Associates. The next year, Toyota pushed Chrysler into the fourth spot.

Merkle estimates Nissan and the South Korean conglomerate of Hyundai-Kia Automotive Group will outpace Chrysler’s U.S. market share in the next six months. That could push Chrysler to the No. 7 spot, he said.

"Every time you find a new partner, the product cadence and product pipeline takes a hit," Merkle said of Chrysler’s new alliance.

Chrysler, for its part, contends it has 24 new vehicles in the next four years. Spokesman Rick Deneau declined to say how many of those were new-name products versus redesigned versions of existing models.

In 2010, it will launch completely redesigned versions of the Chrysler 300, Jeep Grand Cherokee, Dodge Charger and Dodge Durango, he said.

Another analyst, Jim Hall, said that for the next few years, Chrysler will need to live off its profitable vehicles — the minivans and the Dodge Ram. Both have had sales challenges.

"They have to play with what they’ve got," said Hall, principal of 2953 Analytics in Birmingham, Mich.

FIAT TURNAROUND

But the automaker will be playing with a new leader, Marchionne.

Marchionne took the helm of Fiat in 2004, when the automaker was at the edge of bankruptcy. By changing its management and elevating younger employees to higher positions, he helped Fiat rebound, said Pierluigi Bellini, an associate director in Milan, Italy, for IHS Global Insight.

"He’s a very strong leader. He thinks very much outside of the box," Bellini said. "He’s very demanding (of those he oversees) but also gives a lot of empowerment to them."

Marchionne also has forged more than two dozen partnerships globally, Bellini added. And it seems he intends to do more: Marchionne told trade publication Automotive News that manufacturers need to make 5.5 million vehicles a year to remain profitable and survive.

Fiat made about 2.4 million vehicles last year among its Fiat, Alfa Romeo, Ferrari, Maserati and Iveco units, according to IHS Global Insight data. Chrysler made about 1.9 million vehicles among its Chrysler, Jeep and Dodge brands.

Bellini expects that Marchionne will continue to pursue alliances.

Just two weeks into his position as the head of the new Chrysler company, he is using a similar shake-up to the one implemented with Fiat.

Earlier this month, on the day Chrysler and Fiat finalized their deal, Marchionne announced changes to the new company’s leadership compare car insurance prices. He promoted several Chrysler executives, including Jim Press as his deputy chief executive, but also brought in a few Fiat leaders.

Fiat is "certainly not coming in and taking over," Brinley said, adding that Marchionne kept many responsibilities with North American, not Italian, executives.

A request to talk with Marchionne or one of his executives was not granted. Chrysler spokeswoman Shawn Morgan said the company is not making executives available for interviews.

WHAT’S NEXT

Fiat SpA took an initial 20 percent stake in the U.S. automaker earlier this month. In exchange, the Italian automaker will give Chrysler access to small-car platforms at a time when the U.S. company’s lineup is skewed toward pickups and sport utility vehicles. It also gives Chrysler another inroad to selling vehicles outside North America — a feat the U.S. automaker has struggled to achieve.

For Fiat, the alliance gives it access to Chrysler’s manufacturing facilities and dealership network. Fiat made a strong push in the U.S. market in the 1960s and 1970s but pulled out after distribution and quality problems, according to IHS Global Insight.

"Fiat has been looking for returning to the U.S. with the Alfa Romeo (luxury) brand for years," Bellini said.

Several Alfa Romeo cars are scheduled for the U.S. market in the next few years, according to a research note by IHS Global Insight. Likely plans include:

— The Alfa 169 sedan will be built in Chrysler’s Brampton, Ontario, plant in November 2011 for the 2012 model year.

— The Alfa Romeo GTX will be built at Chrysler’s Jefferson North Assembly Plant in Detroit in July 2011.

— The Alfa Romeo MiTo hatchback will be built at the Belvidere, Ill., plant in July 2011.

Some Chrysler products — like the Dodge Caliber and Jeep Liberty — likely will be built on Fiat-based platforms, the research note said.

The only Fiat-badged model to be sold in the U.S., the Fiat 500 subcompact, will be made at Chrysler’s Toluca, Mexico, plant starting roughly in July 2011, according to IHS Global Insight.

Chrysler’s Deneau said Marchionne told employees a few weeks ago that product plans for the Chrysler-Fiat alliance could be unveiled in 60 to 90 days. He could not provide details about specific vehicles.

Deneau also wouldn’t comment on IHS Global Insight’s report of the mid-2011 timeline for Fiat-based vehicles to be sold in the U.S.

But before those car designs come to the U.S., Fiat and Chrysler will have to address differences in federal vehicle regulations and pricing structures.

"Europeans are willing to pay more for small cars (than Americans), and they’re willing to pay for features in small cars," Brinley said.

Several analysts said American car shoppers may not eagerly embrace the Fiat products for several reasons. First, the reputation of poor quality that Fiat left in the U.S. may dissuade consumers from returning to the automakers’ brands, analysts said.

Second, analysts question whether the U.S. government, and not consumer demand, is leading the push for smaller cars on U.S. roads.

"The U.S. is not (a big market) for small, compact cars," even if gasoline prices go higher and the government implements higher fuel regulations, Bellini said. "I still think the American people like big cars, maybe with smaller engines."

Whether Fiat can sell these smaller vehicles in the U.S. is difficult to gauge.

And some say the Fiat alliance won’t accomplish Chrysler’s most important goal: saving it from an eventual breakup.

Merkle said he was glad a bankruptcy judge approved the alliance because it gives Chrysler a chance to wind down operations versus a quick liquidation.

A possible scenario, he said, is Fiat selling off the Jeep and pickup brands, while keeping some Chrysler plants open to produce its own products in North America.

"I take no pleasure in saying that because I love the Chrysler (brands)," he said. "I just don’t see how they get through this."

Source

Unionized workers at the Globe and Mail have been asked by their bargaining committee to vote on the latest company contract offer this weekend, an offer the union committee has recommended they reject.

The move comes after Globe management sent a revised offer today to staff that will replace their expiring contract, with all concessions and changes to be implemented by July 1.

The union has already been given a mandate to call a strike by its membership in an earlier vote. But Brad Honywill – Communications, Energy and Paperworkers Union representative – said Globe employees will vote on the offer Saturday at a Toronto hotel and other bureau locations.

Management's revised proposal includes reducing the collective agreement's length to five years from six years. It also gives existing employees the option to convert their defined-benefits pension plan into a defined-contribution plan – which offers a lower payment – or stick with their defined plan under an increased member contribution rate.

New hires would be started only in a defined contribution plan.

"Based on the economic climate we find ourselves in – the recession and the media landscape – we believe this offer is fair and reasonable," Phillip Crawley, Globe publisher and CEO, said in an interview.

Crawley said the Globe isn't planning to lock employees out when their existing contract expires.

"The company remains available to bargain at any point," he added.

The offer emailed today maintains the previously proposed annual wage increases of zero per cent in 2009 and 2010, 1.5 per cent in 2011, two per cent in 2012 and 2.5 per cent in 2013.

However, the latest offer removes a plan to give workers one unpaid week off each year, though it holds to a workday increase to 7 1/2 hours from seven, increasing the work week to 37 1/2 hours.

Union negotiator Howard Law believes the company removed "straw men" from the proposals to look like they're making concessions, but that it was up to Globe staff to decide if they agree.

"The union's policy is that no matter how bad the company's offer is, and even if the union bargaining team can't recommend it … we take it back for a vote," Law said. "We basically refresh our strike mandate."

Last weekend, editorial, advertising and circulation workers voted 97 per cent in favour to give the union a mandate to call for a strike at the Globe, one of Canada's oldest and most influential newspapers payday loan lenders.

The contract that expires on Tuesday affects about 480 employees at the company.

Many Canadian media outlets are coping with change as advertisers slash their budgets and people migrate to the Internet for their information.

Montreal's La Presse, one of the biggest papers in Quebec, has stopped publishing its Sunday edition while the National Post, owned by Canwest Global Communications (TSX: CGS), has canned the Monday edition for the summer.

The Globe told its staff that advertising revenues have been steadily declining in recent quarters. In May, ad revenue fell 28 per cent over the same time a year earlier, it said.

"We have to balance, on the one hand, being fair to you, our employees, and on the other hand making sure our owners and shareholders continue to see The Globe and Mail as a viable long-term business," the company wrote in the email.

"Bargaining unit employees who come to work on July 1, 2009 will work under the terms and conditions of this offer."

The Globe is owned by CTVglobemedia Inc, which itself is owned by a group that includes Woodbridge, the Thomson family owned investment company, Torstar Corp. (TSX: TS.B), the Ontario Teachers Pension Plan and BCE Inc. (TSX: BCE), Canada's largest telecom company.

Other news organizations have also been looking to cut operating costs in recent quarters.

Canwest has asked organized workers and senior managers for wage concessions it said could save it up to $20 million a year.

The Winnipeg-based multimedia company is also in talks with creditors and banks to restructure a $3.9 billion debt that has weighed down the company's operations for years.

Canadian media conglomerate Quebecor Inc. (TSX: QBR.B) is reworking its operations to regionalize some smaller local papers in Quebec and Ontario.

Other Canadian news organizations, from publishers to broadcasters, have been slashing hundreds of jobs to streamline and become more efficient as they cope with the advertising slump.

In the United States, dozens of papers are in bankruptcy courts and have been slashing jobs just to survive.

Source

The Federal Reserve Bank of St. Louis named Christopher J. Waller senior vice president and director of research and Robert H. Rasch executive vice president and senior policy adviser.

Sachs Electric promoted Joseph T. Barnard to vice president, Sachs Select.

The Vandiver Group added Mike Amelung as Web developer and Kanna Taylor as a team member.

Evans & Dixon hired Eric Kukowski as of counsel in the workers’ compensation practice group.

Consolidated Design & Construction added Jessica Williams as a designer.

John R. Shivers III joined Pulaski Bank as assistant vice president and business development officer in the Florissant office.

The Sisters of Mercy Health System named Judy Akins vice president of marketing and Barb Meyer vice president of corporate communications.

Jay Wolfe Toyota hired Gerry Hogan as new-car sales manager.

Fitness Showcase promoted Rick Vemmer to president, Tammy Hauk to secretary-treasurer and Shawn Hannagan to director of sales.

Glik’s added Ashley Smith as senior assistant buyer of junior tops and dresses.

Gorman & Gorman Home Loans appointed Michelle Kuehn as processor/closer payday loan online.

Marketicity added Stacey Rynders as communications strategist.

Heartland Bank hired Melissa R. Wilson as senior vice president, wealth management/retail services.

Briarcrest added Theresa Rein as regional sales leader for Holiday Retirement’s Midwest operations.

Husch Blackwell Sanders added Brett D. Siglin as an associate in the banking and finance department.

Spencer Fane Britt & Browne named Thomas E. Osterholt, Jr. managing partner in St. Louis.

Weekends Only promoted David Lay as assistant manager of its Affton store.

Mark Steiner was appointed as an account executive for Eastern Missouri for Tension Envelope.

Clean The Uniform Co. named Lisa Hawthorne as customer service representative.

Compiled by Matt Fernandes

To submit items:

St. Louis Post-Dispatch

900 North Tucker Boulevard

St. Louis, Mo. 63101

E-mail: bizfolks@post-dispatch.com

Phone: 314-340-8200

Fax: 314-340-3060

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Bell and Rogers are waging a war for your business – and you can gain by playing off one telecom giant against the other.

It’s Red (Rogers) vs. Blue (Bell), cutting prices for couch potatoes. And both combatants are using couches in their ads.

Rogers kicked off the fight by showing how its home phone service – which includes calling features (such as voice mail and call display) and long distance minutes – undercuts Bell’s prices by up to $25 a month.

Bell attacked on another front, boasting that its satellite TV service was cheaper than Rogers cable and included more channels. Plus, its wireless smartphones were faster and cheaper, too.

Behind the skirmishes could be the arrival of new wireless phone players to Canada’s market later this year.

Bell and Rogers want to shore up their positions before the new companies put out innovative price plans.

They also want to sign up customers for at least one service to get a foot in the door.

Later, they will offer bigger discounts for ordering more services from the same supplier.

This strategy, known as bundling, is the weapon of choice for companies that want to increase customer loyalty.

You can use bundling to your advantage – and capitalize on the rivalry to negotiate better deals.

Marc Charbonneau has three Rogers services (cable TV, Internet and home phone). He was getting a bundle discount of 15 per cent a month on each one.

He was dismayed to learn his saving would drop to 10 per cent, since Rogers now requires having four services to get a 15 per cent bundle discount.

"I was prepared to cancel all of my Rogers services as the prices just seem to rise and rise and I could not afford it," he said.

But when he called to cancel, Rogers came back with several attractive offers.

"The end result is that I now have phone service with two options instead of one and 500 minutes of Canadian long distance affordable health insurance in nc.

"I have reduced my Internet charges and Rogers has increased its speed.

"In the end, I am saving $25 a month. I am quite impressed that customer service was able to adjust my billing with one call and hear my concerns."

I, too, have three Rogers services. And I, too, got a recent letter saying my 15 per cent bundle discount would go down to 10 per cent.

My home phone service is with Bell. And I’m not ready to switch sides yet.

So, I called Rogers and Bell and asked them both a few questions.

How much did our household pay and what were we getting?

What rate plans had come out since we signed on?

If we adopted a different rate plan, how much could we save?

What other savings could be had by cutting features we didn’t use?

As a result, I got offers of better deals from both Rogers and Bell.

I’m paying less than I was before – and I didn’t have to move anywhere.

Rogers agreed to raise our discount on cable TV and Internet to 20 per cent for the next 12 months.

Though our wireless discount would drop to 10 per cent, Rogers added customer loyalty discounts that cut $25 a month from our wireless bill.

Bell also found savings once I spoke to the "loyalty department." Our old plan was replaced by a new one that cost $10 to $15 a month less.

My advice: In a price war between two big players, ask for concessions. Play one side against the other. Don’t switch sides without a fight. You can win great deals for yourself – at least until next year, when you may have to fight all over again.

eroseman@thestar.ca

Source

China’s economy is headed in the right direction but the foundations of the recovery are not yet solid, a Chinese central bank official said on Tuesday, adding to a chorus of voices cautioning against expectations of a rapid rebound from the global crisis.

The world economy is struggling to overcome problems stemming from last year’s housing and financial market meltdown, with access to credit still tight, companies reluctant to spend and job losses mounting.

The U.S. unemployment rate, at 9.4 percent already its highest in about 25 years, is likely to hit 10 percent in the next couple of months, a White House spokesman said on Monday.

U.S. President Barack Obama will likely discuss his plans to create jobs and stem unemployment when he gives his fourth White House press conference since taking office later on Tuesday.

Around the world, governments and central banks have been cutting interest rates to record lows, buying financial assets and building infrastructure to prop up growth and encourage consumers to spend.

German consumer sentiment is poised to rise to a one-year high in July, according to the GfK market research group, but analysts cautioned of more pain to come.

“Consumption is preventing the economic downturn from becoming more acute,” said Klaus Schruefer, an economist at SEB Bank. “But over the medium-term the outlook is not so good: the financial crisis has yet to reach most people and the companies are still holding back from laying people off instant cash advance.

CHINA STABILISING

Su Ning, a vice-governor of the People’s Bank of China, said he hoped China would be among the first economies to recover from the crisis.

“The overall situation is stabilising and moving in the right direction,” Su said at a conference on Tuesday.

But he cautioned that the pick-up was still not firmly anchored and expressed particular concern about the “grim” international environment for Chinese exporters as the financial crisis continues to take a toll on global growth.

China’s annual economic gross domestic product growth for the second quarter would probably accelerate to close to 8 percent from 6.1 percent in the first three months, a government statistician said in a separate report on Tuesday.

STOCKS SLIDE

Both the World Bank and the Organization for Economic Co-operation and Development offered dispiriting assessments of the world economy on Monday, adding to concerns about the economic outlook that has scuppered a rally in equity markets.

Wall Street suffered its worst one-day loss in two months on Monday, with the S&P 500 sliding 3 percent and into negative territory for the year. 

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NEW YORK — They say one thing, but often mean another. It’s one reason credit card statements can slowly ensnare people into bigger debt loads. The mysterious stew of fine print on the back of bills doesn’t help clarify matters.

A law passed last month will bring some relief. Starting next year, credit card companies will need to make statements easier to read and spell out the price of carrying a balance.

For instance, companies will need to provide a table showing how much interest charges will cost if only minimum payments are made. Cardholders will also be shown how much they need to pay each month to deplete a balance within three years.

What the law won’t do is wipe statements clean of misleading or confusing terms. The details of just how banks will implement the changes by February aren’t yet clear either.

So until then, here’s a guide to decoding what your credit card statement really means.

AVAILABLE CREDIT

There are two reasons why the term "available credit" is misleading.

The first is that card companies don’t have to stop you from exceeding your credit limit. But they will slam you with a fee for doing so.

Nearly all cards have over-the-limit fees, with the average being about $29, according to Consumer Action, an advocacy group based in Washington. One provision of the new credit card law is that card holders will have to elect the option to make charges beyond their limits.

The second reason the term is misleading is that a transaction can be denied before your so-called available credit is used up. This might happen if your spending habits are deemed risky or out of character.

A common mistake is confusing your available credit with your cash advance credit line. The two should be listed separately, with the latter coming with a significantly higher interest rate.

AVERAGE DAILY BALANCE

It’s easy to dismiss this figure, because its purpose isn’t immediately clear. The bottom line: It’s an amount used to calculate finance charges business card templates.

To determine your interest charge, the card company starts with the average daily balance — which is your balance at the end of each day during a billing period, divided by the number of days in the period.

That number is then multiplied by a monthly period rate, which is the annual interest rate divided by 12. This determines your financing charges for a given billing period.

In some cases, banks use daily periodic rates, meaning they divide the annual interest rate by 365. The rates should be listed under a heading such as "Finance Charge Schedule."

So what does that mean for you? Paying off bills early — even before the due date — would lower your average daily balance and subsequently your financing charges.

DUE DATE

Even if you mail your payment so it arrives by the due date, don’t be surprised if you’re slapped with a late fee.

One reason is that deadlines can be for a specific time, sometimes as early as 1 p.m. So if your payment isn’t processed until later in the afternoon — boom — late fee. The time that your payment is due is usually buried somewhere in the terms on the back of your bill.

The new law will push due date deadlines back to 5 p.m. and require that they don’t fall on a holiday or weekend.

RESIDUAL INTEREST

Let’s say you pay off a $1,000 balance. But the next month, you get a bill for interest charges on that $1,000. This is called residual interest.

What’s happening is that interest continues accruing on debt in that window of time between when your statement was issued and when you make your payment. By the time you get your statement and submit the payment, you’ve racked up more interest.

Source

Mexico’s central bank cut its benchmark interest rate for a sixth consecutive month in a bid to bolster the country’s flagging economy, and said it would soon stop lowering borrowing costs.

The bank’s five-member board, led by Governor Guillermo Ortiz, lowered the key lending rate a half percentage point to 4.75 percent. The decision matched the forecasts of 22 of 26 economists surveyed by Bloomberg. Three analysts expected a quarter-point cut and one predicted a 0.75-point reduction.

The board “considers that its easing cycle is close to ending,” the bank said in a statement. “Future actions that might be taken will possibly be of smaller magnitude and consistent with both the evolution of the economy and the performance of inflation.”

The economic contraction has been “severe” in the first half of the year, and is a greater risk than inflation, the bank said. The comments signal that it will probably cut a quarter point next month and then keep the rate unchanged for the rest of the year, said Gabriel Casillas, chief economist for Mexico and Chile at UBS AG.

Latin America’s second-biggest economy shrank the most in 14 years in the first quarter and industrial output has declined for the last nine months.

‘Downbeat’

“The statement was downbeat about the prospects for Mexican growth,” Rafael de la Fuente, chief Latin American economist at BNP Paribas, said in a report. “The central bank’s assessment of the external greenshoots is also mixed and less upbeat than what we have seen from other central banks.”

Mexico’s peso gained 0.3 percent to 13.3548 per U.S. dollar as of 12:53 p.m. New York time from 13.3904 yesterday, according to data compiled by Bloomberg.

Barclays Capital changed its rate outlook today, interpreting the bank’s statement as “somewhat hawkish.” The bank will cut borrowing costs by a quarter percentage point next month and likely leave rates unchanged in subsequent months, according to the forecast low fee payday loans. Barclays had expected the bank to cut by a half point in July and a quarter point in August.

Gross domestic product shrank the most since the 1995 Tequila Crisis in the first quarter, output has tumbled every month since July, including a 13.2 percent plunge in April, and sales of goods abroad have fallen by more than a third in the last year.

Swine Flu

The swine flu outbreak in April and May also battered the economy as the government shut schools, restaurants and theaters and foreign tourism revenue plunged. The flu may reduce GDP by 0.5 percent this year, Ortiz said last month.

“The contraction of economic activity in the first half of the year has been severe,” the bank said in its statement. This decline “implies a more significant deterioration in the balance of risks on the side of economic activity than for inflation.”

Ortiz said in a June 11 interview that inflation will slow at a “rapid rate” and that a recent rise in global commodities prices is “less threatening” than when those costs reached their peak. The effect of a weaker peso on prices has mostly ended, he said.

Annual inflation slowed to within the bank’s second-quarter forecast of 5.5 percent to 6 percent for the first time in May as the monthly rate fell the most in two years. Ortiz said inflation will meet the bank’s forecast for the quarter.

Lower interest rates can help prompt businesses to invest and consumers to buy on credit. Cheaper loans also can spur inflation by strengthening demand.

“The main argument for lowering the rate is the state of the economy,” said Benito Berber, an economist at RBS Greenwich Capital Markets in Greenwich, Connecticut. “The industrial sector is contracting at double-digit rates.”

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The index of U.S. leading economic indicators rose in May for a second consecutive month and a regional factory gauge climbed more than forecast in June, showing the worst recession in five decades may soon end.

The leading index increased 1.2 percent after a 1.1 percent gain in April, the best back-to-back performance since November- December 2001, the New York-based Conference Board reported today. The Federal Reserve Bank of Philadelphia’s general economic index jumped to the highest level in nine months.

Stocks snapped a three-day losing streak and Treasury securities fell for a second day after the reports bolstered forecasts the world’s largest economy will begin to grow in the second half of 2009. A third report showed the number of Americans receiving jobless benefits dropped for the first time since January, indicating the job market is starting to thaw.

“The freefall-type environment we saw in the first quarter is definitely behind us,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. Manufacturing “is turning a corner” and “we will exit the recession at some point toward the end of this year.”

The Standard & Poor’s 500 index rose 7.66 points, or 0.8 percent, to close at 918.37 in New York. The yield on the benchmark 10-year Treasury note rose to 3.81 percent at 4:45 p.m. from 3.69 percent late yesterday.

Exceeds Forecast

The leading indicators, which point to the direction of the economy over the next three to six months, were forecast to rise 1 percent, according to the median of 55 economists in a Bloomberg News survey, after an originally reported increase of 1 percent in April. Estimates ranged from a decline of 0.5 percent to a gain of 1.8 percent.

Still, any recovery later this year will not be strong enough to prevent unemployment from climbing even more after reaching a 25-year high of 9.4 percent last month. President Barack Obama in an interview on Bloomberg Television this week predicted the jobless rate will climb to 10 percent, even as the “engines” of recovery have begun to turn.

A slowdown in factory deliveries, which signals an increase in orders, jumps in building permits and stock prices, a gain in consumer confidence and a widening spread between long- and short-term interest rates paced the advance in the leading index.

“The recession is losing steam,” Ken Goldstein, an economist at the Conference Board, said in a statement. “If these trends continue, expect a slow recovery beginning before the end of the year cash advance no faxing. However, employment will take longer to turn around.”

Smaller Drop

The Conference Board’s index of coincident indicators, a gauge of current economic activity, fell 0.2 percent, the smallest drop since October, after decreasing 0.3 percent the prior month. The index tracks payrolls, incomes, sales and production.

In addition to gross domestic product, the measures in the coincident index are used by the National Bureau of Economic Research in determining when recessions begin and end. The private group is the accepted arbiter of U.S. expansions.

The Fed Bank of Philadelphia said its general economic index climbed to minus 2.2 from minus 22.6 in May, paced by improvements in orders and sales. Negative numbers signal contraction.

The slump in manufacturing may be abating after companies reduced inventories in the first quarter at the fastest pace on record. Still, production cutbacks and plant closures at carmakers General Motors Corp. and Chrysler Group LLC are likely to depress factory production in the near term.

Recalling Workers

Some factory producers are preparing for better times. Pittsburgh-based U.S. Steel Corp., the largest U.S. steelmaker by sales, is recalling nearly 800 laid-off workers to restart coke production in the Canadian province of Ontario and a blast furnace in Illinois, union spokesmen Dave Dowling and Rolf Gerstenberger said in separate interviews this week.

“We are continuing to adjust production across North American operations to stay in line with customer demand and to adjust our workforce as appropriate to our production levels,” Erin Dipietro, a U.S. Steel spokeswoman, said in an interview.

The number of people collecting unemployment insurance plunged by 148,000 in the week to June 6, the most since November 2001, to 6.69 million, the Labor Department said today. The average number of initial claims over the last four weeks fell to the lowest level in four months.

“The labor market remains weak but it’s starting to stabilize,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. “An improvement in employment conditions and improvement in confidence go hand in hand with an improvement in consumer spending.”

Economists surveyed by Bloomberg June 1 to June 8 projected the U.S. economy would grow at an average 1.2 percent pace in the second half of the year after falling by 2 percent in the second quarter.

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WASHINGTON – Fresh signs that the U.S. economy is stabilizing – though at very low levels – emerged today in reports that home construction rose more than expected last month and wholesale prices remain in check.

The building of new homes and apartments jumped 17.2 per cent to a seasonally adjusted annual rate of 532,000 units from April's record low of 454,000 units, the U.S. Commerce Department said. Building permits, an indicator of future activity, rose four per cent to an annual rate of 518,000 units, also better than expected.

But the gains in construction were driven by a surge in the highly volatile category of multi family buildings, which soared 61.7 per cent in May after plunging 49.4 per cent in April. Single-family home construction rose at a much lower rate, 7.5 per cent.

Meanwhile, the Producer Price Index, which measures wholesale prices, rose by a seasonally adjusted 0.2 per cent from April, the Labor Department said. That was below analysts' expectations of a 0.6 per cent rise.

Despite the increase, wholesale prices fell five per cent over the past 12 months. That was the largest annual drop in nearly 60 years. Excluding volatile food and energy prices, the core PPI dropped 0.1 per cent in May, also below analysts' forecasts of a 0.1 per cent rise.

Falling prices can raise fears about deflation, a destabilizing period of extended declines. But most analysts say efforts by the Federal Reserve to stimulate the economy will prevent deflation.

The latest governments reports, including a seventh straight drop in industrial production, follow a dip in home builder confidence reported Monday. Taken together, along with a recent rise in mortgage rates, they depict an economy recovering very slowly from the depths of the longest recession since the Great Depression.

"The bottom line is that housing activity appears to have found a floor, albeit at a low level," Paul Dales, U.S. economist at Capital Economics in Toronto, wrote in a research note.

Joshua Shapiro, chief U.S. Economist at MFR Inc., said overall median home prices will keep falling, but the bottom end of the housing market "will probably continue to show signs of life as long as first-time buyers can get the financing they need."

Still, any sustained rebound in home construction isn't expected until next spring. That's partly due to the glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market get free credit score.

For April, the number of unsold existing homes on the market rose almost 9 per cent to nearly four million. And the supply of unsold new homes dipped to 297,000. That amounts to a 10-month supply of new and existing unsold homes at the April sales pace, according to data from the government and the National Association of Realtors, roughly double the amount seen in a healthy housing market.

Separately, the International Monetary Fund boosted its short-term outlook for the U.S. economy. The 185-member IMF expects the nation's gross domestic product will increase 0.75 per cent in 2010, up from an estimate of no growth two months ago.

The fund also projects the U.S. economy will decline 2.5 per cent this year, an improvement from its earlier projection of a 2.8 per cent drop. The report credited an "increasingly strong and comprehensive policy response" in the form of the Obama administration's stimulus package and the Fed's interest rate cuts for the improvement.

President Barack Obama on Wednesday is scheduled to unveil the administration's plan to overhaul financial regulation, in part to prevent the lending abuses that triggered the financial crisis.

A 2.9 per cent rise in energy prices, including a 13.9 per cent jump in the cost of gas, drove the May increase in wholesale prices. Food prices, meanwhile, fell 1.6 per cent, reversing a similar rise in April.

Still, labour is producers' largest expense, and "wage costs will soon start falling sharply," Dales wrote. "Accordingly, the surge in the oil price in unlikely to unleash inflation."

The Federal Reserve today said production at the nation's factories, mines and utilities fell 1.1 per cent in May, the deepest cut since March. The recession has crimped demand for manufactured goods and helped keep inflation in check. Plant shutdowns at Chrysler LLC and General Motors Corp. also weighed on industrial production last month and probably will into the summer, economists say.

The Fed has cut a key interest rate to a record low near zero and taken other extraordinary steps to flood the banking system with cash. Many economists don't expect the Fed to raise interest rates until the unemployment rate stops rising. It hit a 25-year high of 9.4 per cent in May, and many think the jobless rate will top 10 per cent by year's end.

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