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what does net neutrality mean | net neutrality is a policy that was adopted by the obama administration in 2015 that would prevent corporations including internet service providers from blocking content and slowing down access to the internet as such these companies were required to provide equal access to online content these policies though were eliminated in 2017 under the trump administration who controls the fcc the fcc is an independent u s government agency that answers to the united states congress the bottom linethe federal communications commission was established in 1934 as part of the communications act it aims to serve the interests of corporations and consumers by regulating the actions of communications networks including the access they provide competition and innovation in the industry and maintaining consistency throughout the media landscape and methods of communication although it is an independent agency it answers to the government its decisions also influence the stock market which is why investors choose to monitor its actions | |
what is the federal deposit insurance corp fdic | the federal deposit insurance corp fdic is an independent federal agency insuring deposits in u s banks and thrifts in the event of bank failures the fdic was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices 1as of 2023 the fdic insures deposits up to 250 000 per depositor as long as the institution is a member firm it is critical for consumers to confirm whether their institution is fdic insured 2the primary purpose of the fdic is to prevent run on the bank scenarios which devastated many banks during the great depression for example with the threat of the closure of a bank small groups of worried customers rushed to withdraw their money in those years after fears spread a stampede of customers seeking to do the same ultimately resulted in banks being unable to support withdrawal requests those who were first to withdraw their money from a troubled bank would benefit whereas those who waited risked losing their savings overnight before the fdic there was no guarantee for the safety of deposits beyond the confidence in the bank s stability understanding the fdicbecause practically all banks and thrifts now offer fdic coverage many consumers face less uncertainty regarding their deposits as a result banks have a better opportunity to address problems under controlled circumstances without triggering a run on the bank in case of bank failure the fdic covers deposits up to 250 000 per fdic insured bank for each account ownership category such as retirement accounts and trusts this sum is adequate for the majority of depositors though depositors with more than that sum should spread their assets among multiple banks if you have 200 000 in a savings account and 100 000 in a certificate of deposit cd you have 50 000 uninsured if a couple has 500 000 in a joint account as well as 250 000 in an eligible retirement account the entire 750 000 would be covered by the fdic as each co owner s share in the joint account is covered and the retirement account is a different account category the fdic provides a helpful interactive tool to check whether assets are covered | |
what the fdic covers | checking accounts savings accounts cds and money market accounts are generally 100 covered by the fdic coverage extends to individual retirement accounts iras but only the parts that fit the type of accounts listed previously joint accounts revocable and irrevocable trust accounts and employee benefit plans are covered as are corporate partnership and unincorporated association accounts if you have more than 250 000 deposited in an account type with a single bank you may need to spread your assets among multiple banks to ensure you are fully covered by the fdic fdic insurance doesn t cover products such as mutual funds annuities life insurance policies stocks or bonds the contents of safe deposit boxes are also not included in fdic coverage cashier s checks and money orders issued by the failed bank remain fully covered by the fdic eligible business accounts from a corporation partnership llc or unincorporated organization at a bank are also fdic covered filing a claima customer can file a claim with the fdic as early as the day after a bank or thrift folds the request can be submitted online through the fdic website by calling 877 275 3342 1 877 askfdic bank customers can receive personalized assistance at no cost note that the fdic only insures against bank failures instances of fraud theft and similar loss are handled directly by the banking institution the fdic has no jurisdiction over identity theft special considerationswhile banks are covered by the fdic deposits in credit unions are backstopped by the national credit union share insurance fund ncusif the fund is regulated by the national credit union administration ncua and also insures individual accounts up to 250 000 4 | |
what does fdic stand for | the full name of the federal agency that insures bank deposits is the federal deposit insurance corp | |
why was the fdic created | the main purpose of the fdic is to prevent run on the bank scenarios which devastated many banks during the great depression in the late 1920s and early 1930s | |
are my stock and mutual fund holdings protected by the fdic | no fdic insurance doesn t cover or offer loss reimbursement for mutual funds stocks annuities life insurance policies or bonds the bottom linethe fdic insures deposits in u s banks and thrifts in the event of a bank failure or run it was created during the depression to bolster consumer confidence and encourage stability in the financial system the agency insures deposits up to 250 000 per depositor as long as the institution is a member firm it s important to confirm whether a banking institution is fdic insured before opening an account or making a deposit there | |
the federal direct loan program provides low interest student loans to post secondary students undergraduates and graduate students and their parents | the william d ford federal direct loan program managed by the u s department of education is the only government backed student loan program in the u s | |
how the federal direct loan program works | the federal direct loan program offers several types of loans including subsidized direct loans unsubsidized direct loans direct plus loans and direct consolidation loans for refinancing student loans subsidized direct loans are the only student loans made by the federal government that are based on financial need the u s department of education pays the interest on these loans while the student is in school 1all loans granted through the federal direct loan program have maximum annual amounts and set aggregate amounts each successive year allows for an increase in the total maximum yearly loan amount students who wish to apply for funding must first submit the free application for federal student aid fafsa undergraduate students can borrow 5 500 to 12 500 per year depending on their year in school and their dependency status these amounts are for both direct subsidized loans and direct unsubsidized loans 2professional and graduate students may borrow 20 500 each year in direct unsubsidized loans and parents of undergraduate students can borrow using a direct plus loan 2loans from the federal direct loans program are eligible for the student loan forgiveness proposed by president joe biden but private loans are not biden s student loan forgiveness program was deemed unconstitutional by the u s supreme court on june 30 2023 but the administration announced the new save repayment program on the same day 3your college or university determines the amount of money in federal loans that you can borrow | |
what is the federal discount rate | the discount rate is the interest rate set by the federal reserve fed on loans extended by the central bank to commercial banks or other depository institutions adjusting the discount rate allows central banks such as the fed to reduce liquidity problems and the pressures of reserve requirements control the supply of money in the economy and basically assure stability in the financial markets this is not to be confused with the federal funds rate which is instead the target interest rate for overnight interbank lending where commercial banks borrow and lend excess reserves between each other the target is set by the fed but the actual fed funds rate is determined by the market s supply and demand for overnight loans the discount rate is set higher than the fed funds rate and is intended to be used as a last resort for banks who are unable to borrow in the interbank market the secondary discount rate is an even higher discount window rate of interest for fed loans made to banks that are struggling with liquidity | |
how the federal discount rate works | in addition to its other monetary policy and regulatory tools the fed banks can lend directly to member banks and depository institutions this is part of the primary purpose of the fed as a lender of last resort to ensure the stability of the banks and the financial system in general to prevent undue bank failures healthy banks are allowed to borrow all they want at very short maturities usually overnight from the fed s discount window and it is therefore referred to as a standing lending facility under normal circumstances banks prefer to borrow from one another on the overnight lending market however banks that face increased liquidity needs or heightened risks are sometimes unable to raise the necessary funds in the open market once the interbank overnight lending system has been maxed out fed discount lending serves as an emergency backstop to provide liquidity to such banks in order to prevent them from failing borrowing from the central bank is a substitute for borrowing from other commercial banks and so it is seen as a last resort measure the interbank rate called the fed funds rate is usually lower than the discount rate as long as the fed funds rate is lower than the discount rate commercial banks will prefer to borrow from another commercial bank rather than the fed as a result in most circumstances the total amount of discount lending is very small and intended only to be a backup source of liquidity for sound banks three discount ratesdiscount lending is generally classified as either primary or secondary credit the fed also sets a seasonal discount rate for non emergency lending to banks that serve agricultural and other communities where credit demand is highly seasonal depository institutions and commercial banks that are in generally sound financial condition are eligible to borrow from their regional fed banks at a primary credit rate this rate is commonly just referred to as the discount rate funds for commercial banks borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days secondary credit is given to banks that are in financial trouble and are experiencing severe liquidity problems the central bank s interest rate on secondary credit is usually set at 50 basis points 0 5 percentage points above the discount rate the interest rate on these loans is set at a higher penalty rate to reflect the less sound condition of these borrowers the federal discount rate is one of the most important indicators in the economy as most other interest rates move up and down with it the discount rate and monetary policybeyond its role in preventing bank failures the federal discount rate is used as a tool to either stimulate expansionary monetary policy or rein in contractionary monetary policy the economy a decrease in the discount rate makes it cheaper for commercial banks to borrow money which results in an increase in available credit and lending activity throughout the economy conversely a raised discount rate makes it more expensive for banks to borrow and thereby diminishes the money supply while retracting investment activity besides setting the discount rate the fed has several other monetary policy tools at its disposal it can influence the money supply credit and interest rates through open market operations omo in u s treasury markets and by raising or lowering reserve requirements for private banks the reserve requirement is the portion of a bank s deposits that it must hold in cash form either within its own vaults or on deposit at its regional fed bank the higher the reserve requirements are the fewer room banks have to leverage their liabilities or deposits federal discount rate vs federal funds ratethe federal discount rate is the interest rate the fed charges on loans it is not to be confused with the federal funds rate which is the rate banks charge each other for loans that are used to hit reserve requirements the discount rate is determined by the fed s board of governors as opposed to the federal funds rate which is set by the market between member banks the federal open markets committee fomc sets a target for the fed funds rate which it pursues through the open sale and purchase of u s treasuries whereas the discount rate is reached solely through review by the board of governors the discount rate is typically set higher than the federal funds rate target usually by 100 basis points 1 percentage point because the central bank prefers that banks borrow from each other so that they continually monitor each other for credit risk and liquidity | |
why is the discount rate set higher than the fed funds rate target | the discount rate is set higher than the federal funds rate target because it is intended to serve as a backup source of liquidity for banks in case they cannot obtain funds from other banks in the market the fed prefers that banks borrow and lend to one another instead of going to the discount window and sets the discount rate higher to discourage its use unless it becomes necessary | |
why does the federal reserve change the discount rate | the federal reserve increases or decreases the discount rate and the federal funds rate target in order to curtail or stimulate the overall level of economic activity in the country when the economy is growing too rapidly and inflation becomes a concern the fed may raise rates to discourage lending and borrowing and reduce inflationary pressures when the economy is weak or in recession the fed may lower interest rates to encourage more economic activity and spur a recovery | |
which is more important the discount rate or fed funds rate | the federal funds rate is usually considered the more important figure in terms of its overall impact on the economy many other interest rates from mortgages and personal loans to bonds and interest bearing derivatives are set based on the fed funds rate the discount rate is used less frequently and has a more limited impact on overall lending and borrowing in the economy the bottom linethe federal funds rate is the target interest rate at which commercial banks and other financial institutions borrow and lend reserve funds from each other on an overnight basis while the fed sets the target the actual rate is determined by the interbank market the federal reserve may use open market operations omo such as buying or selling government securities to influence the fed funds rate and keep it near its target the discount rate on the other hand is the interest rate at which banks can borrow money directly from the federal reserve s discount window this rate will be set higher than the fed funds rate and serves as a backstop for banks that cannot obtain sufficient funds from the interbank market | |
what are federal funds | federal funds often referred to as fed funds are excess reserves that commercial banks and other financial institutions deposit at regional federal reserve banks these funds can be lent then to other market participants with insufficient cash on hand to meet their lending and reserve needs the loans are unsecured and are made at a relatively low interest rate called the federal funds rate or overnight rate as that is the period for which most such loans are made understanding federal fundsfed funds help commercial banks meet their daily reserve requirements which is the amount of money that banks are required to maintain at their regional federal reserve reserve requirements are based on the volume of customer deposits that each bank holds excess or secondary reserves are cash amounts held by a bank or financial institution in excess of what is required by regulators creditors or internal controls for commercial banks excess reserves are measured against standard reserve requirement amounts set by central banking authorities these required reserve ratios set the minimum liquid deposits such as cash that must be in reserve at a bank more is considered excess the federal reserve bank sets a target rate or range for the fed funds rate it is adjusted periodically based on economic and monetary conditions overnight marketsthe fed funds market operates in the united states and runs parallel to the offshore eurodollar deposit market eurodollars are also traded overnight and the interest rate is virtually identical to the fed funds rate but the transactions must be booked outside of the united states multinational banks often use branches domiciled in the caribbean or panama for these accounts even though the transactions may be executed in u s trading rooms both are wholesale markets with transactions ranging from 2 million to well over 1 billion the fed funds ratesthe federal reserve uses open market operations to manage the supply of money in the economy and adjust short term interest rates this means that the fed buys or sells some of the government bonds and bills it has issued this increases or decreases the money supply and thus lowers or raises short term interest rates open market operations are carried out by the federal reserve bank of new york the federal funds rate fed funds rate is one of the most important interest rates for the u s economy as it affects broad economic conditions in the country including inflation growth and employment the federal funds rate is set in u s dollars and is typically charged on overnight loans the fed funds rate is thus the effective interest rate at which commercial banks lend reserves to one another on an overnight basis the federal funds rate is closely related to short term interest rates in the broader market so these transactions directly impact eurodollar and libor rates as well the federal reserve announces the effective fed funds rate at the end of each trading day which is the weighted average rate for all transactions in the market that day market participantsthe participants in the fed funds market include u s commercial banks u s branches of foreign banks savings and loan organizations and government sponsored enterprises such as the federal national mortgage association fannie mae and federal home loan mortgage association freddie mac as well as securities firms and agencies of the federal government | |
what is the federal funds rate | the term federal funds rate refers to the target interest rate range set by the federal open market committee fomc this target is the rate at which commercial banks borrow and lend their excess reserves to each other overnight the fomc is the policymaking body of the federal reserve system it meets eight times a year to set the target federal funds rate which is part of its monetary policy this is used to help promote economic growth understanding the federal funds ratethe federal funds rate refers to the interest rate that banks charge other institutions for lending excess cash to them from their reserve balances on an overnight basis by law banks must maintain a reserve equal to a certain percentage of their deposits in an account at a federal reserve bank the amount of money a bank must keep in its fed account is known as a reserve requirement and is based on a percentage of the bank s total deposits financial institutions are required to maintain interest bearing accounts at federal reserve banks to ensure they have enough money to cover depositors withdrawals and other obligations any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall in march 2020 the federal reserve announced the reserve requirement would be 0 effectively eliminating the requirements the central bank said this move would free up liquidity in the banking system and that it had no plans to increase the requirement in the immediate future the end of the day balances in the bank s account averaged over two week reserve maintenance periods are used to determine whether it meets its reserve requirements if a bank expects to have end of the day balances greater than what s required it can lend the excess to an institution that anticipates a shortfall in its balances the interest rate the lending bank can charge is the federal funds rate or fed funds rate the fomc makes its decisions about rate adjustments based on key economic indicators that may show signs of inflation recession or other issues that can affect sustainable economic growth the indicators can include measures like the core inflation rate and the durable goods orders report the target for the federal funds rate has varied widely over the years in response to the prevailing economic conditions it was set as high as 20 in the early 1980s in response to inflation with the coming of the great recession the rate was slashed to a record low target of 0 to 0 25 in an attempt to encourage growth in march 2020 the target rate was between 0 and 0 25 in 2022 to combat inflation the fed started raising its rate slowly which is a process that continued into 2023 the fomc last increased the target fed funds rate to a range of 5 25 and 5 5 in july 2023 it maintained this range during subsequent meetings and confirmed the range in its last meeting in june 2024 in order to keep in line with its target inflation rate and goal of reaching maximum employment although the economy is expanding and unemployment remains low the fomc remains cautious about the level of inflation which remains elevated special considerationsthe fomc cannot force banks to charge the exact federal funds rate rather the fomc sets a target rate as a guidepost the actual interest rate a lending bank will charge is determined through negotiations between the two banks the weighted average of interest rates across all transactions of this type is known as the effective federal funds rate while the fomc can t mandate a particular federal funds rate the federal reserve system can adjust the money supply so that interest rates will move toward the target rate by increasing the amount of money in the system it can cause interest rates to fall conversely by decreasing the money supply it can make interest rates rise besides the federal funds rate the federal reserve also sets a discount rate which is the interest rate the fed charges banks that borrow from it directly this rate tends to be higher than the target fed funds rate partly to encourage banks to borrow from other banks at the lower federal funds rate impact of the federal funds ratethe federal funds rate is one of the most important interest rates in the u s economy that s because it impacts monetary and financial conditions which in turn have a bearing on critical aspects of the broader economy including employment growth and inflation the rate also influences short term interest rates albeit indirectly for everything from home and auto loans to credit cards as lenders often set their rates based on the prime lending rate the prime rate is the rate banks charge their most creditworthy borrowers a rate that is also influenced by the federal funds rate investors keep a close watch on the federal funds rate the stock market typically reacts very strongly to changes in the target rate for example a small decline in the rate can prompt the market to leap higher as the borrowing costs for companies get lower many stock analysts pay particular attention to statements by members of the fomc to try to get a sense of where the target rate may be headed | |
how does the federal funds rate work | the federal funds rate is the interest rate that banks charge each other to borrow or lend excess reserves overnight the law requires that banks must have a minimum reserve level in proportion to their deposits this reserve requirement is held at a federal reserve bank when a bank has excess reserve requirements it may lend these funds overnight to other banks that have realized a reserve deficit | |
how is the federal funds rate determined | it is customary for the federal open market committee to meet eight times annually to determine the federal funds rate these rates are influenced by economic indicators such as the core inflation rate and the durable goods orders report which provide signals about the economic health of the country | |
what is the difference between the federal funds and regular interest rates | both the federal funds rate and interest rates are some of the most important financial indicators in the u s the chief distinction is that the federal funds rate sets the range that banks will lend or borrow to each other overnight because this impacts borrowing costs and financial conditions stock markets are typically sensitive to changes in these rates the federal funds rate also indirectly affects short term interest rates conversely interest rates which are set by the federal reserve determine the rate that it costs for banks to borrow the bottom linethe federal funds rate is used by the fed to control monetary policy and is watched closely by investors to gauge how the market may move in the future the rate is one of the most important pieces of financial data in the u s | |
what is the federal home loan bank system fhlb | the federal home loan bank system fhlb is a consortium of 11 regional banks across the u s that provide a reliable stream of cash to other banks and lenders to finance housing infrastructure economic development and other individual and community needs the federal housing finance agency oversees the fhlb while the fhlb itself is overseen by a government bureau and its mandate reflects a public purpose each bank in the fhlb network is privately capitalized and does not receive any government funding | |
how the federal home loan bank fhlb system works | the 11 regional banks comprising the federal home loan bank system known as fhlbanks are structured as privately capitalized corporations specifically cooperatives they are owned by their members local financial institutions that buy stock in the fhlbank the institutions must engage in real estate lending as a condition of membership as cooperatives the fhlbanks pay no federal or state income taxes | |
what banks are part of the federal home loan system | the 11 banks of the federal home loan bank system are scattered around the country each one services a geographic region made up of several states the 11 federal home loan banks include the approximate number of banks credit unions insurance companies thrifts and certified community development financial institutions that are members of the fhlb and receive funding from it fhlb servicesas cooperatives fhlbanks maintain moderate costs and overhead reflected in the interest they charge their member banks this means the member banks have access to low cost loans which they in turn lend to their customers the fhlbanks primary focus is real estate financing unlike the other real estate oriented government sponsored enterprises fannie mae and freddie mac fhlbs do not guarantee or ensure mortgage loans however instead fhlbs act as a bank to banks by providing long and short term loans called advances to their members as well as specialized grants and loans aimed at increasing affordable housing and economic development in some cases fhlbs also provide secondary market outlets for members interested in selling mortgage loans fhlbanks participate in and operate through various federal programs these include the affordable housing program the community investment program the mortgage partnership finance program and the mortgage purchase program about 80 of u s lending institutions rely on federal home loan banks | |
how the federal home loan banks are funded | the federal home loan banks issue bonds discount notes and other forms of term debt in the capital markets to raise funds these are known as consolidated obligations the fhlb office of finance manages debt issuance for all 11 fhlbanks while each debt instrument is issued individually by each bank it is backed collectively by all banks in the system providing for a lower risk investment on june 23 2021 the u s supreme court ruled that the head of the federal housing finance agency fhfa which oversees the fhlb could be removed without cause later the same day president joe biden removed trump appointed fhfa director mark calabria and appointed sandra l thompson as acting director thompson was later confirmed as director by the u s senate and sworn in in june 2022 history of the fhlb systemthe federal home loan bank system was developed in response to the great depression which devastated the u s economy especially the banking industry it was created by the federal home loan bank act of 1932 the first in a series of bills that sought to make homeownership an achievable goal for more americans the rationale was that by providing banks with low cost funds to be used for mortgages they would be more likely to make loans resulting in individuals finding it easier to borrow money to buy homes thus stimulating the residential real estate market the fhlb originally consisted of 12 independent regional wholesale banks similar to the 12 regional federal reserve banks the act provided them with total funding of 125 million in 2015 though the seattle and des moines banks merged reducing the total number of fhlbanks to its current 11 the act also created the federal home loan bank board to oversee the system it was discontinued in 1989 and oversight responsibility was transferred to the federal housing finance board fhfb and regulatory responsibility to the office of thrift supervision ots since 2008 the fhlb has been regulated by the federal housing finance agency created by the housing and economic recovery act hera for much of the fhlb s 89 year history savings and loan institutions dominated the ranks of its member financial institutions their numbers began to dwindle in the 1980s and 90s after the savings and loan crisis in the 21st century commercial banks which were allowed to join the system in 1989 and insurance companies have come to make up most of the membership impact of the federal home loan bank systemproponents of the federal home loan bank system argue it plays a critical role in the continuous flow of funds to the residential mortgage market making housing and homeownership possible for millions fhlbs also provide funding for rental properties small businesses and other neighborhood development initiatives resulting in economic and employment growth stronger local communities and a higher overall quality of living however critics claim that the fhlb via its use of federally subsidized programs distorts the basic supply and demand economics of the housing market funding through the fhlb they argue encourages irresponsible lending and a residential real estate cycle with more volatile booms and busts the amount in total combined assets held by fhlbanks as of dec 31 2023 the most recent figure as of june 27 2024 there are also concerns that the recent growth in the federal home loan bank members and increased reliance on fhlb funding along with the increasing interconnectedness of the financial system could mean that any distress among fhlbanks could spread more widely throughout the capital markets and the economy fhlbanks have had their share of financial difficulties over the years in fact it was an inability to recover from capital losses that led fhlb seattle to merge with fhlb des moines however their practices overall remain strong during the subprime mortgage induced 2008 financial crisis for example the fhlbanks did not require any government bailouts as sister gses fannie mae and freddie mac did in fact as other sources of funding dried up they increased their lending | |
is the fhlb system a government agency or bank | the federal home loan bank system in its entirety was created to act as a government sponsored entity designed to support community investments and mortgage lending it is not an agency but it was created by the federal home loan bank act | |
what is the federal housing administration fha | the term federal housing administration fha refers to a u s agency that provides mortgage insurance to fha approved lenders the fha was established in 1934 by the u s government and became part of the u s department of housing and urban development hud in 1965 1the fha funds its operations with income generated through mortgage insurance premiums mips fha loans allow lower down payment minimums and lower credit scores than traditional lenders this opens up homeownership to thousands of americans who otherwise couldn t qualify for a mortgage the mortgage insurance protects lenders against losses from mortgage defaults so if a borrower does default then the fha pays the lender understanding the fhathe fha is one of the world s largest mortgage insurers protecting fha approved lenders from losses especially if the borrower defaults it was established in 1934 to help stimulate the u s housing market 2 the underlying idea was that more people would qualify for mortgages to buy homes if lenders were provided with insurance as noted above the agency came under the purview of hud s office of housing in 1965 1the fha insures mortgage loans in the united states and u s territories for the following property types most fha loans require a lower minimum down payment as little as 3 5 which means that loans are insured for up to 96 5 34 approved fha lenders can also provide loans to people with lower credit scores than most conventional loan lenders these benefits make fha loans popular with first time homebuyers qualifying borrowers must also purchase mortgage insurance these premiums are made to the fha which it uses as self generated income 5 | |
when a borrower stops paying their mortgage the lender can file a claim through the fha the agency pays the mortgage company the remaining principal balance on a loan using the above mentioned mips that it collects this allows lenders to offer larger loans to borrowers 1 | there are limits on how much you can borrow fha loan limits are set by the region where you live low cost areas have a lower limit than the usual fha loan and high cost areas have a higher limit 6special considerationsthe fha requires borrowers to pay two types of mips payment amounts differ depending on the loan amount the length of the loan and the original loan to value ltv ratio originally the annual mip was automatically removed once borrowers hit 78 ltv based on the original purchase price after the subprime mortgage crisis the fha was facing a fiscal crisis and in 2013 implemented a rule that the annual mip remains over the life of the loan as a result of the change most borrowers with fha mortgages will refinance through a traditional mortgage once they hit 80 ltv even if their credit scores have not improved significantly they are more likely to be approved for a conventional loan now that they have 20 equity in their property 8mips also help fund other fha programs that benefit homeowners renters and communities at large history of the fhabank failures caused home loans to decline decreasing homeownership significantly during the great depression default and foreclosure rates skyrocketed as loans were limited to 50 of a property s market value and mortgage terms including short repayment schedules coupled with balloon payments were difficult for many homebuyers to meet as a result the united states was primarily a nation of renters only one in 10 households owned their homes 1congress enacted the national housing act of 1934 to help restructure the federal banking system its primary purpose was to improve housing standards and conditions provide a method of mutual mortgage insurance and reduce foreclosures on family home mortgages the legislation created the federal savings and loan insurance corp fslic a former government institution whose responsibilities are now part of the federal deposit insurance corp fdic and the fha these acts increased the market for single family homes and built more affordable housing and mortgages the fha website offers informative consumer resources including a home buying guide criticism of the fhafha programs provide substantial u s economic stimulation via community and home development which flows down to local communities in the form of jobs schools and other sources of revenue even though it also ensures that lenders are protected and helps borrowers get larger loans the fha isn t without criticism critics say that borrowers are bound by strict requirements such as the up front and annual mips some experts argue that homeowners may be better off going with a conventional mortgage if they qualify that s because they may save money in the long run through private mortgage insurance pmi premiums provided by conventional lenders lenders of conventional mortgages require borrowers to purchase pmi when they can t come up with a 20 down payment pmi can be canceled once a borrower pays down enough of the mortgage s principal mip is collected for 11 years or until the end of the loan term whichever comes first regardless of the equity in the home 9historically the fha implemented policies like redlining in which officials would literally draw a red line around neighborhoods that were predominantly black and viewed as unsafe and refuse to lend to borrowers in those neighborhoods this practice among others prevented generations of black citizens from taking advantage of the same programs as their white peers this barrier to becoming homeowners and building generational wealth exacerbated the racial wealth inequity that we still see today | |
what does the federal housing administration fha do | congress created the federal housing administration fha in 1934 during the great depression to stimulate the housing market the fha guarantees home loans issued by approved lenders the loans are designed for borrowers with lower than average credit scores and who don t have the cash to come up with a big down payment 1 | |
how do fha loans work | qualified borrowers can borrow up to 96 5 of the value of a home homebuyers are required to purchase mortgage insurance premium payments are made to the fha and if a borrower defaults on a mortgage then the fha pays the lender 4 | |
do fha home loans have income limits | fha loans do not have income limits there are limits on how much you can borrow which are based on the region where you live 10the bottom linethe fha was originally created to stimulate the economy by encouraging home buying and home construction and to help lower income americans become homeowners when viewed in that light the program has been a resounding success however early policies like redlining have prevented millions of black americans from experiencing the generational wealth that cheap homeownership gave the post world war ii generation of their white peers while the program continues today and has attempted to rectify some of its past misdoings changes following the subprime mortgage crisis make fha loans less of a hand up bargain than they once were | |
what is a federal housing administration fha loan | a federal housing administration fha loan is a home mortgage that is insured by the government and issued by a bank or other lender approved by the agency fha loans require a lower minimum down payment than many conventional loans and applicants may have lower credit scores than the best mortgage lenders usually require 1 fha loans are designed to help low to moderate income families attain homeownership and they are particularly popular with first time homebuyers | |
how does an fha loan work | if you have a credit score of at least 580 you can borrow up to 96 5 of the value of a home with an fha loan that means the required down payment is only 3 5 2if your credit score falls between 500 and 579 you can still get an fha loan but you will need to make a down payment of at least 10 3with fha loans the down payment can come from savings a financial gift from a family member or a grant for down payment assistance the fha doesn t actually lend anyone money to buy a home instead the loan is issued by a bank or other financial institution that is approved by the fha | |
what the fha does is guarantee the loan that makes it easier to get bank approval since the bank isn t bearing the default risk some people refer to it as an fha insured loan for that reason | borrowers who qualify for an fha loan are required to purchase mortgage insurance with the premium payments going to the fha 4history of the fha loancongress created the fha in 1934 during the great depression at that time the housing industry was in trouble default and foreclosure rates had skyrocketed 50 down payments were commonly required and the mortgage terms were impossible for ordinary wage earners to meet as a result the u s was primarily a nation of renters and only one in 10 households owned their homes 5after the government created the fha to reduce the risk to lenders and make it easier for borrowers to qualify for home loans the homeownership rate in the u s steadily climbed reaching an all time high of 69 2 in 2004 according to research from the federal reserve bank of st louis in mid 2024 the rate stood at 65 6 6though principally designed for lower income borrowers fha loans are available to everyone including those who can afford conventional mortgages in general borrowers with good credit and strong financials will be better off with a conventional mortgage while those with poorer credit and more debt as well as would be homebuyers who simply don t have the cash for a larger down payment can benefit from an fha loan types of fha loansin addition to traditional mortgages the fha offers several other home loan types this is a reverse mortgage program that helps homeowners age 62 and older convert the equity in their homes to cash while retaining the home s title the homeowner can take the funds as a lump sum in a fixed monthly amount in a line of credit or in some combination 7this loan factors the cost of certain repairs and renovations into the amount borrowed it s helpful for those willing to buy a fixer upper and put some sweat equity into their home this program is similar to the fha 203 k improvement loan program but it s focused on upgrades that can lower your utility bills such as new insulation or solar or wind energy systems this program works for borrowers who expect their incomes to increase the graduated payment mortgage gpm starts with lower monthly payments that increase over time the growing equity mortgage gem has scheduled increases in monthly principal payments both promise shorter loan terms | |
what are fha loan requirements | your lender will evaluate your qualifications for an fha loan as it would with any mortgage applicant starting with a check to see that you have a valid social security number reside lawfully in the u s and are of legal age according to your state s laws fha loan criteria are less rigid in some ways than a bank s usual loan criteria however there are also some more stringent requirements whether or not it s an fha guaranteed loan your financial history will be examined when you apply for a mortgage fha loans are available to individuals with credit scores as low as 500 3 that is within the poor range for a fico score 8if your credit score is between 500 and 579 you may be able to secure an fha loan assuming you can afford a down payment of at least 10 if your credit score is 580 or higher you can get an fha loan with a down payment of as little as 3 5 9by comparison applicants typically need a credit score of at least 620 in order to qualify for a conventional mortgage 10 the down payment required by most banks varies between 3 and 20 depending on how eager they are to lend money at the time you apply as a general rule the lower your credit score and down payment the higher the interest rate you ll pay on your mortgage a lender will look at your work history as well as your last two years of payment history on your credit report 11people who fall behind on federal student loan payments or income tax payments will be rejected unless they agree to a satisfactory repayment plan for those debts 12 a history of bankruptcy or foreclosure may prove problematic too typically to qualify for an fha loan or any type of mortgage at least two years must have passed since the borrower experienced bankruptcy or foreclosure and they must have established good credit and got their financial affairs in order since then however exceptions can be made if the borrower has experienced extenuating circumstances such as serious illness 13mortgages must be repaid and the fha approved lender will want assurances that the applicant can achieve this a key to determining if the borrower can make good on their commitment is evidence of recent and steady employment this can be documented by tax returns and pay stubs if you ve been self employed for less than two years but more than one year you may still qualify if you have a solid work and income history in the same or a related occupation for the two years before becoming self employed 14your mortgage payments property taxes mortgage insurance and homeowners insurance premiums and any homeowner association fees must generally total less than 31 of your gross income 15 banks call this the front end ratio meanwhile your back end ratio which consists of your mortgage payment and all other monthly consumer debts should be less than 43 of your gross income 15an fha loan requires that you pay two types of mortgage insurance premiums mips an upfront mip and an annual mip which is paid monthly the upfront mip is equal to 1 75 of the base loan amount 16for example if you re issued a home loan for 350 000 you ll pay an upfront mip of 1 75 x 350 000 6 125 you can either pay the upfront mip at the time of closing or it can be rolled into the loan these payments are deposited into an escrow account that the u s treasury department manages if you end up defaulting on your loan the funds will go toward the mortgage repayment after the initial one time payment borrowers make mip payments every month those payments can range from 0 15 to 0 75 annually of the loan amount rates differ depending on the loan amount the length of the loan and the home s loan to value ltv ratio 17let s say you have an annual mip of 0 55 in that case a 350 000 loan would result in annual mip payments of 0 55 x 350 000 1 925 or 160 42 monthly these monthly premiums are paid in addition to the one time upfront mip payment you will make have to make annual mip payments for either 11 years or the life of the loan depending on the length of the loan and the ltv 17you can no longer take a tax deduction for the amount you pay in premiums this provision expired in 2022 you can still deduct mortgage interest though if you itemize your deductions rather than taking the standard deduction on your taxes 18usually the property you want to finance must become your principal residence and must be owner occupied in other words the fha loan program is not intended for investment or rental properties detached and semi detached houses townhouses row houses and condominiums within fha approved condo projects are all eligible for fha financing also you will need a property appraisal from an fha approved appraiser and the home must meet certain minimum standards homes that are in such disrepair that they do not meet the fha s requirements are deemed uninsurable if the home doesn t meet these standards and the seller won t agree to make the required repairs you must pay for the repairs at closing in this case the funds are held in escrow until the repairs are made 19 | |
what are the federal housing administration loan limits | fha loans have limits on how much you can borrow these are set by region with lower cost areas having a lower limit and high cost areas having a higher one 20for 2024 the limits range from 498 257 to 1 149 825 which the fha refers to as its floor and its ceiling there are special exception regions including alaska hawaii guam and the u s virgin islands where very high construction costs make the limits even higher 21elsewhere the limit is set at 115 of the median home price for the county as determined by the u s department of housing and urban development hud 22the chart below lists the 2024 loan limits federal housing administration fha loan relief | |
when you get an fha loan you may be eligible for loan relief if you experience a legitimate financial hardship such as a loss of income or a large increase in living expenses for example the fha has several forbearance plans that can allow you to pause or reduce your mortgage payments for a period of time 23 | another program the fha home affordable modification program hamp permanently lowered monthly mortgage payments to an affordable level however the program has been temporarily suspended through april 30 2025 23advantages and disadvantages of fha loansfha loans are often the best source of a mortgage for borrowers who are unable to obtain financing through private lenders they may qualify for an fha loan with a lower credit score and or greater amounts of debt and a higher debt to income ratio however because fha borrowers are often riskier fha loans usually come with somewhat higher interest rates and require borrowers to pay mortgage insurance premiums both upfront and monthly fha loans can only be used for your primary residence and come with borrowing limits available to borrowers with lower credit scoressmaller down paymentsfederally backedrequires insurance paid both upfront and monthlycannot be used for second homes or investment propertieshigher interest ratesnot all properties qualify | |
how do i apply for an fha loan | you apply for an fha loan directly with a bank or other lender that you choose most banks and mortgage lenders are approved for fha loans if you apply for pre approval of an fha loan the lender will gather enough financial information to issue or deny a pre approval within a day or so that will give you an idea of how much you can borrow while not committing yourself to anything all of the above is true for any mortgage application if you want an fha loan you should say that upfront | |
what is the max amount you can get from an fha loan | that depends on where you plan to buy as well as on your ability to repay the loan the maximum amount anyone can borrow from the fha varies by region in 2024 loan limits for a single family home for example range from 498 257 in low cost areas to 1 149 825 in high cost areas alaska hawaii guam and the u s virgin islands have special higher limits 24 | |
how much does fha mortgage insurance cost | fha loans include both an upfront premium which can be rolled into the mortgage and an annual premium paid monthly to estimate the costs you can plug the numbers into an fha loan calculator several of which are available online for example a 30 year fha loan at an interest rate of 7 125 on a home priced at 400 000 will have a 2 646 monthly loan payment plus a 176 monthly mortgage insurance payment | |
how do i get rid of my fha mortgage insurance | in most cases fha mortgage insurance payments continue for either 11 years or the entire life of the loan 17the only way to end them earlier is to refinance the mortgage with a non fha loan your fha loan will then be paid off in full assuming you have at least 20 equity in the home you should no longer be required to have private mortgage insurance pmi either | |
what are the downsides of fha loans | fha loans usually come with higher interest rates than conventional mortgages and require borrowers to purchase mortgage insurance fha loans also have strict limits on the amount you can borrow the bottom linethe fha loan is a path to homeownership for people that banks might reject otherwise because they have a less than stellar credit score or little cash available for a down payment however borrowers who can afford a substantial down payment may be better off going with a conventional mortgage from one of the best lenders that way they can avoid the fha loan s monthly mortgage insurance payments and get a lower interest rate on the loan | |
what is federal income tax | the u s federal income tax is levied by the internal revenue service irs on the annual earnings of individuals corporations trusts and other legal entities federal income taxes apply to all forms of earnings that make up a taxpayer s taxable income including wages salaries commissions bonuses tips investment income and certain types of unearned income 12in the u s federal income tax rates for individuals are progressive meaning that as taxable income increases so does the tax rate federal income tax rates range from 10 to 37 as of 2024 and kick in at specific income thresholds 3 the income ranges to which the rates apply are called tax brackets income that falls within each bracket is taxed at the corresponding rate | |
how federal income tax works | tax is collected from individuals and corporations by the city state or country where they reside or operate when the tax collected is credited to the country s government it is referred to as a federal tax governments use the money collected through federal taxes to pay for the growth and upkeep of the country some look at federal tax as rent charged to live in a country or the fee to use the resources provided by a country when you pay tax to the u s government you re investing in your economy as the government uses the funds to do the following 5in fiscal year 2023 the u s government collected 4 44 trillion in revenue and spent 6 13 trillion resulting in a 1 70 trillion deficit 7the largest source of revenue for the federal government comes from the income of its residents 4in fiscal year 2022 the latest data available the irs collected over 4 9 trillion in receipts of which individuals estates and trusts contributed 2 9 trillion meanwhile business income taxes accounted for about 476 billion 8types of taxable incomemany different types of income are taxable in addition different forms of income may be assessed at different tax rates generally speaking there are two types of income earned income and unearned income earned income is income primarily generated by being employed by an employer including if you are self employed the most common forms of earned income are 9unearned income is income primarily generated by more passive forms of activity especially surrounding investing the most common forms of unearned income are 10gross income vs net incomeworkers receive their earnings either as net income also known as take home pay or gross income net income is the total amount received after taxes benefits and voluntary contributions are deducted from the paycheck when taxes are withheld it means the company or payer has paid the tax to the government on the worker s behalf the amount your employer withholds for taxes depends on how much you earn and the information you gave your employer on form w 4 11 all money earned whether as a wage salary cash gift from an employer business income tips gambling income bonuses or unemployment compensation constitutes income for federal tax purposes 12filing federal income taxesfederal income taxes are reported and remitted to the irs through a series of forms created by the u s department of treasury the primary form used to report federal income taxes is form 1040 which collects not only your personal information but your income and tax benefit activities for the year there are several variations of form 1040 based on the type of activity incurred by the taxpayer over the prior year an example of the first page for form 1040 sr is below all pages of form 1040 sr are available on the irs website investopediaif a taxpayer has more information to submit to the irs they usually attach or provide additional forms for example if you decide to claim an itemized deduction discussed below you are required to submit schedule a to support your return 13 many tax credits also discussed below require additional forms federal income tax bracketsthe federal income tax is built on a progressive tax system where higher income earners are taxed at higher rates the tables below show the tax brackets and rates for 2023 and 2024 1415 | |
how tax brackets work | the united states uses a progressive tax system meaning taxpayers pay more incremental tax as they earn more income this system aims to provide inherent tax benefits to lower income individuals and collect more taxes from higher income individuals tax brackets are often cited as a range of income with an associated percentage for example for 2023 federal income taxes taxpayers who earn between 44 726 and 95 375 are in the 22 tax bracket this means their earnings between these two amounts are assessed at a 22 tax rate earnings below 44 726 are assessed at a lower rate and earnings above 95 375 are assessed at a higher rate 16as an example an individual who is single and earns 80 000 annually falls into the 22 marginal tax bracket 17 this means the taxpayer would be responsible for 12 908 in taxes for 2023 the breakdown for which is illustrated in the chart below because of the varying tax brackets a taxpayer will usually have an effective tax rate different from their highest tax bracket the marginal tax rate is the additional tax paid for every extra dollar of income for example a 10 marginal tax rate means that 10 of every next dollar earned will be taken as tax 19however note that while the marginal rate is 22 the effective tax rate is 16 1 this figure is arrived at by dividing the total tax bill 12 908 by income 80 000 and multiplying by 100 the effective tax rate is the actual rate the individual ends up paying in taxes to the government | |
how to reduce your taxes tax deductions | there are two ways to pay less tax make less money or earn more tax benefits as it s usually more advantageous to seek out tax benefits there are several specific places taxpayers can look tax deductions are legislative enactments that allow a taxpayer to reduce the amount of income they are taxed on their return though tax deductions don t directly reduce the amount of tax a taxpayer must pay it does reduce the calculation basis for the taxpayer s tax liability for example consider a taxpayer who contributes to a traditional ira in many situations the taxpayer is allowed to deduct their contribution from their taxable income should the taxpayer have contributed the 2023 maximum amount their taxable income would be reduced by 6 500 if the taxpayer is in the 22 marginal tax bracket this would result in a potential 1 430 6 500 22 tax savings 20the most common federal tax deduction used to reduce your federal income tax liability is the standard deduction each taxpayer may claim a standard deduction based on their filing status this amount which is reassessed annually allows a taxpayer to reduce their taxable income by a set amount established by the federal government the alternative to a standard deduction is the itemized deduction this option allows taxpayers to accumulate certain types of eligible expenses and opt to deduct the total allowable amount of these expenses instead of the standard deduction these types of expenses include charitable contributions mortgage interest payments and medical expenses 21last there are deductions exclusive of the standard deduction or itemized deduction for example as long as taxpayers meet specific contribution and income limit thresholds certain types of retirement contributions may be deducted 22 alternatively taxpayers may receive deductions on other types of spending such as educational expenses 23 | |
how to reduce your taxes tax credits | tax credits are legislative enactments that allow a taxpayer to reduce the amount of tax they owe after a taxpayer s tax liability is calculated a taxpayer may then directly reduce their liability by tax credit amounts they are eligible for take a taxpayer who has one child and is eligible for the child tax credit the taxpayer s taxable income is 50 000 and the taxpayer s tax liability is 4 500 the child tax credit directly reduces the tax liability from 4 500 to 2 900 the child tax credit is not applied to the 50 000 of taxable income instead it is directly applied to the tax liability amount 24the largest tax credits are all associated with legislative incentive endeavors for specific types of taxpayers for example the earned income tax credit awards tax credits to those of low income while the american opportunity tax credit and lifetime learning credit award those pursuing higher education the child and dependent care credit benefits those with children dependents some federal tax credits are nonrefundable meaning once they reduce your tax liability to 0 a taxpayer may not receive additional benefit nor receive a refund due to an unused portion of the credit an example of a nonrefundable tax credit is the adoption tax credit once the credit reduces a taxpayer s tax liability to 0 the taxpayer will simply not pay tax 25on the other hand other credits may be refundable not only can refundable tax credits reduce a taxpayer s liability to 0 but they may flip the taxpayer into receiving a tax refund for example if you owe 750 in taxes but qualify for a 1 000 refundable tax credit you would ultimately receive a 250 tax refund be mindful that some credits are partially refundable for example in 2023 the child tax credit of 1 600 is partially refundable in 2024 up to 1 700 is refundable 2627state income tax vs federal income taxit is important to distinguish between the definition of income tax and federal income tax in the u s governments at the state level may also levy income taxes in addition to federal income taxes not all states have state level income taxes as of 2023 alaska florida nevada south dakota tennessee texas and wyoming don t have an income tax new hampshire taxes dividends and interest income only but the state will completely phase out these taxes by 2027 28individual vs other federal income taxesthe information above has been primarily informative regarding individual federal income taxes the irs also collects tax revenue from other entities businesses must report income and receive tax benefits similar to individuals certain legal business forms such as partnerships have a different tax filing date compared to individual filers 29 in addition businesses are subject to a wide range of tax credits only available to businesses many credits derive from the general business credit filed using form 3800 30charities and nonprofits that have received tax exempt status must also usually file a form 990 with the irs to maintain their tax free status this information return does not result in any taxes owed from the nonprofit however information provided on the return may result in further evaluation or revocation of the tax advantaged status 31last international individuals or businesses may be required to file federal taxes within the u s there are specific rules for foreign entities with income generating activities within the united states and domestic entities with income generating activities outside the united states 32 | |
what are the federal income tax brackets for 2023 and 2024 | the u s federal income tax is a marginal tax rate system based on an individual s income and filing status for the 2023 and 2024 tax years the tax brackets are 10 12 22 24 32 35 and 37 173 | |
does social security count as income | social security benefits are not counted as gross income however benefits are included in your combined income which the irs uses to determine if you should pay taxes on your benefits combined income is determined by totaling your adjusted gross income agi nontaxable interest and half of your social security benefits if your combined income is between 25 000 and 34 000 you may be taxed on up to 50 of your benefits if your combined income is more than 34 000 you may be taxed on up to 85 of your benefits 33 | |
which country has the highest federal income tax | ivory coast has the highest tax rate at 60 34 finland 56 95 denmark 56 japan 55 97 austria 55 sweden 52 3 aruba 52 belgium 50 israel 50 and the netherlands 49 5 round out the top 10 as of 2023 35 | |
which u s president imposed the first federal income tax | president abraham lincoln was the president to impose the first federal income tax by signing the revenue act on aug 5 1861 the reason he did so was to finance the civil war a 3 tax was imposed on all annual incomes over 800 36 | |
when is federal income tax due | generally federal income tax is due on april 15 of every year the day can shift slightly if april 15 falls on a weekend or because of other factors 37the bottom linefederal income taxes are considered a marginal tax or progressive tax and apply to all forms of earnings that make up a taxpayer s taxable income including wages salaries commissions bonuses tips investment income and certain types of unearned income each year the irs releases updates to the tax brackets and rates that apply to single filers married individuals filing joint returns or separately and heads of households | |
what is the federal insurance contributions act fica | the federal insurance contributions act fica of 1935 established a payroll tax on u s wage earners paychecks and called for matching contributions from employers 1 the revenues from this tax finance the nation s social security program and medicare program 2from the beginning the idea behind the act was that working people would contribute a certain amount of each of their paychecks throughout their working years to fund social security and later medicare so that later in life they d be able to count on earned financial and health benefits the self employment contributions act seca of 1954 requires the self employed to pay taxes on their net earnings to help fund social security and later medicare once it was started 34understanding ficain 1935 the united states congress passed the federal insurance contributions act known as fica its purpose was to collect contributions to fund the new social security program established by the administration of president franklin d roosevelt in the same year roosevelt believed that the money collected from all working americans through fica would belong directly to them he didn t want the financial benefits for their retirement disability or death to depend on federal revenue he feared that politicians would take and use the money for their own purposes 5in 1965 the payroll tax to fund health care benefits was added when medicare was signed into law by president lyndon b johnson 6fica contributions are mandatory although the rate can be set annually it has remained mostly stable since 1990 the limit changes each year based on the national average wage index 78according to the internal revenue service irs fica taxes are made up of old age survivors and disability insurance taxes social security plus the hospital insurance tax medicare each applies different rates 9there s a maximum wage base for social security taxes on earnings above which no tax is levied the wage base is set at 160 200 for 2023 and 168 600 for 2024 there is no wage base limit for medicare taxes 10for 2023 and 2024 the total social security tax rate of 12 4 is split between employee and employer the employee pays 6 2 and the employer pays the other 6 2 the total medicare tax rate of 2 9 is also split between employee and employer the employee pays 1 45 and the employer pays 1 45 9employees pay an additional 0 9 medicare tax on wages over a threshold amount for 2023 and 2024 that amount is 200 000 for individuals 250 000 for married couples filing jointly 11 so depending on their wages an employee s total medicare tax could reach 2 35 1 45 plus 0 9 employers are not required to match the additional medicare tax 9the self employed contributions act seca under seca the self employed pay both the employee and employer portions of the social security and medicare taxes for example as a sole proprietor you d be responsible for paying 12 4 of your income toward social security and 2 9 toward medicare 12moreover you d pay the additional medicare tax of 0 9 on self employment income over the threshold amount 11though they pay more than wage earners self employed individuals do get a tax break they can deduct the amount that represents the employer s share half as a business expense 12fica and seca taxes do not fund supplemental security income ssi benefits even though that particular program is run by the social security administration ssa ssi benefits come out of general tax revenues 13 | |
how to calculate fica | an employee earning 50 000 will pay 3 825 in fica contributions in 2024 that breaks down to 3 100 in social security tax and 725 in medicare tax the wage earner s employer would pay the same amount | |
how it s calculated | social security tax 50 000 x 062 the employee rate of 6 2 3 100medicare tax 50 000 x 0145 the employee rate of 1 45 725total fica 3 825 3 100 725 2an employee earning 250 000 and filing singly will pay 14 528 20 in fica contributions in 2024 that breaks down to 10 453 20 in social security tax 3 625 in medicare tax and 450 in additional medicare tax the wage earner s employer would pay slightly less because they aren t required to pay the additional medicare tax of 0 9 on the 50 000 above the 200 000 threshold | |
how it s calculated | social security tax 168 600 wage base limit x 062 the employee rate of 6 2 10 453 20medicare tax 250 000 x 0145 the employee rate of 1 45 3 625additional medicare tax 50 000 x 009 the total rate of 0 9 450total medicare taxes 4 075 3 625 450 total fica 14 528 20 10 453 20 4 075 21114special considerationsaccording to the congressional budget office it s estimated that the social security trust fund will run out of the money needed to make monthly social security payments in 2033 this would occur because revenues received into the program will not be enough to cover payments from it 15that imbalance will be due to the growing population of recipients of social security benefits and a shrinking workforce that s needed to fund the program with fica taxes policy makers are considering a variety of actions that could rectify this situation these include raising the full retirement age currently age 67 decreasing the financial benefits received in particular by high earners and increasing the payroll tax rate 16 | |
do i have to pay fica | yes the federal insurance contributions act or fica requires that wage earners contribute a portion of their earnings to fund the social security and medicare programs ultimately you ll be entitled to what s referred to as earned benefits you paid for them and they re owed to you | |
is social security the same as fica | no but it s related to it fica is an acronym that stands for an act passed by the u s congress back in 1935 at about the time social security was established this federal insurance contributions act called for all working people in the u s to fund social security so that it could provide them with financial benefits later in life the dollar amounts on your paycheck labeled as fica are the payroll taxes contributed to social security and since 1965 medicare 1617 | |
what is the fica tax rate | wage earners pay 6 2 on income up to 168 600 in 2024 toward social security their employers also pay 6 2 on their behalf so the total tax rate for social security is 12 4 any income above that threshold is not taxed for social security purposes the medicare rate of 1 45 is paid by wage earners on all their income for income above 200 000 they pay an additional medicare tax of 0 9 on the portion above that threshold employers match the 1 45 rate but are not responsible for matching the 0 9 rate 11109the bottom linefica refers to the 1935 u s law and later the 1965 law that mandated that payroll taxes be paid by workers and employers to fund the nation s social security and medicare programs fica taxes are mandatory from then until now american wage earners have had a portion of every paycheck withheld throughout their working years so that they can receive financial benefits from the government in their retirement years | |
what is the federal open market committee fomc | the federal open market committee fomc is the branch of the federal reserve system frs that determines the direction of monetary policy in the united states by directing open market operations omos the committee is made up of 12 members including seven members of the board of governors the president of the federal reserve bank of new york and four of the remaining 11 reserve bank presidents who serve on a rotating basis understanding the federal open market committee fomc the 12 members of the fomc meet eight times a year to discuss whether there should be any changes to near term monetary policy a vote to change policy would result in either buying or selling u s government securities on the open market to promote the healthy growth of the national economy committee members are typically categorized as hawks favoring tighter monetary policies doves who favor stimulus or centrists moderates who are somewhere in between 12the fomc chair is also the chair of the board of governors the current makeup of the board is as follows there are 12 federal reserve districts each with its own federal reserve bank these regional banks operate as extensions of the central bank the president of the federal reserve bank of new york serves continuously while the presidents of the others serve one year terms on a three year rotating schedule except for cleveland and chicago which rotate on a two year basis 6the one year rotating seats of the fomc are always comprised of one reserve bank president from each of the following groups 1the geographic group system helps ensure that all regions of the united states receive fair representation here are the 2024 fomc members 1fomc meetingsthe fomc has eight regularly scheduled meetings each year but they can meet more often if the need should arise the meetings are not held in public and are therefore the subject of much speculation on wall street as analysts attempt to predict whether the fed will tighten or loosen the money supply with a resulting increase or decrease in interest rates 1in recent years fomc meeting minutes have been made public following the meetings when it is reported in the news that the fed changed interest rates it is the result of the fomc s regular meetings 7during the meeting members discuss developments in the local and global financial markets as well as economic and financial forecasts all participants the board of governors and all 12 reserve bank presidents share their views on the country s economic stance and converse on the monetary policy that would be most beneficial for the country after much deliberation by all participants only designated fomc members get to vote on a policy that they consider appropriate for the period at the july 2023 fomc meeting the committee raised the fed funds rate to a target between 5 25 and 5 50 this was an increase of 25 basis points from the last increase in may 2023 at subsequent meetings the committee kept the target rate at the same level and confirmed the rate as of the last meeting which was on march 20 2024 89fomc operationsthe federal reserve possesses the tools necessary to increase or decrease the money supply this is done through omos adjusting the discount rate and setting bank reserve requirements the fed s board of governors is in charge of setting the discount rate and reserve requirements while the fomc is specifically in charge of omos which entails buying and selling government securities for example to tighten the money supply and decrease the amount of money available in the banking system the fed would offer government securities for sale 1securities bought by the fomc are deposited in the fed s system open market account soma which consists of a domestic and a foreign portfolio the domestic portfolio holds u s treasuries and federal agency securities while the foreign portfolio holds investments denominated in euros and japanese yen 10the fomc can hold these securities until maturity or sell them when they see fit as granted by the federal reserve act of 1913 and the monetary control act of 1980 a percentage of the fed s soma holdings are held in each of the 12 regional reserve banks however the federal reserve bank of new york executes all of the fed s open market transactions 10the process begins with the results of the meeting being communicated to the soma manager who relays them to the trading desk at the federal reserve bank of new york which then conducts transactions of government securities on the open market until the fomc mandate is met 11the interaction of all of the fed s policy tools determines the federal funds rate or the rate at which depository institutions lend their balances at the federal reserve to each other on an overnight basis the federal funds rate in turn directly influences other short term rates and indirectly influences long term interest rates foreign exchange rates and the supply of credit and demand for investment employment and economic output special considerationson jan 30 2024 the fomc reaffirmed its statement of longer run goals and monetary policy strategy 12this statement is based on the fomc s commitment to fulfilling a statutory mandate from congress to promote maximum employment stable prices and moderate long term interest rates because monetary policy determines the inflation rate over the long term the fomc can specify a longer run goal for inflation in the statement the fomc reaffirmed its analysis that a 2 target inflation rate was the rate most consistent with its statutory mandate 12 | |
what does the fed s federal open market committee do | the federal open market committee is responsible for directing monetary policy through open market operations the group is a 12 member group that is the primary committee of the fed affecting monetary policy through its decisions it sets the fed s short term objective for purchasing and selling securities which is the target level of the fed funds rate which influences other interest rates 1 | |
is the fomc the same as the fed | no the fomc is not the same as the fed the fomc is a committee within the fed the federal open market committee and is responsible only for open market operations the fed s board of governors set the discount rate and the reserve requirements 1 | |
how often does the fomc meet | the federal open market committee meets eight times a year 1the bottom linethe federal open market committee is the division of the federal reserve that sets monetary policy by managing open market operations by doing this the fed influences the fed funds rate which impacts other interest rates the fomc does this to either contract or expand the economy depending on current market conditions | |
what is the federal open market committee fomc | the federal open market committee fomc is the branch of the federal reserve system frs that determines the direction of monetary policy in the united states by directing open market operations omos the committee is made up of 12 members including seven members of the board of governors the president of the federal reserve bank of new york and four of the remaining 11 reserve bank presidents who serve on a rotating basis understanding the federal open market committee fomc the 12 members of the fomc meet eight times a year to discuss whether there should be any changes to near term monetary policy a vote to change policy would result in either buying or selling u s government securities on the open market to promote the healthy growth of the national economy committee members are typically categorized as hawks favoring tighter monetary policies doves who favor stimulus or centrists moderates who are somewhere in between 12the fomc chair is also the chair of the board of governors the current makeup of the board is as follows there are 12 federal reserve districts each with its own federal reserve bank these regional banks operate as extensions of the central bank the president of the federal reserve bank of new york serves continuously while the presidents of the others serve one year terms on a three year rotating schedule except for cleveland and chicago which rotate on a two year basis 6the one year rotating seats of the fomc are always comprised of one reserve bank president from each of the following groups 1the geographic group system helps ensure that all regions of the united states receive fair representation here are the 2024 fomc members 1fomc meetingsthe fomc has eight regularly scheduled meetings each year but they can meet more often if the need should arise the meetings are not held in public and are therefore the subject of much speculation on wall street as analysts attempt to predict whether the fed will tighten or loosen the money supply with a resulting increase or decrease in interest rates 1in recent years fomc meeting minutes have been made public following the meetings when it is reported in the news that the fed changed interest rates it is the result of the fomc s regular meetings 7during the meeting members discuss developments in the local and global financial markets as well as economic and financial forecasts all participants the board of governors and all 12 reserve bank presidents share their views on the country s economic stance and converse on the monetary policy that would be most beneficial for the country after much deliberation by all participants only designated fomc members get to vote on a policy that they consider appropriate for the period at the july 2023 fomc meeting the committee raised the fed funds rate to a target between 5 25 and 5 50 this was an increase of 25 basis points from the last increase in may 2023 at subsequent meetings the committee kept the target rate at the same level and confirmed the rate as of the last meeting which was on march 20 2024 89fomc operationsthe federal reserve possesses the tools necessary to increase or decrease the money supply this is done through omos adjusting the discount rate and setting bank reserve requirements the fed s board of governors is in charge of setting the discount rate and reserve requirements while the fomc is specifically in charge of omos which entails buying and selling government securities for example to tighten the money supply and decrease the amount of money available in the banking system the fed would offer government securities for sale 1securities bought by the fomc are deposited in the fed s system open market account soma which consists of a domestic and a foreign portfolio the domestic portfolio holds u s treasuries and federal agency securities while the foreign portfolio holds investments denominated in euros and japanese yen 10the fomc can hold these securities until maturity or sell them when they see fit as granted by the federal reserve act of 1913 and the monetary control act of 1980 a percentage of the fed s soma holdings are held in each of the 12 regional reserve banks however the federal reserve bank of new york executes all of the fed s open market transactions 10the process begins with the results of the meeting being communicated to the soma manager who relays them to the trading desk at the federal reserve bank of new york which then conducts transactions of government securities on the open market until the fomc mandate is met 11the interaction of all of the fed s policy tools determines the federal funds rate or the rate at which depository institutions lend their balances at the federal reserve to each other on an overnight basis the federal funds rate in turn directly influences other short term rates and indirectly influences long term interest rates foreign exchange rates and the supply of credit and demand for investment employment and economic output special considerationson jan 30 2024 the fomc reaffirmed its statement of longer run goals and monetary policy strategy 12this statement is based on the fomc s commitment to fulfilling a statutory mandate from congress to promote maximum employment stable prices and moderate long term interest rates because monetary policy determines the inflation rate over the long term the fomc can specify a longer run goal for inflation in the statement the fomc reaffirmed its analysis that a 2 target inflation rate was the rate most consistent with its statutory mandate 12 | |
what does the fed s federal open market committee do | the federal open market committee is responsible for directing monetary policy through open market operations the group is a 12 member group that is the primary committee of the fed affecting monetary policy through its decisions it sets the fed s short term objective for purchasing and selling securities which is the target level of the fed funds rate which influences other interest rates 1 | |
is the fomc the same as the fed | no the fomc is not the same as the fed the fomc is a committee within the fed the federal open market committee and is responsible only for open market operations the fed s board of governors set the discount rate and the reserve requirements 1 | |
how often does the fomc meet | the federal open market committee meets eight times a year 1the bottom linethe federal open market committee is the division of the federal reserve that sets monetary policy by managing open market operations by doing this the fed influences the fed funds rate which impacts other interest rates the fomc does this to either contract or expand the economy depending on current market conditions | |
what is the federal open market committee fomc | the federal open market committee fomc is the branch of the federal reserve system frs that determines the direction of monetary policy in the united states by directing open market operations omos the committee is made up of 12 members including seven members of the board of governors the president of the federal reserve bank of new york and four of the remaining 11 reserve bank presidents who serve on a rotating basis understanding the federal open market committee fomc the 12 members of the fomc meet eight times a year to discuss whether there should be any changes to near term monetary policy a vote to change policy would result in either buying or selling u s government securities on the open market to promote the healthy growth of the national economy committee members are typically categorized as hawks favoring tighter monetary policies doves who favor stimulus or centrists moderates who are somewhere in between 12the fomc chair is also the chair of the board of governors the current makeup of the board is as follows there are 12 federal reserve districts each with its own federal reserve bank these regional banks operate as extensions of the central bank the president of the federal reserve bank of new york serves continuously while the presidents of the others serve one year terms on a three year rotating schedule except for cleveland and chicago which rotate on a two year basis 6the one year rotating seats of the fomc are always comprised of one reserve bank president from each of the following groups 1the geographic group system helps ensure that all regions of the united states receive fair representation here are the 2024 fomc members 1fomc meetingsthe fomc has eight regularly scheduled meetings each year but they can meet more often if the need should arise the meetings are not held in public and are therefore the subject of much speculation on wall street as analysts attempt to predict whether the fed will tighten or loosen the money supply with a resulting increase or decrease in interest rates 1in recent years fomc meeting minutes have been made public following the meetings when it is reported in the news that the fed changed interest rates it is the result of the fomc s regular meetings 7during the meeting members discuss developments in the local and global financial markets as well as economic and financial forecasts all participants the board of governors and all 12 reserve bank presidents share their views on the country s economic stance and converse on the monetary policy that would be most beneficial for the country after much deliberation by all participants only designated fomc members get to vote on a policy that they consider appropriate for the period at the july 2023 fomc meeting the committee raised the fed funds rate to a target between 5 25 and 5 50 this was an increase of 25 basis points from the last increase in may 2023 at subsequent meetings the committee kept the target rate at the same level and confirmed the rate as of the last meeting which was on march 20 2024 89fomc operationsthe federal reserve possesses the tools necessary to increase or decrease the money supply this is done through omos adjusting the discount rate and setting bank reserve requirements the fed s board of governors is in charge of setting the discount rate and reserve requirements while the fomc is specifically in charge of omos which entails buying and selling government securities for example to tighten the money supply and decrease the amount of money available in the banking system the fed would offer government securities for sale 1securities bought by the fomc are deposited in the fed s system open market account soma which consists of a domestic and a foreign portfolio the domestic portfolio holds u s treasuries and federal agency securities while the foreign portfolio holds investments denominated in euros and japanese yen 10the fomc can hold these securities until maturity or sell them when they see fit as granted by the federal reserve act of 1913 and the monetary control act of 1980 a percentage of the fed s soma holdings are held in each of the 12 regional reserve banks however the federal reserve bank of new york executes all of the fed s open market transactions 10the process begins with the results of the meeting being communicated to the soma manager who relays them to the trading desk at the federal reserve bank of new york which then conducts transactions of government securities on the open market until the fomc mandate is met 11the interaction of all of the fed s policy tools determines the federal funds rate or the rate at which depository institutions lend their balances at the federal reserve to each other on an overnight basis the federal funds rate in turn directly influences other short term rates and indirectly influences long term interest rates foreign exchange rates and the supply of credit and demand for investment employment and economic output special considerationson jan 30 2024 the fomc reaffirmed its statement of longer run goals and monetary policy strategy 12this statement is based on the fomc s commitment to fulfilling a statutory mandate from congress to promote maximum employment stable prices and moderate long term interest rates because monetary policy determines the inflation rate over the long term the fomc can specify a longer run goal for inflation in the statement the fomc reaffirmed its analysis that a 2 target inflation rate was the rate most consistent with its statutory mandate 12 | |
what does the fed s federal open market committee do | the federal open market committee is responsible for directing monetary policy through open market operations the group is a 12 member group that is the primary committee of the fed affecting monetary policy through its decisions it sets the fed s short term objective for purchasing and selling securities which is the target level of the fed funds rate which influences other interest rates 1 | |
is the fomc the same as the fed | no the fomc is not the same as the fed the fomc is a committee within the fed the federal open market committee and is responsible only for open market operations the fed s board of governors set the discount rate and the reserve requirements 1 | |
how often does the fomc meet | the federal open market committee meets eight times a year 1the bottom linethe federal open market committee is the division of the federal reserve that sets monetary policy by managing open market operations by doing this the fed influences the fed funds rate which impacts other interest rates the fomc does this to either contract or expand the economy depending on current market conditions | |
what is the federal reserve system frs | the federal reserve system frs is the central bank of the united states often called the fed it is arguably the most influential financial institution in the world it was founded to provide the country with a safe flexible and stable monetary and financial system 1 the fed has a board of seven members and 12 federal reserve banks each operating as a separate district with their own presidents 23there is a common misconception that the federal reserve system is privately owned in fact it combines public and private characteristics the central governing board of the frs is an agency of the federal government and reports to congress the federal reserve banks that it oversees are set up like private corporations understanding the federal reserve system frs a central bank is a financial institution given privileged control over the production and distribution of money and credit for a nation union or group of countries in modern economies the central bank is usually responsible for formulating monetary policy and regulating member banks the fed is composed of 12 regional federal reserve banks that are each responsible for a specific geographic area of the u s 3the fed was established by the federal reserve act which was signed by president woodrow wilson on dec 23 1913 in response to the financial panic of 1907 4 before that the u s was the only major financial power without a central bank its creation was precipitated by repeated financial panics that afflicted the u s economy over the previous century leading to severe economic disruptions due to bank failures and business bankruptcies a crisis in 1907 led to calls for an institution that would prevent panics and disruptions 5the fed has broad power to act to ensure financial stability and it is the primary regulator of banks that are members of the federal reserve system it also serves as the lender of last resort to member institutions often referred to simply as the fed it has what is often called its dual mandate of ensuring price stability and maximum employment 6the system s 12 regional federal banks are based in boston new york philadelphia cleveland richmond atlanta chicago st louis minneapolis kansas city dallas and san francisco 7the federal reserve system s mandate and dutiesthe monetary policy goals of the federal reserve are twofold to foster economic conditions that achieve stable prices and maximum sustainable employment 8the fed s duties can be further categorized into four general areas 3the federal reserve system s organizational structurethere are seven members of the board of governors these individuals are nominated by the president and approved by the u s senate each governor serves a maximum of 14 years their appointment is staggered by two years which is intended to limit the political influences it might be subjected to when control of appointments shifts to different political parties during elections 9 the law also dictates that appointments represent all broad sectors of the u s economy at times there may be an empty seat on the board but as of october 2023 all board positions are occupied 10in addition to the governors of the fed s board each of the 12 regional banks has a president each of these banks is set up in a different federal reserve district 7the federal reserve system s independencecentral bank independence refers to the question of whether the overseers of monetary policy should be completely disconnected from the realm of government those who favor independence recognize the influence of politics in promoting monetary policy that can favor re election in the near term but cause lasting economic damage down the road critics say that the central bank and government must tightly coordinate their policies and that central banks must have regulatory oversight the fed is also considered independent because its decisions do not have to be ratified by the president or any other government official however it is still subject to congressional oversight and must work within the framework of the government s monetary and fiscal policy objectives the fed is considered to be independent because its decisions do not have to be ratified the federal reserve system frs vs federal open market committee fomc the federal reserve system is composed of the federal reserve board of governors the federal reserve banks the federal open market committee and all the programs created by the fed as a whole to accomplish its dual mandate the federal open market committee fomc is the federal reserve s main monetary policymaking body it is responsible for open market operations which is buying and selling government securities to influence the amount of money banks keep in reserve the fomc includes the board of governors or the federal reserve board frb as it s also called the president of the federal reserve bank of new york and the presidents of four other regional federal reserve banks who serve on a rotating basis 11the committee is responsible for monetary policy decisions which are categorized into three areas maximizing employment stabilizing prices and moderating long term interest rates 1213special considerationsthe fed s main income source is interest charges on a range of u s government securities acquired through its open market operations omo other income sources include interest on foreign currency investments interest on loans to depository institutions and fees for services such as check clearing and fund transfers provided to these institutions after paying expenses the fed transfers the rest of its earnings to the u s treasury 14the federal reserve payments system commonly known as the fedwire moves trillions of dollars daily between banks throughout the u s transactions are for same day settlement 1516 in the aftermath of the 2008 financial crisis the fed has paid increased attention to the risk created by the time lag between when payments are made early in the day and when they are settled and reconciled the fed is pressuring large financial institutions to improve real time monitoring of payments and credit risk which has been available only on an end of day basis the fed has developed a payment system it calls fednow which is designed to take the place of the traditional and slower settlement systems fednow was launched in july 2023 17who owns the federal reserve the federal reserve system is not owned by anyone it was created in 1913 by the federal reserve act to serve as the nation s central bank the board of governors is an agency of the federal government and reports to and is directly accountable to congress 18 | |
what does it mean that the federal reserve is a central bank | a central bank is a financial institution responsible for overseeing a nation s monetary system and policies a central bank monitors economic changes controls the money supply and sets interest rates to influence price stability and employment | |
does the fed print u s money | money is printed by the bureau of engraving and printing the federal reserve controls the amount of money circulating by implementing monetary policy 19 you may also hear that the fed prints or creates money through its operations however this is untrue depository institutions and lenders are the ones who print money through fractional reserve banking 20 | |
how does the fed set interest rates | the federal reserve sets the rate for its overnight reverse repurchase on rrep agreement facility where it buys and sells securities this rate helps set the bottom number for the rate range it also pays interest on reserve balances iorb the rate of which helps set the top number for the range the fed also uses the rate at its discount window and open market operations to help establish interest rates that it believes will influence the economy to produce an average inflation rate of 2 over the long run 21 | |
does the fed collect taxes | no the fed is responsible only for monetary policy and banking system oversight federal taxes are approved and collected exclusively by congress via the internal revenue service irs a federal agency which is an instance of fiscal policy 22 state and local taxes are collected by individual states or municipalities the bottom linethe federal reserve system is the central banking system of the united states the fed uses the system and the tools it has to set interest rates and regulate the money supply to accomplish its mandate of price stability and maximum employment | |
what is the federal reserve board frb | the board of governors of the federal reserve system also known as the federal reserve board frb is the governing body of the federal reserve system 1 the frb was established by the banking act of 1935 2 the members are statutorily tasked with giving a fair representation of the financial agricultural industrial and commercial interests and geographical divisions of the country 3 | |
how the federal reserve board frb works | the board of governors of the federal reserve system called the federal reserve board or frb for short is a seven member body that governs the federal reserve system the u s central bank in charge of making the country s monetary policy 1the members of the u s senate confirmed frb are considered an independent agency of the federal government 4 the fed has a statutory mandate to maximum employment and stable prices at moderate long term interest rates and the frb chair and other officials frequently testify before congress however it makes monetary policy independently of the legislative or executive branches and is structured like a private corporation 5the vice chairman is required to appear before the senate and the house of representatives the vice chairman is also required at semi annual hearings to discuss efforts activities objectives and plans of the board 6appointments terms and rolesthe president appoints the frb s members and they are confirmed by the senate each is appointed to a single 14 year term but may serve shorter or longer periods a new board member serves the remainder of the outgoing member s term if any the new member may then be reappointed to one full term 1if a replacement has not been confirmed when that term expires they may continue to serve so that it is possible for a member to serve for much longer than 14 years however the president is allowed to remove a member from the board given sufficient cause terms are staggered so that a new one begins every two years 6 once appointed each board member operates independently 1the chair and vice chair for the supervision of the federal reserve board are appointed to four year terms by the president from among the board s existing members they can be reappointed to these leadership roles as many times as their term limits as board members allow 1the board of governors includes several subcommittees with their chairs and vice chairs these are the committees on board affairs consumer and community affairs economic and monetary affairs financial stability federal reserve bank affairs supervision and regulation payments clearing and settlement and the subcommittee on smaller regional and community banking 7here is the current list of federal reserve board members 8duties of the federal reserve board frb the federal reserve board members most important role is as members of the federal open market committee fomc which is in charge of the open market operations that determine the federal funds rate one of the global economy s most important benchmark interest rates in addition to the seven governors the fomc consists of the president of the federal reserve bank of new york and a rotating set of four other branch presidents the chair of the frb also chairs the fomc 9the frb is directly in charge of two other monetary policy tools the discount rate based on suggestions from the regional branches and reserve requirements 10 it is also tasked with supervising the fed s 12 regional branches 1administration of the federal reserve board officersthe board s principal offices are located in the district of columbia at board meetings the chairman presides and in the chairman s absence the vice chairman takes over if both the chairman and vice chairman are absent the board can elect a member to act as chairman pro tempore funds collected through assessments on federal reserve banks are used to cover expenses and salaries of board members board members are prohibited from holding positions or stock in banks banking institutions or trust companies each board member must certify this fact under oath as part of their service 6 | |
how does the federal reserve board influence interest rates | the fed influences interest rates through open market operations where it buys or sells government securities by adjusting the supply of money in the banking system it can control the federal funds rate which in turn impacts short term interest rates and broader financial conditions | |
what is the structure of the federal reserve system | the federal reserve system comprises the board of governors in washington d c and 12 regional federal reserve banks located across the country these regional banks serve as operational and financial centers supporting the central banking functions | |
what is the relationship between the federal reserve and the u s treasury | while the federal reserve and the u s treasury are separate entities they work together on various issues including managing the national debt the fed purchases and holds treasury securities and the u s treasury issues these securities to finance government activities | |
how does the federal reserve board respond to financial crises | during financial crises the fed provides liquidity to banks and financial markets to prevent a collapse of the financial system it can make emergency loans and employ unconventional monetary policy measures to stabilize the economy and restore confidence the bottom linethe federal reserve board commonly known as the fed is the central banking system of the united states its primary mission is to control monetary policy to promote stable prices sustainable economic growth and full employment the federal reserve board uses various tools including adjusting interest rates and conducting open market operations to influence the money supply and influence the broader economy correction jan 31 2023 a previous version of this article incorrectly listed the federal reserve board as a non governmental agency while independent the frb is an agency of the federal government | |
what is the federal reserve system frs | the term federal reserve system frs refers to the central bank of the u s the fed as it is commonly known regulates the u s monetary and financial system the federal reserve system is composed of a central governmental agency in washington d c the board of governors and 12 regional federal reserve banks in major cities throughout the u s the fed s central role is to handle the country s monetary policy among other things understanding the federal reserve system frs the federal reserve system is the central banking system of the united states it is a major force in the country s economy and banking industry the bank is headed by the governor and has a board with six other members these individuals are nominated by the president and are then confirmed by the senate the fed performs five general functions the fed also operates three wholesale payment systems including the fedwire funds service the fedwire securities service and the national settlement service the fed has broad power to act to ensure financial stability and it is the primary regulator of banks that are members of the federal reserve system it acts as the lender of last resort to member institutions who have no place else to borrow the fed s open mouth operations are known to publicly declare the current interest rate banks in the u s are also subject to regulations established by the states the federal deposit insurance corporation if they are members and the office of the comptroller of the currency occ jerome powell was sworn in as fed chair on feb 5 2018 for a four year term he was reappointed for a second four year term on may 23 2022 fed paymentsthe fed uses two payment systems fedwire and fednow the fednow service allows for instant payments as the fed describes payments that can be sent and received within seconds at any time of the day on any day of the year such that the receiver can use the funds almost instantly fedwire is a payment service for financial institutions that hold an account with the fed according to the fed it is a real time gross settlement system that enables participants to initiate funds transfer that are immediate final and irrevocable once processed it is used to make large value time critical payments history of the frsthe fed was established by the federal reserve act which was signed by president woodrow wilson on dec 23 1913 in response to the financial panic of 1907 before that the u s was the only major financial power without a central bank the following are some key highlights in the fed s history the federal reserve attempts to reach a target rate of inflation of 2 federal reserve system frs vs federal open market committee fomc the federal open market committee fomc is the fed s monetary policy making body and manages the country s money supply it is made up of the seven members of the fed s board of governors the president of the new york fed and four of the remaining 11 regional fed presidents who serve one year terms on a rotating basis the fomc meets eight times a year and additionally on an as needed basis to discuss the outlook for the national economy and review options for its monetary policy the fomc adjusts the target for the overnight federal funds rate which controls short term interest rates at its meetings based on its view of the strength of the economy when it wants to stimulate the economy it reduces the target rate conversely it raises the federal funds rate to slow the economy here s a history of how the target rate has moved in recent years | |
what are the 3 main purposes of the federal reserve system | the three main purposes of the federal reserve system are these goals were laid out in the federal reserve act that created the federal reserve system who controls the federal reserve the federal reserve is the central bank of the united states and is managed by the board of governors of the federal reserve the board is based in washington d c and is made up of seven members who are nominated by the president of the united states and confirmed by the u s senate who controls monetary policy monetary policy is controlled by a central bank in the united states this is the federal reserve a central bank controls open market operations reserve requirements and the discount window rate a country s government is responsible for fiscal policy such as setting taxes the bottom linethe federal reserve system refers to the central bank of the united states the fed as it is commonly known sets the monetary policy of the united states its responsibilities also include regulating banking institutions monitoring and protecting the credit rights of consumers maintaining the stability of the financial system and providing financial services to the u s government | |
what is the federal trade commission ftc | the federal trade commission ftc is an independent bipartisan agency of the u s government tasked with protecting consumers and ensuring a strong competitive market lina khan is the current chair of the federal trade commission ftc its principal purpose is to enforce non criminal antitrust laws in the united states preventing and eliminating anticompetitive business practices including coercive monopolies the ftc also seeks to protect consumers from predatory or misleading business practices understanding the federal trade commission ftc the federal trade commission ftc was established in 1914 by the federal trade commission act as part of the wilson administration s trust busting efforts trust busting being a significant concern at the time 1 it was tasked with enforcing the clayton act which banned monopolistic practices before the birth of the ftc there was the bureau of corporations created by the roosevelt administration in february 1903 part of the department of commerce and labor the bureau of corporations was tasked with making sure businesses acted in the best interest of the public the success of the bureau of corporations led to the creation of the ftc the ftc continues to discourage anticompetitive behavior through the bureau of competition which reviews proposed mergers together with the department of justice doj as the years have passed the ftc has been tasked with enforcing additional business regulations as codified in title 16 of the code of federal regulations under the premerger notification program parties of larger mergers must submit a premerger notification to the ftc and department of justice doj 2the federal trade commission s core activitiesthe ftc s regular activities include investigating fraud or false advertising from consumers businesses and the media congressional inquiries and pre merger notification filings the ftc may investigate a single company or an entire industry if an ftc investigation reveals unlawful activities on the part of one or more companies within an industry it can seek voluntary compliances via consent order initiate federal litigation or file an administrative complaint traditionally such a complaint would be heard in front of an administrative law judge alj and may be appealed to the u s court of appeals and then the supreme court the ftc also deals with complaints of unfair business practices such as scams and deceptive advertising its bureau of consumer protection conducts investigations into alleged abuses carries out enforcement actions and provides educational materials to consumers the bureau of consumer protection is in charge of the u s national do not call registry the ftc also administers and enforces the telemarketing sales rule the pay per call rule and the equal credit opportunity act in total the commission has enforcement or administrative responsibilities under more than 70 laws 3the bureau of economics provides research support to the other two departments of the ftc including analysis of the potential effects of ftc actions the ftc typically does not have the ability to directly enforce its rulings but it can go to the courts to have them enforced examples of federal trade commission actionsin 1984 the ftc cracked down on deceptive pricing in the funeral home industry implementing the ftc funeral rule which requires funeral homes to offer a written general price list gpl detailing all prices for goods and services in the funeral industry to anyone who requests one 4no one can be denied a written copy of gpl by law and they must be allowed to keep it if they desire in 1996 the ftc implemented the funeral rule offenders program which allows offending funeral homes to make a voluntary payment to the u s treasury or an appropriate state fund in exchange for not having to go to court in the 1990s the agency also conducted several investigations into telemarketing scams beginning with project telesweep in 1995 which cracked down on at least 100 fictitious business opportunity scams 5the ftc has been active in the healthcare industry too blocking the proposed acquisition of palmyra medical center by putney memorial hospital based on potential harm to consumers 6 the case went to the supreme court which ruled in the ftc s favor in 2013 more recently in 2021 the ftc ordered e commerce giant amazon to pay more than 61 million as a settlement for its failure to pay amazon flex drivers all of their tips from amazon customers 7 the charges against amazon state that the company promised its flex drivers 100 of customers tips while delivering and that the customers were advised the same for more than two years it withheld part of customer paid tips from its flex drivers | |
what is the federal trade commission act of 1914 | the federal trade commissions act of 1914 created the federal trade commission ftc and bestowed full power to the u s government to address unscrupulous acts among businesses | |
what does the ftc regulate | the ftc can regulate trade by outlining deceptive and unfair practices in the marketplace it also enforces antitrust and consumer protection laws | |
how do you file a complaint with the federal trade commission | consumers can file complaints with the federal trade commission online or call 1 877 ftc help the ftc also maintains the identity theft hotline 1 877 id theft and the national do not call registry 1 888 382 1222 | |
what happens when you file a complaint with the ftc | once a complaint is submitted the ftc shares it with more than 3 000 law enforcers 8 the ftc gathers information from submitted complaints to create reports which are used to investigate fraud unfair business practices and scams | |
what is the federal unemployment tax act futa | the federal unemployment tax act futa is a federal law that imposes an additional tax on employers on top of existing federal income and payroll taxes the money raised through futa is allocated to state unemployment insurance agencies which fund unemployment benefits for individuals who are out of work futa taxes are only paid by employers which means individual taxpayers are not responsible for paying them the futa tax rate is 6 and only applies to a certain dollar figure paid to employees during the year 1understanding the federal unemployment tax act futa futa is a federal law that raises revenue to administer unemployment insurance and job service programs in every state as directed by the act employers are required to pay annual or quarterly federal unemployment taxes they make up a part of what is commonly known as payroll taxes the tax rate is 6 according to the internal revenue service irs the tax applies to the first 7 000 you paid to each employee as wages during the year the 7 000 is often referred to as the federal or futa wage base your state wage base may be different based on the respective state s rules 1the funds in the account are used for unemployment compensation payments to workers who have lost their jobs although the amount of the futa payroll tax is based on employees wages it is imposed on employers only not their employees in other words it is not deducted from a worker s wages as such futa differs from other payroll taxes such as the social security tax which applies to both employers and employees | |
how to calculate futa tax liability | a company s futa tax liability is fairly straightforward to calculate a company is subject to futa taxes on the first 7 000 of payments made to an employee excluding exempt payments the futa tax rate is 6 and employers often receive a credit of up to 5 4 against this tax 2suppose that employee a was paid 10 000 in wages subject to futa taxes while employee b was paid 5 000 in wages subject to futa taxes both in the first quarter regarding employee a only the first 7 000 of wages per quarter are subject to the tax therefore the tax liability is futa liability employee a s eligible wages employee b s eligible wages x 6 futa liability 7 000 5 000 x 6 the company s futa tax liability would be 720 note that the company may be eligible for a tax credit of 648 12 000 x 5 4 if this is the case the company would only owe 72 the federal unemployment tax act requires employers to file irs form 940 annually to report the paying of their futa taxes irs form 940 generally must be filed in the first quarter of the year who pays the futa tax the reporting requirements for futa vary on the underlying entity that is remitting the taxes to the irs futa taxes can be paid annually or quarterly and the amount of an employer s futa tax liability determines when the tax must be paid here are the different reporting requirements for various types of entities or employers according to the irs a business owes futa if it meets one of two requirements there are two broad measurements to determine whether a business must collect and remit futa and a company only needs to satisfy one of the two following conditions in order to be required to remit futa a calendar quarter is january through march april through june july through september or october through december there is a different set of reporting requirements for household employers those who hire a nanny babysitter maid housekeeper or other people to provide services within one s private home household employers must pay futa tax on wages if the following two conditions are met household employers can opt to file and report futa taxes using schedule h via form 1040 instead of form 940 another varying set of requirements exists for agricultural or farming employers if the employer meets either of the conditions below they are subject to futa tax collection and reporting indian tribal governments are exempt from the futa tax however the tribe must have participated in the state unemployment system for the entire year and be compliant with prevailing unemployment laws religious educational scientific charitable or other tax exempt organizations are also exempt from futa services performed by state or local government parties are also exempt if you re filing your last form 940 because your business has closed or you have stopped paying wages you can select box d in the top right corner of the form to notify the irs 2 | |
how to pay and report futa taxes | there are two components to futa depositing futa taxes and filing the appropriate tax form companies that owe 500 or more of futa in a calendar year must make at least one quarterly payment the irs permits any single quarterly tax liability of less than 500 to be rolled to the next period 2futa must usually be deposited at the end of the month after quarter end for example with the first quarter ending march 31 futa taxes in q1 are due for deposit by april 30 the irs also requires all federal tax deposits to be made via electronic funds transfer 2the tax form is often due in full early in the calendar year form 940 is considered to be on time as long as it is properly addressed and postmarked before the due date 2futa can be reported via form 940 electronically using the irs electronic filing platform taxpayers wanting to mail in a paper form will have varying mailing addresses based on the state they are in 4if the due date for filing falls on a saturday sunday or a legal holiday irs guidelines mandate that the return is subsequently due the next business day 2federal unemployment tax act futa vs state unemployment tax act suta many states collect an additional unemployment tax from employers as per the state unemployment tax act the suta taxes range from 0 to 18 78 of an employee s wages 5paying suta taxes can lessen the burden of futa taxes as noted above employers can take a tax credit of up to 5 4 of taxable income if they pay state unemployment taxes in full and on time this amount is deducted from the amount of employee federal unemployment taxes owed 1an employer that qualifies for the highest credit will have a net tax rate of 0 6 calculated as 6 minus 5 4 thus the minimum amount an employer can pay in futa tax is 42 per employee however companies that are exempt from state unemployment taxes do not qualify for the futa credit 1federal unemployment tax act futa vs federal insurance contribution act fica while futa is used to fund unemployment benefits federal insurance contribution act fica taxes are different in several ways fica taxes are paid by both the employer and the employee the tax is split evenly between the two though self employed individuals are usually responsible for both portions fica is intended to fund different government programs these taxes are used to provide social security and medicare benefits it is automatically deducted from employee paychecks and federal law dictates that it is furnished by workers and their employers special considerationswages that an employer pays to their spouse a child under the age of 21 or parents do not count as futa wages payments such as fringe benefits group term life insurance benefits and employer contributions to employee retirement accounts are not included in the tax calculation for the federal unemployment tax form 940 can be amended for a previous year when the prior year s information needs to be updated the irs requests using the subsequent year to reflect the change various authorized personnel are allowed to sign form 940 and remit the reporting of futa taxes in general a business owner president vice president principal officer fiduciary overseeing an estate authorized partner or officer knowing the affairs of a company may be allowed to sign the form | |
what is the futa tax in the u s | futa stands for federal unemployment tax act the law imposes a payroll tax on employers to fund unemployment programs in the united states a company is usually responsible for a tax of 6 on every employee s wages up to 7 000 per year a company may often be eligible to receive a credit of up to 5 4 1 | |
what is futa vs fica | futa is a payroll tax implemented on just an employer to help fund federal unemployment programs fica is a payroll tax implemented on both the employer and employee that provides funding for medicare and social security who is subject to futa most businesses are subject to futa if they have employees if a company pays wages of more than 1 500 to employees in any calendar quarter during the year they are subject to futa in addition if one or more employees worked part of a day in 20 or more different weeks during the year the company they work for is subject to futa 1the bottom linethe federal unemployment tax act futa is only imposed on employers not employees this means that as an employee you don t have to pay this additional tax taxes collected through the federal unemployment tax act are used to fund unemployment insurance programs along with those collected by individual states | |
what is a feasibility study | a feasibility study is a detailed analysis that considers all of the critical aspects of a proposed project in order to determine the likelihood of it succeeding success in business may be defined primarily by return on investment meaning that the project will generate enough profit to justify the investment however many other important factors may be identified on the plus or minus side such as community reaction and environmental impact although feasibility studies can help project managers determine the risk and return of pursuing a plan of action several steps should be considered before moving forward lara antal investopediaunderstanding a feasibility studya feasibility study is an assessment of the practicality of a proposed plan or project a feasibility study analyzes the viability of a project to determine whether the project or venture is likely to succeed the study is also designed to identify potential issues and problems that could arise while pursuing the project as part of the feasibility study project managers must determine whether they have enough of the right people financial resources and technology the study must also determine the return on investment whether this is measured as a financial gain or a benefit to society the latter in the case of a nonprofit project the feasibility study might include a cash flow analysis measuring the level of cash generated from revenue vs the project s operating costs a risk assessment must also be completed to determine whether the return is enough to offset the risk of undergoing the venture | |
when doing a feasibility study it s always good to have a contingency plan that is ready to test as a viable alternative if the first plan fails | benefits of a feasibility studythere are several benefits to feasibility studies including helping project managers discern the pros and cons of undertaking a project before investing a significant amount of time and capital into it feasibility studies can also provide a company s management team with crucial information that could prevent them from entering into a risky business venture such studies help companies determine how they will grow they will know more about how they will operate what the potential obstacles are who the competition is and what the market is feasibility studies also help convince investors and bankers that investing in a particular project or business is a wise choice | |
how to conduct a feasibility study | the exact format of a feasibility study will depend on the type of organization that requires it however the same factors will be involved even if their weighting varies although each project can have unique goals and needs there are some best practices for conducting any feasibility study once the initial due diligence has been completed the real work begins components that are typically found in a feasibility study include the following examples of a feasibility studybelow are two examples of a feasibility study the first involves expansion plans for a university the second is a real world example conducted by the washington state department of transportation with private contributions from microsoft inc officials at a university were concerned that the science building built in the 1970s was outdated considering the technological and scientific advances of the last 20 years they wanted to explore the cost and benefits of upgrading and expanding the building a feasibility study was conducted in the preliminary analysis school officials explored several options weighing the benefits and costs of expanding and updating the science building some school officials had concerns about the project including the cost and possible community opposition the new science building would be much larger and the community board had earlier rejected similar proposals the feasibility study would need to address these concerns and any potential legal or zoning issues the feasibility study also explored the technological needs of the new science facility the benefits to the students and the long term viability of the college a modernized science facility would expand the school s scientific research capabilities improve its curriculum and attract new students financial projections showed the cost and scope of the project and how the school planned to raise the needed funds which included issuing a bond to investors and tapping into the school s endowment the projections also showed how the expanded facility would allow more students to be enrolled in the science programs increasing revenue from tuition and fees the feasibility study demonstrated that the project was viable paving the way to enacting the modernization and expansion plans of the science building without conducting a feasibility study the school administrators would never have known whether its expansion plans were viable the washington state department of transportation decided to conduct a feasibility study on a proposal to construct a high speed rail that would connect vancouver british columbia seattle washington and portland oregon the goal was to create an environmentally responsible transportation system to enhance the competitiveness and future prosperity of the pacific northwest 1the preliminary analysis outlined a governance framework for future decision making the study involved researching the most effective governance framework by interviewing experts and stakeholders reviewing governance structures and learning from existing high speed rail projects in north america as a result governing and coordinating entities were developed to oversee and follow the project if it was approved by the state legislature 2a strategic engagement plan involved an equitable approach with the public elected officials federal agencies business leaders advocacy groups and indigenous communities the engagement plan was designed to be flexible considering the size and scope of the project and how many cities and towns would be involved a team of the executive committee members was formed and met to discuss strategies as well as lessons learned from previous projects and met with experts to create an outreach framework the financial component of the feasibility study outlined the strategy for securing the project s funding which explored obtaining funds from federal state and private investments the project s cost was estimated to be 24 billion to 42 billion the revenue generated from the high speed rail system was estimated to be 160 million to 250 million 3the report bifurcated the money sources between funding and financing funding referred to grants appropriations from the local or state government and revenue financing referred to bonds issued by the government loans from financial institutions and equity investments which are essentially loans against future revenue that need to be paid back with interest the sources for the capital needed were to vary as the project moved forward in the early stages most of the funding would come from the government and as the project developed funding would come from private contributions and financing measures private contributors included microsoft inc the benefits outlined in the feasibility report show that the region would experience enhanced interconnectivity allowing for better management of the population and increasing regional economic growth by 355 billion the new transportation system would provide people with access to better jobs and more affordable housing the high speed rail system would also relieve congested areas from automobile traffic 3the timeline for the study began in 2016 when an agreement was reached with british columbia to work together on a new technology corridor that included high speed rail transportation 4 the feasibility report was submitted to the washington state legislature in december 2020 2 | |
what is the main objective of a feasibility study | a feasibility study is designed to help decision makers determine whether or not a proposed project or investment is likely to be successful it identifies both the known costs and the expected benefits in business successful means that the financial return exceeds the cost in a nonprofit success may be measured in other ways a project s benefit to the community it serves may be worth the cost | |
what are the steps in a feasibility study | a feasibility study starts with a preliminary analysis stakeholders are interviewed market research is conducted and a business plan is prepared all of this information is analyzed to make an initial go or no go decision if it s a go the real study can begin this includes listing the technological considerations studying the marketplace describing the marketing strategy and outlining the necessary human capital project schedule and financing requirements who conducts a feasibility study a feasibility study may be conducted by a team of the organization s senior managers if they lack the expertise or time to do the work internally it may be outsourced to a consultant | |
what are the 4 types of feasibility | the study considers the feasibility of four aspects of a project technical a list of the hardware and software needed and the skilled labor required to make them workfinancial an estimate of the cost of the overall project and its expected returnmarket an analysis of the market for the product or service the industry competition consumer demand sales forecasts and growth projectionsorganizational an outline of the business structure and the management team that will be neededthe bottom linefeasibility studies help project managers determine the viability of a project or business venture by identifying the factors that can lead to its success the study also shows the potential return on investment and any risks to the success of the venture a feasibility study contains a detailed analysis of what s needed to complete the proposed project the report may include a description of the new product or venture a market analysis the technology and labor needed and the sources of financing and capital the report will also include financial projections the likelihood of success and ultimately a go or no go decision | |
what is a fee | a fee is a fixed price charged for a specific service fees are applied in a variety of ways such as costs charges commissions and penalties fees are most commonly found in heavily transactional services and are paid in lieu of a wage or salary | |
how a fee works | fees are most often associated with transactional relationships specifically to professionals who provide services in some cases a fee is charged when an individual hires a business to do a specific task such as cleaning a house or filing taxes this type of fee is often the most transparent and transactional as it represents payment for the sole reason a fee charging business was hired examples of transactional fees include mortgage fees and fees for wiring money it is important to read the fine print in contracts and ask questions about any and all fees in order to not be surprised by hidden fees for a product or service types of feesindividuals and businesses pay fees for a wide variety of reasons an individual may pay a financial advisor a fee for helping choose and manage investments and a family may pay a fee to a real estate broker when selling a home a business may pay a fee to an accountant to help manage its books and to a security company to make sure that the building is protected after work hours governments may charge fees for obtaining a business license or an individual passport investment institutions may charge a quarterly maintenance fee for accounts and banks may charge overdraft fees when cardholders overdraw their accounts fees charged by banks are less likely to be transactional in the sense that the account holder has not requested a service in some cases as when an account is overdrawn or a credit card payment is made late a fee is charged as a penalty in other cases such as when a bank charges a monthly fee to checking account holders the fee has little to do with the cost of maintaining the accounts regulations targeting the activities of banks have reduced or eliminated traditional sources of revenue prompting these organizations to find other sources investors who trade stocks mutual funds and options face a variety of fees equity trades often carry a per trade fee known as a trade commission while options trades include both a per trade fee and a per contract fee fees paid for margin trading vary according to the outstanding margin balance with a lower fee rate levied on higher balances an investor looking to put some money into mutual funds may be faced with costs like the management expense ratio mer and fees associated with load funds fees can also be charged in situations in which a customer requests additional services these la carte fees are commonly found in transactions related to travel for example a travel package may include the option of having ground transportation waiting for the customer upon arrival at a port of call one of the more recognizable examples involves baggage on flights as airlines often allow passengers to bring one carry on item for free but charge for any bags that are checked | |
have you ever noticed that your phone or cable bill or the price you paid for your dream vacation may be higher than you expected that may be due to extra fees tacked on to the original charge while most consumers expect to pay specific fees for the services they use there may be additional charges added on that they may not necessarily be aware of at the time they signed up these are called hidden or undisclosed fees which may be a one time charge and may appear in fine print on a contract these are charged by a variety of companies such as banks credit cards cellphone cable and internet providers brokers and insurance firms and those in the travel industry | hidden fees can cost consumers billions of dollars a year and in turn make big profits for corporations and are usually regulated at the state and federal level according to a 2016 report from the national economic council these fees can often be deceptive because they muddy the purchase price for consumers the report states that fees have steadily increased in the airline hotel and related industries example of a hidden feefor example one hotel may charge travelers 110 per night but if you re looking for a deal you may opt for cheaper accommodations at another hotel at a rate of 100 per night but there may be a 10 resort fee at the time of booking or even at a later date these charges are not typically part of the price advertised some hotels will justify these fees for amenities like swimming pools or gym access even though the cost may be the same in the end the 100 per night rate may still be attractive to the consumer despite the hidden fee securities traders may face multiple fees and expenses it is important to carefully study the fee schedule before trading to avoid losing profits the bottom linefees are an unpleasant but expected part of transactional relationships especially when there are additional charges by third parties while some additional costs are to be expected for various services the abuse of hidden fees is a potentially unethical way of squeezing extra revenue from unsuspecting customers fee faqshoa fees are charged by a homeowner s association to pay for maintenance of public areas security and other services to improve the neighborhood they may also be used to remunerate elected hoa officials and to defray legal costs as of may 31 2021 paypal transactions and donations are free for senders in the united states most merchant fees are 2 9 but they are slightly lower for qr code transactions there are additional fees for international transactions 1 5 and fixed fees for currency transactions there is a separate fee schedule for cryptocurrency transactions which cost between 1 5 and 2 3 in addition to the normal cost spread a retainer fee is an upfront payment to engage a lawyer consultant accountant or other professional a typical retainer fee does not represent the final cost of the transaction the specialist may return money from the retainer if the work finishes early or bill additional time if the retainer is insufficient fee simple is a term in real estate referring to full and irrevocable ownership of an area of land and any buildings on it this is the highest form of real estate ownership recognized by law when a landowner in fee simple dies their land is divided among their heirs a balance transfer fee is the cost of transferring debt from one lender to another or in other words the cost of using one loan to pay another balance transfer fees are common in credit cards many of which have low introductory rates a typical balance transfer fee ranges from 1 3 a loan origination fee is an additional fee charged by lenders to pay for the costs of executing a loan a typical origination fee is 0 5 to 1 of the total loan value and is used to defray the cost of processing underwriting and executing a loan contract a rehoming fee is a fee charged by animal shelters or owners for the adoption of an animal in addition to defraying the costs of food and veterinary care a high rehoming fee can prevent animals from being used for unethical purposes |
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