Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 18, 1993 TAG: 9301160018
SECTION: BUSINESS PAGE: B6 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Medium
COMPUTER IS BLIND TO SEX, BANK SAYS
Q: I'm sending you copies of exhibits I sent to the Virginia Bureau of Financial Institutions in what appears to be a possible practice of sex discrimination.My wife and I received separate mailings on Nov. 17 from Signet Bank. My wife and I have been married 25 years, hold our assets jointly and have the same credit history. However, the rate quoted my wife for a credit card was 11.9 percent, and the rate quoted to me was 9.9 percent. It was my understanding that the law does not allow banks to discriminate between the male and his wife.
A: Forget the notion that spouses share the same credit history, regardless of how long they have been married.
Larry Poteat, president of Credit Marketing and Management Association of Roanoke, said your wife may have no credit history at all if everything is in your name. He recommends that couples have some accounts in each of their names. That's especially important if one partner has a poor history while the other has shown greater financial responsibility.
But that is irrelevant in your situation.
Nina Teller, spokeswoman for Signet Bank, said it hires outside firms to obtain marketing lists, screen for credit worthiness and set credit scores. The files come to the bank with scores and codes, but without personal information. The bank determines which credit codes will receive various promotional mailings.
A computer compares addresses to eliminate duplicates, but in your specific case you and your wife were listed with different box numbers on the same rural route. The computer did not detect this.
Teller said Signet was testing response to mailings that offered differing terms and conditions. She said the computer randomly assigned the various types of offers that were being tested so gender was not a consideration. \
Locking yourself in
Q: What are the ups and downs of preferred stock offerings? I see good returns, low entry price and acceptable ratings. Are there risks for loss of capital?
As for a little background information, I have at least 25 years before retirement. I do have a portfolio that includes small holdings in other areas.
A: Preferred stock is a hybrid between stocks and bonds, but more closely resembles bonds.
On the plus side, preferred stock usually has a somewhat higher rate of return than the dividends on common stock, at least at the time of issue.
It is slightly safer in that owners of preferred stock are paid before owners of common stock in case a company fails. In a bankruptcy, however, neither class would probably be paid. And bondholders would stand ahead of both types of stockholders.
On the down side, the value of preferred stock is volatile. It fluctuates inversely to the direction of interest rates, just as bonds do. That means your capital is at risk if you are forced to sell at a time interest rates are rising.
And preferred stockholders give up all hope of sharing in the growth of a company. The value cannot grow as common stock usually does, and dividends will not increase. Buyers are more or less locked in. They really have something like a bond but without a maturity date.
With 25 years to go until retirement, you should be looking for growth. You should invest in common stocks with potential for gains over the next 25 years. Or, if you want more diversification, you can buy shares in a common stock mutual fund.
\ Insurance tax
Q: I am thinking about cashing in a $5,000 life insurance policy that I've had since I was 2 years old and using the cash value of about $1,700 for a $50,000 or maybe $75,000 whole life policy that pays dividends.
Will I owe taxes on the $1,700 I get when I cash in the policy? If so, is there a legal way to avoid that?
A: As a general rule, people pay taxes on their earnings from investments. But the actual amount invested is not taxed when it's returned to you. That's because the money, such as the money used to buy annuities, insurance or mutual funds, already has been taxed when you earned it.
Valerie Kowalski, a certified public accountant with the Roanoke firm of Kowalski & Associates, said it is almost certain that the relatives who gave you the policy years ago paid more in premiums over the years than the $1,700 cash value. No tax is due, therefore, on their gift to you.
She warned, however, that the situation might possibly be different in the case of a newer policy. In that instance, people should check the amount of the investment versus the cash value. The insured's tax basis would be the same as the person who gave the gift.
\ Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010.