Earn More with Certificate of Deposits (CDs)

Dec 15th, 2014     Bank Account

Certificate of Deposits (CDs) is an investment option available with the banks, credit unions and online banks where a customer agrees to store a certain amount of sum for a fixed period of time with the bank. During this period, the customer does not have access to the money stored in the CD account.

If the customer wishes to withdraw the funds before the agreement’s due date, the customer has to pay a penalty fee for it. Usually this penalty fee would be more than the interest earned on the account. Hence, it’s advisable to invest in a CD only if the customer is sure to keep aside the money for the decided period in the agreement.

Certificate of deposits with banks, credit unions and online banks

Customers who have existing accounts with banks, credit unions and online banks can open an additional CD account with them, the CD account will appear with a separate account number. Interest rates on CD’s are different between various financial institutions. Generally, online banks offer best rates on CDs followed by CUs and then banks; however, there can be exceptions.

In order to get the best rates, it’s advisable that customers compare interest rates and other features of CDs offered by various financial institutions by checking information online, through newspapers, banks, credit unions and telephone banking services.

Savings Vs Certificate of deposits (CD’s)

CD’s and savings accounts are different in nature, especially in the form of interest earned and immediate access to money. If customers are looking to earn high interest for their savings and they don’t require their money in the near term, they can opt for CD’s.

Saving accounts interest rates are comparatively lower than CD’s but customers can withdraw funds from saving account whenever they want. It’s not the same with CD accounts, customer cannot access the money stored in the CD’s for the decided period of time. This gives financial institutions the opportunity to use the funds stored in CD’s by giving them in the form of loans, mortgages and credit cards. Due to this reason the interest provided on CD’s is higher than savings.

Different type of CD accounts

Within Certificate of Deposits (CDs) accounts, there are different options available to the customers such as

Fixed CD account: CD accounts with a fixed interest rate and duration are known as fixed CD accounts. This is a normal CD account where customer comes into an agreement to store funds for a certain period of time with a fixed interest rate. If the customer wishes to use the funds before the due date in the agreement, then they would have to pay the penalty fee to access the funds in the account

Liquid CD’s: This type of CD accounts usually start with a low interest rate, as it gives customers the flexibility to use the funds without having to pay the penalty fee for withdrawing the funds before the maturity of CD as per agreement. Even though these accounts give the flexibility to access fund, they do have many rules and regulations related to the same. Therefore the customers have to understand them carefully before opening this type of CD, or else they would have to pay other fees related to the same. If customers predict an increase in CD’s interest rates in future and are sure about the same, then opting for a liquid CD account would be beneficial. As the customer can withdraw the funds and invest in a CD with a higher interest rate.

Bump Up CD’s: This type of CD accounts gives customers the option to switch to a higher interest rate once or twice during the term of CD agreement. Bump up CD’s are usually starting with a low interest rate, hence it’s advisable to check the pros and cons before applying for the same. The increase in the interest rate will only be applied, provide the customer contacts the bank and requests to increase the rate based on the information gathered.

Brokered CD’s: These types of CD accounts are CD’s sold in brokerage accounts. It’s a system where customer can buy numerous CD’s with different banks and maintain them all at one place. Such accounts are usually risky, as some banks may not have insurance and provide high interest rates. In such cases the customer has a risk of losing their savings in case of failures; hence a thorough research is required while opening brokerage accounts.

We see that all these accounts have to be compared and analyzed at the time of opening a CD account in order to earn high interest rate with CD’s. While customers open CD’s they need to check if the bank or credit unions are insured by FDIC and NCUSIF. Because CD’s insured by them are safer and secure to invest with.

Common Methods used to earn more from CD’s:

Several factors influence customers while investing in CD’s, some of them are interest rates, reason for saving, customer needs, amount to be saved and duration of savings. It’s more likely that CD’s with a longer duration period are likely to earn more interest. . Some of the strategies, customers can follow for investing in CDs are listed below

Bullets methods: Such a method is applicable for customers who choose to use the funds for a specific reason at a certain time. In such case bullet method can be used where customer invests in numerous CD’s and all the accounts mature around the same time.
Example: Miss P plans to get married in September 2015; she would save in numerous CD accounts probably from 2011 and they all would come to maturity by September 2015. This will give her access to her funds along with the interest earned on all the accounts and she can use it successfully for her wedding in Sept 2015.

Ladder Method: This method is used by customers who do not wish to save money for a using it in the near future, in this method the customers aim to earn a higher interest rate and its suitable for them due the uncertainty of interest rates on CD’s. Customers invest in 5 or more CD accounts for different terms in ascending order. And when a CD matures, they invest in the longest term CD in the ladder to earn more interest on their CD’s.

ladder method

Barbell Method: This strategy is similar to ladder method but in this method customer also invest in short term CDs along with long term CDs. This provide the investor opportunity to take advantage of new interest rates on long term CDs as they can invest the returns of short term CDs into new long term CDs. Barbell method is seen as more secure and adaptive method in comparison to the ladder method.

CDARS (Certificate of deposits accounts with registry service): It’s a program which allows customers to spread money among various banks, so that they stay below the FDIC insurance limits at any given bank. This is suitable for customers with huge savings, who seek security and high rate of interest on their savings. To avail this feature customer should contact the bank that’s participating in the CDARS program. If the customer applies for this program, bank will do the rest for them along with investing the money in CD’s with different banks based on the limit insured by FDIC.

Therefore we see that customers can earn more on CD’s based on different scenarios, hence it’s always beneficial for customers to do a proper research and apply for a CD account that’s most beneficial for them.

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Checking Account 101

Dec 15th, 2014     Bank Account

Checking account is a bank account which helps you manage your finances easily. A checking account is an active account on which all kinds of transactions can be processed. The most common services and features available on a checking account are check book, bill payments, debit cards, international payments, inter account transfers, and automatic transfers such as direct deposits and standing orders. Apart from making payments, customers can use their checking account to receive payments and deposits too.

How to open a checking account?

It’s wise to do a proper research before applying for a checking account, as customers will be provided with different type of options on a checking account. In these cases it’s best to apply for the account that’s most suitable for you.

Some of the options are listed below –

Minimum balance to maintain the checking account:
Most of the checking accounts require a minimum balance to be maintained in the account, as this will stop the customers from overdrawing on the account. Such accounts, will charge customers if the minimum balance is not maintained on the account. Hence the customer should choose an account where he can easily maintain the minimum balance.

Limited number of checks, bill payments and other payment services:
Checking accounts come with different type of options. Some of them provide limited number of checks and check payments, limited number of bill payments, direct deposits and standing orders. Hence it’s advisable for customers to read and know these options, before opening an account.

Debit Cards:
Checking accounts provide customers with different type of debit cards. For example some debit cards can be used for withdrawing cash only and customers cannot make purchases with it. Some debit cards can be used in different countries; there is a charge for international transactions. Therefore, it’s advisable for customers to check the type of options they have on the debit card before applying for it.

Overdraft facility and protection:
Checking accounts have different options with regards to overdraft facility and protection. In case of emergency if customer is unable to make payments, some checking accounts might offer the option to transfer funds from an easy to access savings account to help the customer process the payments successfully. This can help customers to avoid going into a negative balance on the account. Some checking accounts have overdraft facility, wherein customer would be offered a limited credit on the account. If the customer uses this credit offered by the bank, then would be liable to pay a low interest rate as agreed during the time of opening the account.

Customers who wish to open a checking account should have a decent credit score, as the banks, credit unions and online banks would give a checking account to customers with good credit history.

Different type of checking accounts:

Free Checking Account:
This type of checking accounts does not require any fees or minimum balance to be maintained on the account. Customer can open the account for free, whereas there is a possibility that this kind of account will offer customers with checks, debit card, bill payments etc. However other bank charges such as charge for stopping checks, charge for going into a negative balance etc would be applied on the account.

Basic Checking Account:
This type of checking account usually requires a minimum balance or fee in order for the customers to use the account. The fees vary based on the amount to be maintained. Such accounts might give limited checks and payment options.

Joint Checking Accounts:
An account owned by two or more people is called as a joint checking account. On such accounts all the parties will be issued with checks, debit cards and online banking options. In some case the bill payments and other payment options can be limited to a single partner on the account.

Student Checking Accounts:
Such accounts are offered to students who are resident of USA and also for student from overseas. Such accounts usually have a low maintenance balance and fee. Students can enjoy free checks, bill payments and debit cards facilities on the account with an added benefit of low interest rate on loans and credit cards that are especially offered to students.

Senior Checking Accounts:
Customers who are 55 years and above can apply for a senior checking account. There is a possibility that such accounts have special rates and offers for traveling, purchasing medicines etc.

Checking Accounts with Interest:
Some checking accounts credit customers account monthly or annually with interest on the balance maintained in the account. Such accounts usually require a minimum maintenance balance. If the balance goes below the minimum amount to be maintained in the account then the customer would be liable to pay high charges on the account.

Express Checking Accounts:
These accounts are suitable for customers who wish to bank electronically via internet, telephone, Atm’s and mobiles. The fees and maintenance balance are comparatively low. However if a customer requires bank or credit union staff’s assistance with their finances then would have to pay an additional fee to have an appointment with them.

Green Checking Account:
This type of accounts usually charge low fees and low minimum balance to be maintained on the account. It’s because such accounts have the option wherein they support environment and avoid plastic, paper usage as much as possible to protect the environment. Green checking accounts have different debit cards options and there is a possibility that no paper statements are sent on such accounts. If customer requires paper statement then they have to pay a fee for the same. Fees vary depending on the number of statements required.

Premium Checking Accounts:
Such accounts are suitable for customers with huge funds. The minimum balance to be maintained on such accounts is usually high it can be $1500 and above. Customers have to pay high fees to maintain such accounts but enjoy some special benefits. Some insurance, loans, credit cards and savings account will be provided at a good interest rate. Premier account customers might get to withdraw funds for free while traveling abroad.

Business Checking Accounts:
These accounts are suitable for businesses to manage their finances, pay salaries and make purchases. The offers and accessibility options can vary between the account holders on such accounts.

We see that customers have loads of variety while choosing a bank account. Based on the needs and requirements customers can opt for the checking account that’s most suitable for them. It’s always secure to opt for accounts where customer is able to maintain the minimum balance and fees. Credit unions and online banks might require minimum balance anywhere between $1 and above. The fees and charges vary widely.

Benefits of Checking Accounts:

Checking accounts help customers to manage their finances. There are loads of benefits which the customer can enjoy with checking accounts some of them are listed below.

Receive Deposits: Customers with checking accounts can receive payments from employers, family and friends easily. These deposits can be made electronically or via a check. If the credit transfer is done electronically then the funds are likely to be available faster than a check deposit on the account.
Make payments: Customers with checking accounts can make payments electronically, via checks and debit cards. We see that customers with checking accounts have many options to make payments hence this makes it easier for them to manage their finances.

Time Saving: Customers with checking accounts don’t have to go physically to give cash for their payments or receive cash for their deposits. This way it helps them save a lot of time while dealing with their finances.

Online Shopping: These days, almost everything can be purchased online right from household requirements to luxuries. Therefore customers can sit anywhere is the world and make online purchases with their debit card.

Investments, loans, insurance, credit cards, mortgage and savings: Customers with checking accounts can opt for all these easily. When customer have a checking account it becomes easier to apply for a loan, savings accounts, mortgage, credit cards etc.

Keep a tab on their finances: Customers with checking accounts can view their statement and manage their finances easily.

Debit Cards: Customers can withdraw money from an ATM easily when they have a checking account. With debit cards customers can make purchases at shops too.

Safe and Secured Money: When customer keeps they funds in a checking account they can be assured of the safety of their money, especially if the funds are insured by US government.

Online Banking: Customers with checking accounts can use online banking facility to make payments, transfer money between accounts, check recent transactions, make international payments etc. This way they can manage their accounts easily with checking accounts.

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Why Prefer an Online Bank Account?

Nov 20th, 2014     Banking

Bank accounts that are mainly maintained and operated online are known as online bank accounts. These accounts are provided by online banks, which are not the same as street side banks. Bank accounts can now be opened and maintained online, without having to go to a branch. Online bank accounts have similar features as the bank accounts functioning from streets.

However the main difference is the accessibility of the accounts. Street side banks offer customers with branches and bank staff to help them maintain their accounts. While online banks provide most of the services online, they don’t have branches and customers don’t meet the bank staff personally.

Features and services provided by online banks

Tech savvy customers who use internet frequently can now make the most of online banks, as they make banking easier and simpler for customers. With online banks customers can save a lot of time, without having to visit the branch. Banking chores can now be completed by customers from any location provided they have access to internet. Below we have listed few of the features provided by online banks.

  • Easy Account Opening: Customers can open online bank accounts online via website, for this they have to log on the bank’s website and apply by filling the online application form.
  • Purchase Certificate of Deposits (CD’s): Customers can buy CD’s online through the bank website.
  • Online Bank Customer Service: If customers have any enquires they can connect with customer service via online chat, email and toll free telephone banking services.
  • Fund accounts: Customers can open different type of fund accounts online.
  • Transfers: If customers have two or more accounts with the online bank, they can transfer money easily between their accounts through online banking. This service can also be used for transferring funds to other bank accounts.
  • Balance, Recent Transactions and Statements: Customers can view and take print outs of statements, recent transactions and balance through online banking• Direct Deposits and Standing Orders: Online bank accounts provide these options to make customer’s life easier, and best thing is – this can be done online in fraction of minutes.
  • Debit Cards: Customers who have checking accounts will be provided with a debit card, so that they can withdraw funds at ATM’s.
  • Online Bill Payments: By logging on the accounts customers will be able to make payments between different states and countries; this can be done by filling the required information online.
  • Check: After customers open the accounts online, checks are mailed to them via post.
  • Loans: Through online bank’s, customers can apply for a loan by getting a quotation through their website.
  • Overdraft facility: Online banks are offering customers with overdraft facility; customers can use this overdraft facility by applying for it. Many people now opt for overdraft facility as this saves them during the rain day. Also interest to be paid on the overdrafts is usually low.

We can see that the features and services provided by online banking makes customers’ life easier, it also saves them from standing and waiting in long lines at the branch. Some people prefer online bank accounts as its less time consuming and simple to use.

Benefits of online bank accounts

Online bank accounts have many similar features and services that are similar to institutional bank accounts. With so much in common certainly customers would like to know why to opt for online banking, bearing this in mind we have listed some points below.

  • Hassle free banking without branch issues: As online banking doesn’t have branches customers don’t have to face the trouble of waiting at the branch. Generally customers have to stand in a line to submit forms for getting loans and opening accounts. However customers don’t face the same issue with online banks as it’s much easier. All that the customer has to do online is fill the details and click to submit. So we see that people can easily save time and get their banking needs fulfilled from any location with internet access.
  • Interest Rate: Online banks do not have high expenditure like the financial banking institutions. Buildings, staff, branches and other infrastructure expenditure is not applicable for online banks. As online banks don’t have high expenditure, they are more likely to give higher interest on savings and lower interest for loans. However this can vary from bank to bank and some financial banking institutions might offer more too.
  • Free Checking Accounts: Customers, who wish to get an online banking account, can simply start by applying online with a minimum balance of $1. Some online banks offer free checking accounts too. Customer doesn’t require huge deposits to open a checking account. It’s very rare to find free checking accounts at financial banking institutions.
  • Updated with technology: Financial banking institutions provide their customers with internet banking, due to which many customers get to manage some accounts online. However, when compared to online banks, we can see that online banks are more advanced with technology than street side banks. Online banks are totally dedicated to serving customers online, hence they always try to find new innovative methods to serve their customers. For example: Online banks came up with the concept of mobile check deposits, this service made customers download a mobile application through which check deposit can be made by clicking a picture of the check. The instructions to be followed would be provided by the bank and the mobile screen. Following which the customers of few online bank accounts could get their checks deposited without going physically anywhere. This way online bank comes up with many innovative tech savvy services to keep their customers happy.
  • Independent maintenance: Online bank account removes the hassle of middlemen. The customer doesn’t have to worry about any errors or wrong entries. As they will be the sole managing party on the account. When customers take care of their own accounts they are more cautious and careful while making payments and other transactions. As online bank accounts give customers complete access to their accounts online, there is more scope for managing the accounts productively. For example: Customer M has checking account and savings account. Ms M receives $1000 from her aunty; this amount credited her account as of today. In this scenario Ms M doesn’t have much expenditure for the next 1 year, and decides to save. She can immediately log on the account online and transfer the funds. By doing this she will earn interest from the day of receiving the funds, and she can also check how much interest she is earning by logging on to the account every month.
  • Saves Paper: Customers don’t have to order statements every month, as they can check the information online. This will surely reduce the requirement for paper and saves the environment in one way.

Hence from the above mentioned information we can clearly see that online banks can make customers life more comfortable, by helping them operate their accounts online. Online bank accounts are easy, safe and less time consuming. If customers are well advanced with technology and internet they can surely opt for online bank accounts, as it not only saves their time, but also helps them earn decent interest on savings.

Customers who opt for online bank accounts should be cautious about online banking security; it’s advisable to ignore phishing emails while following the other security methods to maintain the security of their account.

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How to open a credit union account?

Nov 20th, 2014     Credit Unions

Credit unions are financial institutions where customers (members) are the owners. Hence, to join a credit union, the customer should be eligible to be a member. Basically credit unions offer membership to customers who qualify to be members based on some common factors, criteria and bonds. The criteria may be same employer, similar business or even same region of residence. Therefore any customer who wishes to open an account in a credit union should follow the easy steps listed below.

Find a credit union that’s suitable for you

: If you’re planning to open a credit union account, then it’s a must to do a proper research about them. After going through different credit unions and their features you can open an account with a credit union that’s most suitable for you. Credit unions can be found online by searching through different search engines and also via National Union Administration’s Credit Union Search.

While searching for credit unions it’s always wise to check the insurance for deposits in case of credit union failure. Federal credit unions are insured by US government and the others are having private insurance. Whichever credit union you choose to take, ensure you’re aware about its insurance policy and coverage. If you are sure about the safety of your deposits, it’s sensible to open an account.

After a proper research, you should be able to see which credit union you’re eligible to join. Eligibility factors are mostly based on the industry you’re working in, organization you work for, your geographic location and membership’s you have with other credit unions. Once you search and find the credit union your eligible to join. Based on your preference you can then proceed to open an account with the credit union of your choice.

Search online and find credit unions

Submit the application and complete the joining formalities:

At this stage you can go to the credit union of your choice and fill in the application to open an account. While submitting the application you would have to provide

  • Your photo identification proof which could be your driving license, passport or any other identification proof.
  • Your address proof, which could be last 3 months’ bank statements, electricity bill etc.
  • Your passport sized photograph.
  • Cash or check for the amount to be deposited, most common amount requested by credit unions is $25. Minimum deposit has to be paid at most of the credit unions to become a member.

After submitting all of the above, credit unions would run a credit check to ensure you’re eligible for a checking account with debit card. Therefore, if you wish to apply for a checking account with credit unions, ensure you have a decent credit score. This information can be found via the US government free credit reports program. If credit unions are satisfied with your credit score and find no errors then they would open an account for you.

Therefore we see that by following the above mentioned procedure it would be possible for you to open an account with credit union. Some credit unions have their online application forms too. After you become a member of credit unions you can start using the various products and services they have.

Ask Family and Friends:
Apart from the above mentioned steps, there can be situations wherein you hear about credit unions from co-workers, friends and family who are existing members of a credit union. If these members offer you to join a credit union, you can ask them relevant questions based on the information provide above and proceed with opening an account only if you’re eligible and satisfied.

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How to do International Money Transfer?

Nov 13th, 2014     Payments

International money transfer is a system where money is transferred from one entity in one country to another entity in a different country. This entity can be an individual, or a business entity. These transfers can be done electronically or can be sent via sea/air/road (through foreign checks, drafts and money orders). In 2013, more than $120 billion was sent by workers in the form of remittances to their friends and families in different countries and thus remittance to home country constitutes major portion of the money transfers done by individuals. However, entities also need to transfer money internationally for business purposes such as imports and exports. The international wire transfer (i.e. electronic payment of money across borders) is the most cost-effective and fast way to send money abroad.

International Wire Transfers

Uses of International Money Transfers?

Globalization has led to significant rise in International trade and also has made it easier for people to travel and live in other countries. This has increased both the need and use of international money transfers. Some examples –

  • Many students choose to live and study aboard. Hence the use international wire transfers for payments to schools/colleges apart from their family and friends.
  • Businesses participating in international trade, make international wire transfers for import and export of goods and services.
  • People, who migrated to different countries for work purposes and settled abroad, make international wire transfers frequently to their family in home country.
  • Instances where marriage is done with foreigners, friends and families living in different countries and when people are traveling for leisure they tend to make international payments.

Apart from that, most of us are aware about online shopping, imports and exports. When orders are placed between different countries, surely international money transfers have to be made.

Factors to consider before making International money transfer

Customers who are interested to transfer money internationally require assurance that the transfer would be done successfully and their money is safe. Hence the common factors influencing money transfers are:

  • Safety and Security
  • Exchange rate of the currency
  • Fees for the transfer
  • Speed (Time Duration) of the transfer
  • Ease of use (Process and Method of the transfer).

Information required for making an international money transfer

Customers can make international money transfer through different types of services available these days. Below we have listed the common services used frequently and listed out its requirements accordingly.

International wire transfer is a remittance done electronically from one person to another in a different country. Such wire transfers are done by banks and credit unions. Most of the electronic fund transfers require general information such as

  • Beneficiary Name (person receiving the money)
  • International Bank Account Number (IBAN) or Account Number
  • SWIFT Code or BIC Code
  • National Routing Codes, if applicable (e.g. ABA Routing Number in USA, IFSC Code in India, Sort Code in UK etc.)
  • Branch Name
  • Bank Address
  • Address of the Beneficiary

In case of international bank transfers, the person receiving the funds can contact the bank through branch or telephone and get the above mentioned details. For customers registered with online banking service, can also find the information by logging on to the bank account online.

Western Union and Money Gram makes inward and outward remittances for the customers in the form of cash at cash offices. For this customers have to go physically and provide information to make the payments. To make a payment via western union and money gram customers usually require the details listed below.

  • Photo Identification proof of both the parties who would be paying and receiving the amount.
  • Date of birth of the receiver
  • Reason for transfer
  • Relationship between the receiver and the payor
  • Beneficiary address
  • Cash
  • Country names of both the parties involved in the transaction

When a remittance is being made via western union or money gram both receiver and payor have to fill in forms to pay and collect the amount. This information is a must as all payments have to abide by safe and security measures.

International fund transfers involving USA are monitored by Offices of Foreign Assets Control. This is done to avoid money laundering. Money laundering is a system where terrorist groups and other cheating agencies transfer huge amount of funds to carry out illegal actions. To ensure no illegal transfers are done, US Government has its own rules and regulations pertaining to international money transfers. Hence all transfers that are done from USA have to abide by the rules and procedure as per law.

Types of International Money Transfers

• Transfers via bank accounts
• Transfer Operators (Western Union and Money Gram, PayPal )
• Foreign Checks, Money Orders and Bank Drafts

Customers who choose to transfer money to different countries can use any of the above mentioned service.

All the international money transfer services have a charge (fees) to process the transfer. Customers should be careful while making the payment, as some payments cannot be cancelled once made. If information provided is wrong then there is a risk of loosing the amount along with the charge.

Hence customers should be cautious while transferring funds internationally.

Electronic funds transfer between accounts can be done by banks, credit unions and transfer operators. Sending cash via post is not advisable; if cash is lost in post, it may not be possible to trace it. As all the modes of payments are safe and secure, it’s advisable for customers to select the type of payment that’s most suitable for them based on the time, charge and convenience.

Difference between Domestic and International Transfer

Domestic wire transfer is an electronic funds transfer between two bank accounts in USA, where as international wire transfers money moves between accounts in from USA to another country.

International wire transfers are more expensive than domestic transfer. Domestic transfer fees are usually fixed irrespective of the amount being sent – while the fee varies for international wire transfer depending on the amount and service type used.

Domestic wire transfers do not require IBAN, SWIFT Code etc. Hence they can be processed faster than international wire transfers.

Fees Associated with International Money Transfers

Fees for International money transfers depend on the service used for transfer, amount and the country where the funds are being transferred to. International payments can cost between $40 to $65 approximately. While the cost for receiving an international money transfer can be $10 to $30. Do check all the transfer fees associated with the international transfer prior to initiating the transfers. Also, if there is currency conversion involved, then, also ask for the conversion rate. Sometimes, banks and CUs charges less fees but give poor conversion rate to the end customer.

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