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Tag: Credit card debt

  • Credit card interest calculator – MoneySense

    Play around with our credit card interest calculator to calculate credit card interest and figure out how long it will take you to repay the debt. This tool can help you develop a plan to address your balance and avoid paying interest going forward.

    How to use the credit card interest calculator

    Our credit card interest calculator can help you figure out two key pieces of information: 

    • How much money you’ll pay in interest based on your current monthly payment
    • How many months it will take to pay off your credit card balance

    Start by inputting your credit card balance and your card’s annual percentage rate (APR). If you don’t know this number, log into your credit card account and pull up your card’s terms and conditions. 

    Next, decide if you want to see how much total interest you’ll pay based on your current monthly payment (and enter that amount) or specify your payoff goal in months to see how the total interest charges.

    How to calculate credit card interest

    Since interest is expressed as an annual percentage rate, card issuers take several steps to determine how much to charge each month. Here’s how you can figure out their method:

    1. Convert your APR to a daily rate. Most issuers charge interest daily, so divide the APR by 365 to find the daily periodic interest rate. Make sure you’re using the purchase interest rate (not the cash advance or balance transfer rate).
    2. Figure out your average daily balance. Check your credit card statement to see how many days are in the billing period. Then, add up each day’s daily balance, including the balance that carried over from the previous month. Once you have all the daily balances, divide the figure by the number of days in the billing period to find your average daily balance.
    3. Multiply the balance by the daily rate, then multiply the result by the number of days in the cycle. Now that you have all the details you need, multiply the average daily balance by your daily periodic interest rate. Then multiply that number by the number of days in the billing cycle. This shows you how much interest you’ll pay in a month.

    A quick example

    If you have a credit card with a $1,000 balance and 20% APR, your daily interest rate would be 0.0548%. Assuming you don’t add to the debt, you’ll be charged around $0.55 in interest every day. If there are 30 days in the billing cycle, you’ll pay $16.50 in interest for the month.

    How to avoid paying credit card interest

    When you get a credit card statement each month, you’ll see a minimum payment amount listed. This is often a flat rate or a small percentage of your balance (usually 3%), whichever is higher. 

    While it’s tempting to just pay the minimum payment your credit card issuer asks for, doing so guarantees you’ll be charged interest because you’ll be carrying a balance into the following month. 

    Instead, make a point of paying off your balance in full every month. Not only will you avoid paying credit card interest, but your card issuer will report these payments to the credit monitoring bureaus, which can boost your credit score. Plus, the cash back or rewards you earn with the card won’t be offset by the interest you’re charged, so you truly get more out of using your card.

    How to reduce credit card debt

    If you already have a credit card balance, don’t despair. There are strategic things you can do to get out from under credit card debt.

    1. Negotiate with your credit card provider

    As a first step, call your bank or credit card provider to request a lower interest rate. Your card issuer may be willing to work with you, so don’t hesitate to ask. They might agree to lower your rate, offer to switch you to a lower-interest card, or create a repayment plan that works for your situation—but you’ll never know if you don’t ask.

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    2. Make a budget and pay with cash or debit

    It’s important to honestly track your income and expenses so you can trim unnecessary costs. Stop charging purchases to your credit cards and switch to cash or debit, instead.

    While it might seem difficult, try to contribute to an emergency savings fund. If an unexpected expense comes up (like an appliance repair or vet bill), you can pull from your fund rather than charge it to your credit card.

    3. Open a balance transfer credit card

    If you have significant debt, find a balance transfer credit card with a great promotional rate. Then, move your existing balance to the card. You can quickly pay down the balance while you’re not being charged interest. The golden rule of balance transfer cards: never charge new purchases to the card.

    Canada’s best credit cards for balance transfers

    4. Try the avalanche or snowball repayment strategy

    There are two main approaches to paying off debt:

    • Avalanche method: Focus on paying off the debt with the highest interest rate first, while making only the minimum payments on your other accounts. Once the highest-interest debt is paid off, move on to the next-highest-interest debt.
    • Snowball method: Start by paying off the debt with the smallest balance first, while continuing to make minimum payments on your other debts. After clearing one debt, move to the next-smallest balance. This method may cost more in interest over time, but it can provide strong motivation and momentum to stay on track with debt repayment.

    5. Work with a credit counselling agency.

    It’s completely understandable to feel overwhelmed by your credit card debt, which is why a credit counsellor can be so helpful. Speak to representatives from your financial institution, a credit counselling agency, or a debt consolidation program to discuss your options. They can help you create a tailored plan to resolve the situation.

    5. Consider debt consolidation.

    If you’re juggling multiple loans and credit card balances and having trouble paying them off, it may make sense to consolidate your debt. This means combining two or more debts into one, with just one payment to make each month.

    Another option is a debt consolidation loan from a bank or other financial institution. Or you could work with a credit counselling agency to negotiate a debt consolidation program (DCP) or consumer proposal (repaying only part of your debt) with your lenders.

    Learn more about each of these options by reading “How to consolidate debt in Canada” and “Who should Canadians consult for debt advice?”

    Jessica Gibson

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  • How smart borrowing can grow your wealth

    Taking on debt isn’t always a bad thing. In fact, some strategic borrowing could help you build wealth, as long as you have a clear purpose for the funds.

    When used wisely, debt such as a personal loan can be an effective tool for growing your income, improving your credit, consolidating debt, or increasing the value of your home. Using a personal loan for a vacation or other discretionary expense, however, won’t improve your long-term financial picture.

    Knowing how to use a personal loan strategically can help you achieve your financial goals while avoiding the pitfalls of burdensome debt.

    Taking on debt to make more money may seem counterintuitive, but personal loans can be useful tools for building financial security. The key is to use the loan for a specific goal that offers a return on investment (ROI), such as consolidating high-interest debt or increasing your home’s value with renovations. Here’s a closer look at some of the ways a personal loan could improve your financial stability.

    Using a personal loan to consolidate high-interest debt could save you money on interest and get you out of debt faster.

    • Lower your interest rate: Personal loan rates are typically lower than credit card rates. According to the Federal Reserve, the average interest rate on a two-year personal loan is 11.14%, while the average rate on a credit card is nearly double that at 21.39%. Reducing your rate can save you money and potentially help you pay the debt off faster.

    • Simplify repayment: After consolidating, you’ll have just one monthly payment to manage, rather than juggling multiple due dates and payments. Personal loans typically have fixed rates and repayment terms, so your monthly payments are predictable and won’t fluctuate over time.

    • Reduce your credit utilization: If you use a personal loan to consolidate credit card debt, you’ll reduce your credit utilization, which could boost your credit score. This can make it easier to qualify for good rates and terms on a loan in the future.

    • Remove the temptation to keep borrowing: A personal loan offers a lump sum up front. Since it’s not a revolving line of credit, you won’t be able to continually borrow against it and incur additional debt.

    If debt consolidation helps you pay off your debt faster, you’ll have more money to save for retirement, funnel into investments, or put toward another long-term goal.

    Paying for home improvements is another common use for a personal loan. Refurbishing your home can increase its value, potentially leading to a higher sale price or rental income. It can also increase your equity, which could make it easier to borrow a home equity loan or HELOC in the future.

    You can put a personal loan toward a variety of projects, such as replacing an old roof or adding energy-efficient upgrades that reduce your utility costs. Renovations that can add the most value to your home include renovating a kitchen, remodeling bathrooms, and sprucing up the curb appeal.

    You may also use a personal loan to cover the costs of job training, such as one-on-one coaching or a certification program. Gaining new skills can lead to a higher income if it helps you secure a promotion, land a new job, or attract new clients.

    Developing your expertise through professional training or business coaching can offer a high return on investment over time. This ROI may outweigh the interest you pay on a personal loan. Keep in mind, however, that most lenders don’t let you use personal loan funds for college tuition.

    If the lender allows it, you might also use a personal loan to start or expand your business or side hustle. You could use the funds to pay for startup expenses, create new products, or grow your team.

    Leveraging a personal loan in this way could grow your wealth if it helps your business succeed. Keep in mind that not all lenders let you use personal loans for business expenses. You should consider small business loans to determine which type of loan better suits your needs.

    Read more: Can I use a personal loan for anything? 6 expenses that are restricted.

    Taking on a personal loan isn’t always a recipe for wealth creation. There are situations where borrowing could hurt your financial situation more than it helps, such as:

    • Using the loan on nonessential expenses: Taking out a personal loan to pay for discretionary expenses, such as a vacation or wedding, can be costly and is unlikely to offer a financial ROI.

    • Borrowing without a clear plan for repayment: Before agreeing to a loan, review the terms, interest rate, and monthly payment to understand your financial obligations and have a solid plan for covering them.

    • Taking on more debt than you can afford: If your budget is already tight, taking out a loan could create financial strain. Failing to make payments on time can result in late fees and a negative impact on your credit score.

    • Consolidating debt without changing your spending habits: Using a personal loan for debt consolidation would only be a temporary solution if you continue to accumulate high-interest credit card debt.

    • Spending the funds on a depreciating asset: If you’re purchasing an item that loses value quickly, like a boat, electronics, or luxury goods, you could end up paying more in interest than the item is worth.

    Read more: Good debt vs. bad debt: A guide to borrowing wisely

    If you’re considering a personal loan to grow wealth, ask yourself how the loan will improve your financial situation over time. Will it help you grow your income or increase the value of your home? If you’re using it for debt consolidation, will you save money on interest or pay the debt off faster? Ensure the loan aligns with your long-term goals and doesn’t add unnecessary risk.

    Check that you can comfortably afford the monthly payments without draining your emergency savings. Consider how borrowing will impact your debt-to-income (DTI) ratio too, which compares your monthly debt payments with your gross income. Most lenders prefer a DTI below 35% when considering you for a new loan or line of credit.

    Finally, take the time to shop around with multiple lenders before picking a loan. You can often check your rates and prequalify online, a quick process that won’t affect your credit score. By doing your due diligence, you can find your best offer and use the loan to achieve your wealth-building goals.

    This article was edited by Alicia Hahn.

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  • Legal expert warns of buy now, pay later plans this holiday shopping season

    DENVER — As you’re out holiday shopping, one legal expert warns to keep an eye out for buy now, pay later (BNPL) plans. With tighter budgets, they can look enticing as they can split large purchases into smaller, more manageable ones over a monthly basis.

    However, the lawyer Denver7 spoke with said BNPL plans can easily rope you into more debt, and there aren’t many protections in place to keep you out of trouble.

    76% of Americans use BNPL plans, 72% of GenZ uses them, and 50% of users have already missed at least one payment, according to LegalShield.

    Rebecca Carter is a principal at the law firm Friedman, Framme & Thrush. Carter told Denver7 she is seeing more people calling her office asking for advice after falling into debt with buy now, pay later plans. She said there’s not much that can be done legally after you’ve signed the terms.

    “It’s not as though [these companies] are doing anything unlawful,” Carter said. “Protection really comes in with spreading education and understanding the potential for penalty. I wish there was more, but [there’s not].”

    Prices for all goods rose 0.3% in September after rising 0.4% in August, according to the latest Consumer Price Index report. It continues a trend of rising inflation amid interest rate cuts aimed at jump-starting a slowing job market.

    It has made holiday shopping budgets tighter this year, so Carter said to be mindful and educate yourself and your kids about these plans.

    “Creditors have an interest in getting paid back,” Carter said. “You have an interest in preserving your credit, you know, and trying to be proactive earlier on.”

    She said it can be easy to find yourself over-spending when you rely on BNPL plans and then finding yourself in credit trouble down the road.

    Denver7 | Your Voice: Get in touch with Dan Grossman

    Denver7 morning anchor Dan Grossman shares stories that have an impact in all of Colorado’s communities, but specializes in covering consumer and economic issues. If you’d like to get in touch with Dan, fill out the form below to send him an email.

    Dan Grossman

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  • How to build credit history in Canada – MoneySense

    How to build credit history in Canada – MoneySense

    How to get a credit card in Canada

    Well, you apply. But make sure you’re applying for the right card and that you have a high chance of being approved. You see, the credit card company will check your credit history, and that can affect your current credit score. So, don’t apply for a bunch and hope for the best, as that could make it look like you are at risk for having access to too much credit. The good news: There are many types of credit cards in Canada, including those for newcomers to Canada, students and even those with bad or no credit. Check out our rankings for the best credit cards in Canada for your situation.

    Once you have a credit card you will want to maintain good credit habits, like paying it off on time and paying more than the required minimum payment. Here are some other articles that will help you navigating your first credit card in Canada.

    Read:

    Why is credit history important?

    Say you want to rent an apartment. Your credit history is vital because most landlords will want to see your credit score and credit report to judge whether you’ll pay your rent on time. If you get the apartment, you’ll want an internet connection—and for this, too, the large providers will query your credit score.

    If you need to buy or lease a car, your credit history will not only determine whether you’re approved for a loan, but also what interest rate you’re offered: the higher your credit score, the lower the interest rate. Insurance companies may check your credit history before providing coverage. And finally, if you want to buy a home, your credit history is key to qualifying for a mortgage, as well as what mortgage interest rates lenders will offer. A lower rate could save you tens of thousands of dollars over the life of your mortgage.

    Read:

    How to build a good credit history when you have no credit history

    Credit history is usually built organically as people start using credit. In Canada, young people who have reached the age of majority (18 or 19, depending on where they live) can apply for a credit card and start building a history of borrowing and repayment.

    If you’re a newcomer to Canada, or if you’re a student, recent grad or young adult who doesn’t have much of a credit history, your credit score may be low—which is a hurdle in getting approved for credit. It’s a frustrating cycle—you need credit history to access credit, and you need credit to build that history. So, what’s the solution? Here are a few steps anybody can take to build their credit history:

    Aditya Nain

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  • Personal loan versus line of credit: Which should you choose? – MoneySense

    Personal loan versus line of credit: Which should you choose? – MoneySense

    Personal loans vs. lines of credit

    With a personal loan, you borrow a single (fixed) amount of money from a bank or other lender. In return, you agree to pay back the principal plus interest over a certain period of time. This is called “installment credit.” Often, personal loans are for specific expenses. For example, you might apply for a car loan to buy a vehicle, or a debt consolidation loan to reduce your debt. Personal loans can be secured with collateral or unsecured, and the amount you’re eligible to receive is tied to your credit history and financial picture.

    When you’re approved for a line of credit, the bank, firm or lender extends a certain amount and you can borrow on an as-needed basis. Whatever you pay back, you can access the credit again, just like with a credit card. This is called “revolving credit.” You can use the money for any purpose you wish. Just like with loans, lines of credit can be secured or unsecured. 

    Here are the key differences at-a-glance.

    Personal loan Line of credit
    Type of credit Installment (non-revolving) Revolving
    Payment schedule A fixed amount over a fixed time period. As-needed, with a minimum monthly payment if you borrow
    Interest rates Fixed or variable Usually variable, and tied to the Prime Rate (which is currently 6.45%.)
    Interest applicability On the whole loan Only on what you borrow
    Extra fees Transaction or service fees Transaction or service fees
    Uses A need specified when applying Any purpose, no need to reveal

    Pros and cons of a personal loan

    Here are the pros and cons for personal loans.

    Pros

    • Interest rates can be lower than with credit cards
    • The fixed payment schedule ensures your loan will be repaid by a certain date.

    Cons

    • Typically higher interest rates than the majority of lines of credit.
    • To use more credit you have to refinance the loan or get a separate loan.
    • Lenders may charge fees for administering the loan.
    • There might be limitations on what you can spend the money on. A car loan is only for the purchase of a vehicle, which may seem obvious, but other loans may only be used for renovations or debt consolidation. 

    Pros and cons of a line of credit 

    Here are the pros and cons for lines of credit.

    Pros

    • Typically have lower interest rates than personal loans.
    • Interest is only charged on the portion of credit used.
    • There is no fixed term so you can pay it off at any time without penalty (as long as you pay the minimum monthly amount).
    • The credit is “revolving”, meaning that once you pay it back you can borrow again without refinancing.
    • You can use the money for any purpose.

    Cons

    • Interest rates are variable, based on the prime rate, so the loan rate will fluctuate. For example, you might have a line of credit where the interest rate is prime + 1.5%. As the prime rate changes, so will the total interest on your line of credit.
    • Lenders often offer the maximum amount which can make it easy to overborrow. 
    • As there is no fixed payment schedule, you must manage repayment on your own. 
    • A secured line of credit against your home (like a HELOC) will require a one-time appraisal as well as legal fees. 

    How interest rates work for loans and lines of credit

    The interest you pay on a personal loan or a line of credit will depend on many factors including the lender, your credit history, the terms of the credit and the prime rate (in the case of variable interest). That said, these are the variables you can negotiate to get the best rates. 

    For a personal loan:

    • Interest rate
      Look for the lowest rate available to you, and decide whether you prefer a fixed or variable rate. 
    • Fixed or variable rate
      Loans most often incur a fixed rate, meaning that the interest is the same throughout the term of the loan. With a variable-rate loan, the interest rate will change in the same direction as the prime rate. 
    • Secured or unsecured
      You might negotiate a lower interest rate if you can secure the loan with collateral, such as a home. 
    • Amortization period
      Amortization is the amount of time you take to pay off the loan and can range from six months to 60 months (five years) for personal loans, reports the Financial Consumer Agency of Canada. Adjusting your amortization period might affect your interest rate.
    • Fees or penalties
      Loans come with fees. With personal loans, for example, you may pay a penalty if you pay it off early.

    For lines of credit:

    Keph Senett

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  • Nearly half of Americans don’t know their credit card APR. Here’s why that can cost you.

    Nearly half of Americans don’t know their credit card APR. Here’s why that can cost you.

    How to get yourself out of credit card debt


    How to get yourself out of credit card debt

    02:39

    Almost half of Americans don’t know how much their credit card debt could be costing them, a new survey shows. 

    That’s because more than 47% of Americans say they don’t know their current credit card annual percentage rate (APR), which is its effective yearly interest rate, according to LendingClub, a financial services company. Being in the dark on how much interest your issuer charges can be costly, particularly if you carry a balance from month to month. 

    A credit card’s APR determines the cost of borrowing money, and only comes into play when a cardholder doesn’t pay off their bill in full each month by determining how much interest they’ll pay on the balance. Consumers collectively owe a record $1.14 trillion in credit card debt, while APRs have jumped due to the Federal Reserve’s flurry of interest rate hikes, which have pushed rates to their highest point in 23 years.

    “Credit card debt levels are the highest they have ever been and when you don’t pay off your credit card in full every month, which roughly half of Americans don’t, you have a loan. And it’s not a very good loan,” LendingClub CEO Scott Sanborn told CBS MoneyWatch. 

    LendingClub surveyed more than 1,000 consumers in May to understand their habits and opinions on card usage and debt management.

    “Buried at the bottom”

    Consumers’ lack of awareness around how much their credit card debt costs them illustrates a concerning phenomenon: many appear unable to easily find and track their APRs, according to LendingClub. The survey also found that roughly one-quarter of Americans don’t know the total amount of their credit card debt, or even where to find out what their interest rate is.

    “It is disclosed, but you have to go into your account, look at your statement, and it’s not at the top of the statement — it’s buried in fine print far down at the bottom, which is not a place most people look,” Sanborn said.

    APRs are also currently at an average of 22.76% — a record high. With APRs rising and consumers spending more on their credit cards while being unaware of the debt they’re carrying and how much it costs, many are risking serious financial predicaments, according to Sanborn. 

    “Because of the inflationary environment, people are turning to cards more often, so they are increasing balances at an increasing cost. That causes people to get into trouble when they are unable to meet their obligations,” Sanborn explained. 

    He added, “Once you go delinquent, that’s reported and has a very big impact to your credit score, and any new debt you bring out will be at an even higher cost.”

    Calling for clearer communication

    LendingClub said part of the onus is on lenders to be more transparent with consumers. 

    “The need for clearer communication from credit card companies is more pressing than ever,” LendingClub chief customer officer Mark Elliot said in a statement. “The real issue is that credit cards are designed to do better when the cardholder does worse. Frankly, the deck is stacked against consumers.”

    The survey also found that even tools consumer use to climb out of debt and regain their financial footing have terms and conditions that they’re not familiar with. 

    For example, many consumers who open 0% interest balance transfer accounts, or sign up for cards with promotional rates, don’t know that those rates don’t last. For example, more than 26% of consumers said they didn’t know their rates will increase after a promotional period ends. 

    Megan Cerullo

    Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.

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  • Home equity is near a record high. Tapping it may be tricky due to high interest rate

    Home equity is near a record high. Tapping it may be tricky due to high interest rate

    Cultura Rm Exclusive/twinpix | Image Source | Getty Images

    Home equity is near all-time highs. But tapping it may be tough due to high interest rates, according to financial advisors.

    Total home equity for U.S. mortgage holders rose to more than $17 trillion in Q1 2024, just shy of the record set in Q3 2023, according to new data from CoreLogic.

    Average equity per borrower increased by $28,000 — to about $305,000 total — from a year earlier, according to CoreLogic. That’s up almost 70% from $182,000 before the Covid-19 pandemic, said chief economist Selma Hepp.

    About 60% of homeowners have a mortgage. Their equity equals the home’s value minus outstanding debt. Total home equity for U.S. homeowners with and without a mortgage totals $34 trillion.

    The jump in home equity is largely due to a runup in home prices, Hepp said.

    Many people also refinanced their mortgage earlier in the pandemic when interest rates were “really, really low,” perhaps allowing them to pay down their debt faster, she said.

    “For the people who owned their homes at least four or five years ago, on paper they’re feeling fat and happy,” said Lee Baker, founder, owner and president of Apex Financial Services in Atlanta.

    Baker, a certified financial planner and a member of CNBC’s Advisor Council, and other financial advisors said accessing that wealth is complicated by high borrowing costs, however.

    “Some options that may have been attractive two years ago are not attractive now because interest rates have increased so much,” said CFP Kamila Elliott, co-founder of Collective Wealth Partners and also a member of CNBC’s Advisor Council.

    That said, there may be some instances in which it makes sense, advisors said. Here are a few options.

    Home equity line of credit

    Grace Cary | Moment | Getty Images

    A home equity line of credit, or HELOC, is typically the most common way to tap housing wealth, Hepp said.

    A HELOC lets homeowners borrow against their home equity, generally for a set term. Borrowers pay interest on the outstanding balance.

    The average HELOC has a 9.2% interest rate, according to Bankrate data as of June 6. Rates are variable, meaning they can change unlike with fixed-rate debt. (Homeowners can also consider a home equity loan, which generally carry fixed rates.)

    For comparison, rates on a 30-year fixed-rate mortgage are around 7%, according to Freddie Mac.

    More from Personal Finance:
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    A 20% down payment is ‘definitely not required’ to buy a house
    What to expect from the housing market this year

    While HELOC rates are high compared to the typical mortgage, they are much lower than credit-card rates, Elliott said. Credit-card holders with an account balance have an average interest rate of about 23%, according to Federal Reserve data.

    Borrowers can generally tap up to 85% of their home value (minus outstanding debt), according to Bank of America.

    Homeowners can leverage a HELOC to pay off their outstanding high-interest credit-card debt, Elliott said. However, they must have a “very targeted plan” to pay off the HELOC as soon as possible, ideally within a year or two, she added.

    For the people who owned their homes at least four or five years ago, on paper they’re feeling fat and happy.

    Lee Baker

    certified financial planner

    In other words, don’t just make the minimum monthly debt payment — which might be tempting because those minimum payments would likely be lower than a credit card, she said.

    Similarly, homeowners who need to make home repairs (or improvements) can tap a HELOC instead of using a credit card, Elliott explained. There may be an added benefit for doing so: Those who itemize their taxes may be able to deduct their loan interest on their tax returns, she added.

    Reverse mortgage

    A reverse mortgage is a way for older Americans to tap their home equity.

    Like a HELOC, a reverse mortgage is a loan against your home equity. However, borrowers don’t pay down the loan each month: The balance grows over time with accrued interest and fees.

    A reverse mortgage is likely best for people who have much of their wealth tied up in their home, advisors said.

    “If you were late getting the ball rolling on retirement [savings], it’s another potential source of retirement income,” Baker said.

    A home equity conversion mortgage (HECM) is the most common type of reverse mortgage, according to the Consumer Financial Protection Bureau. It’s available to homeowners who are 62 and older.

    Here's how to get an ultra low mortgage

    A reverse mortgage is available as a lump sum, line of credit or monthly installment. It’s a non-recourse loan: If you take steps like paying property taxes and maintenance expenses, and using the home as your primary residence, you can stay in the house as long as you like.

    Borrowers can generally tap up to 60% of their home equity.

    The homeowners or their heirs will eventually have to pay back the loan, usually by selling the home, according to the CFPB.

    While reverse mortgages generally leave less of an inheritance for heirs, that shouldn’t necessarily be considered a financial loss for them: Absent a reverse mortgage, those heirs may have been paying out of pocket to help subsidize the borrower’s retirement income anyway, Elliott said.

    Sell your home

    Alexander Spatari | Moment | Getty Images

    Historically, the biggest advantage of having home equity was amassing more money to put into a future home, Hepp said.

    “That’s historically how people have been able to move up in the housing ladder,” she said.

    But homeowners carrying a low fixed-rate mortgage may feel locked into their current home due to the relatively high rates that would accompany a new loan for a new house.

    Moving and downsizing remains an option but “that math doesn’t really work in their favor,” Baker said.

    “Not only has their home gone up in value, but so has everything else in the general vicinity,” he added. “If you’re trying to find something new, you can’t do a whole lot with it.”

    Cash-out refi

    A cash-out refinance is another option, though should be considered more of a last resort, Elliott said.

    “I don’t know anyone right now who’s recommending a cash-out refi,” she said.

    A cash-out refi replaces your existing mortgage with a new, larger one. The borrower would pocket the difference as a lump sum.

    To give a simple example: let’s say a borrower has a home worth $500,000 and an outstanding $300,000 mortgage. They might refinance for a $400,000 mortgage and receive the $100,000 difference as cash.

    Of course, they’d likely be refinancing at a higher interest rate, meaning their monthly payments would likely be much higher than their existing mortgage, Elliott said.

    “Really crunch the numbers,” Baker said of homeowners’ options. “Because you’re encumbering the roof over your head. And that can be a precarious situation.”

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  • Canadian consumer debt: How we’re paying for our credit cards – MoneySense

    Canadian consumer debt: How we’re paying for our credit cards – MoneySense

    What is causing debt for Canadians?

    Matthew Fabian, director of financial services research at TransUnion Canada, said many household incomes are not keeping up with inflation and higher interest rates, leaving them to rely on credit.

    “Consumers that have had significant increases in their mortgage payment have made that deliberate trade-off to pay less on their credit card and in some cases, they’re missing their payment,” Fabian said in an interview. “We’ve seen a higher delinquency rate in credit cards for those consumers that have mortgages than traditional credit card consumers.”

    How much debt do Canadians have?

    Total consumer debt in Canada was $2.38 trillion in the first quarter, compared with $2.32 trillion in the same quarter last year, and down only slightly from a record $2.4 trillion in the fourth quarter. The report said 31.8 million Canadians had one or more credit products in the first quarter, up 3.75% year-over-year. The jump was mainly driven by newcomers and gen Z signing up for their first credit products. The report showed there was a 30% surge in outstanding credit card balances for the gen Z cohort compared with the previous year.

    “The younger generation (is) only getting access to credit for the very first time in their life,” said Fabian. “They’re still learning how to use it, they’re still learning what it means to pay your monthly obligations.”

    Meanwhile, millennials held the largest portion of debt in the country—about 38% of all debt—likely due to higher credit needs as they grow older, according to the report. “They’re in the life stage where they’re probably having children, getting houses and have auto loans,” Fabian said. “The structure of the debt is shifted where 10 years ago, the majority of them would have had credit cards and car loans.” (Read: “How much debt is normal in Canada? We break it down by age”)

    Are mortgages in Canada at risk for defaults

    Fabian said he isn’t overly concerned about households falling behind on their mortgage payments because of the strict screening process established by the banking watchdog to qualify for a mortgage. He also said cash-strapped consumers will typically pay their mortgage first at the expense of other credit products like their auto loan or credit card. 

    Even though there are concerns about missed payments among the vulnerable population, Fabian said, “We’re still seeing pretty decent resiliency in the Canadian consumer base, especially when you look at how quickly it’s grown with gen Z and the volume of credit participation.”

    He added interest rate cuts, which are anticipated as early as June, can lessen the burden on households over time. “Our expectation is that the market will start to correct back to normal,” Fabian said.

    The Canadian Press

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  • Trump-appointed judge halts Biden administration credit card late fee cap

    Trump-appointed judge halts Biden administration credit card late fee cap

    A former President Trump-appointed judge in Texas halted President Biden’s administration’s plan to decrease late fees on credit cards to $8.

    The new rule, which was set to take place next week, was stopped with US District Judge Mark T. Pittman issuing a preliminary injunction, a decision beneficial to credit card companies and big banks.

    The lawsuit against the Consumer Financial Protection Bureau (CFPB) was led by the US Chamber of Commerce. They alleged, along with other banking organizations, that the rule, finalized in early March, was in violation of several federal acts.

    CFPB’s rule, which was planned to be active on Tuesday, was designed to save more than $10 billion in late fees annually by dropping the amount from $32 to $8, according to CFPB. The average saving would sit at $220 per year and would affect over 45 million who were hit with late fees, according to the agency.

    “This ruling is a major win for responsible consumers who pay their credit card bills on time and businesses that want to provide affordable credit,” U.S. Chamber of Commerce Litigation Center Counsel Maria Monaghan said in a statement.

    “The CFPB’s attempted micromanagement would have raised costs for most credit card users and made it harder for businesses to meet consumers’ needs. The U.S. Chamber will continue to hold the CFPB accountable in court,” she said.

    Slashing credit card fees is one of the ways is one the Biden administration is trying to downsize the financial difficulties for Americans as they try to stay out of credit card debt after increased inflation.

    For the latest news, weather, sports, and streaming video, head to The Hill.

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  • What happens if I don’t pay my credit card bills?  – MoneySense

    What happens if I don’t pay my credit card bills?  – MoneySense

    If you’re struggling to make your minimum credit card payments, you’re not alone. Unexpected emergencies can sometimes leave us short on funds to make the minimum payment on a credit card. According to Equifax Canada’s 2023 Market Pulse Consumer Credit Trends and Insights report, nearly 35% of Canadians carry balances on their credit cards from month to month. However, there are potential consequences for not paying your credit card bill on time. So here are the steps you can take to minimize the impact.

    Note that credit card companies may respond differently to missed payments, ranging from a tersely worded letter to potential legal action, depending on your issuer and your situation. In this article, we’ll explore the implications and ways to manage your credit card debt.

    What are the immediate consequences of not paying a credit card bill?

    If you don’t pay your minimum credit card balance, there could be different outcomes depending on the type of credit card you carry and the credit card issuer. Missing a couple payments will usually result in a hit to your credit score, as well as penalty fees like late charges and potentially a higher interest rate. If you miss more than one payment, the credit card company may also close your card. 

    Review your credit card agreement to ensure you are aware of your obligations and any potential penalties. If you miss payments, the credit card company may do any or all three of the following, according to the Canadian government:

    1. Revoke promotional interest rates.
    2. Increase interest rates in general.
    3. Cancel the credit card.

    Will my credit score be impacted if I don’t pay?

    Payment history is the biggest factor in calculating your credit score, so a late or missed payment can definitely impact it. Your credit score indicates creditworthiness for lenders, meaning it influences the loans you may qualify for, the interest rate you’ll pay, what you can buy on credit, and maybe even where you work and where you live. 

    Typically, one missed payment won’t end up on your credit report for at least 30 days after the payment due date. If you make the payment before that point, you might incur penalty fees, but your credit score likely won’t suffer. However, if you don’t pay your credit card for longer than that, your credit will take a hit and hinder your ability to qualify for certain financial services in the future.

    Interest increases and penalty fees on missed card payments

    Depending on the terms and conditions of your credit card, you may have to pay a late fee if you miss a payment. Penalty fees can depend on your balance and what’s outlined in the credit card agreement. 

    In addition, you might face a penalty annual percentage rate (APR) if you miss payments by at least 60 days, resulting in a higher interest rate being applied for a period of time. And that can grow your debt even higher. These terms differ depending on the credit card issuer. 

    Randolph Taylor

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  • ‘I’m Sure I’m Going To Die Penniless’ — Almost Half Of Gen X, The ‘Lost Generation,’ Has More Credit Card Debt Than Savings — Even the ‘Broke’ Millennials’ Are Faring Better

    ‘I’m Sure I’m Going To Die Penniless’ — Almost Half Of Gen X, The ‘Lost Generation,’ Has More Credit Card Debt Than Savings — Even the ‘Broke’ Millennials’ Are Faring Better

    Generation X, often referred to as the “Lost Generation,” finds itself in a precarious financial situation, wedged between the money struggles of millennials and Gen Z on one side and the relative stability of baby boomers on the other. According to a recent Bankrate survey, 47% of Gen Xers (ages 44-59) have more credit card debt than emergency savings.

    This statistic paints a picture of Gen X falling behind all generations, with millennials (ages 28-43) faring only slightly better at 46% having more debt than savings, and Gen Z (ages 18-27) at 32%. On the other end of the spectrum, baby boomers (ages 60-78) appear to be in a more comfortable position, with 68% having higher emergency savings than credit card debt — the highest percentage among all generations surveyed.

    Don’t Miss:

    The survey data highlights the financial tightrope that Gen X is walking, sandwiched between the debt burdens of millennials and Gen Z, often referred to as the “broke” generations, and the comparatively well-prepared boomers. This Lost Generation moniker takes on new significance as Gen Xers struggle to build a financial safety net amid competing demands of supporting their children and aging parents.

    Greg McBride, chief financial analyst at Bankrate, points out the strain many households are facing, stating, “Financing purchases at 20% interest rates is a sign of the financial strain millions of households are feeling.”

    The survey also revealed that Gen Xers were the most likely generation to report having less emergency savings than they did a year ago, with 34% admitting to a decline in their financial cushion.

    Pew Research Center’s examination of Generation X highlights their significant role as a bridge between the notably different baby boomers and millennials. Despite their critical economic and social position, Gen Xers have often been overlooked in discussions about demographic, social and political changes. Their financial outlook is notably more pessimistic compared to other generations, partly because of the economic stresses associated with middle age.

    Trending: If the average American household is a millionaire, why do people feel so broke?

    This bleak reality was echoed on Reddit, which posted an article about Gen X having the largest wealth gap. In the comments, one user wrote, “I feel like I did everything they told us to do and be successful, and I’m sure I’m going to die penniless.”

    Another lamented, “I myself have been a casualty of multiple economic downturns, notably the 2008 recession … and, well, it’s not looking good for me.” A third user pointed out, “There’s no safety net under capitalism, but millennials are not the enemy. They’re allies.”

    As the generational divide widens, Gen X finds itself at a crossroads, caught between the financial challenges of their children’s generations and the looming retirement prospects of their parents’ cohort. Navigating this middle ground will require a concerted effort to prioritize both debt reduction and consistent savings — a balancing act that many Gen Xers are still struggling to master.

    it is never too late (or too early) to start working toward financial stability. Consulting with a financial adviser can play a pivotal role in helping people across all generations to assess their current financial situation, set realistic goals and create a plan to achieve these goals.

    Financial advisers can offer tailored advice on a range of strategies to reduce debt, increase savings and plan for retirement, ensuring that individuals are taking proactive steps toward financial health. Whether it’s exploring options to consolidate debt to lower interest rates, setting up an emergency fund to avoid future debts or investing wisely for long-term growth, a financial adviser can provide guidance tailored to each person’s unique circumstances.

    Read Next:

    *This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

    Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.

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    This article ‘I’m Sure I’m Going To Die Penniless’ — Almost Half Of Gen X, The ‘Lost Generation,’ Has More Credit Card Debt Than Savings — Even the ‘Broke’ Millennials’ Are Faring Better originally appeared on Benzinga.com

    © 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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  • Biden announces credit card late fee cap of $8

    Biden announces credit card late fee cap of $8

    Biden announces credit card late fee cap of $8 – CBS News


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    President Biden on Tuesday announced credit card late fees will be capped at $8, down from around $32. Nikki Battiste has the details.

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  • Couples and credit scores: How your partner’s credit can affect yours – MoneySense

    Couples and credit scores: How your partner’s credit can affect yours – MoneySense


    Should I get a joint credit card with my partner?

    While your partner’s credit score won’t directly impact your credit score, joint accounts or adding the other as a co-applicant will. The one exception is adding your partner as an authorized user to your credit cards and banking accounts. 

    When added as an authorized user, your partner is able to use the credit card but cannot make any changes to the account. Their credit will also not be impacted in any way. However, when a partner is added as a co-applicant, they have to go through the required credit checks and both partners’ credit is impacted based on usage of the account.

    Joint accounts can be beneficial when both partners are on the same page with money. For example, a joint account can give you access to a larger borrowing limit. It also can simplify your finances and foster feelings of partnership. However, depending on your partner’s money habits, sharing a joint credit card could be a real risk to your money and your credit score.

    If either of you miss a payment on a joint account or run up a large balance, each of your credit scores can take a hit. On the other hand, if you and your partner always make your payments on time, both of you will see improvement in your credit scores as the joint account will show up on both of your credit reports. 

    Getting extra credit through a joint credit card might seem like a good idea, be sure to assess each of your financial situations before doing so as gaining new credit can influence financial behaviours. Be critical about how having more or less credit affects your ability to live within your means and pay off your debt in full each month. If you or your partner have any debt, the focus should be on paying it down. Only consider a new, joint credit card if you have paid off your individual debts first.

    How to maintain healthy credit history (and prevent debt) as a couple

    Before combining finances in any way, such as joint credit cards or loans, it is imperative that you and your partner are in agreement and have the same expectations. To maintain healthy credit and prevent debt, consider the following five things: 

    1. Make sure your partner is someone you can trust to properly budget by having open and transparent conversations about money. 
    2. Set boundaries on how the joint account or loan will be used, as well as spending limits. Some couples ensure they both agree on a purchase beforehand, whereas others may check in at the end of the month to ensure all spends are accounted for—it’s good for catching credit card fraud, too, since you never assume it was the other person.
    3. Agree on who will make payments to ensure they’re made on time.
    4. Decide the amount you each will contribute to shared expenses. Will it be 50/50 or a percentage based on your incomes?
    5. Discuss what happens if one of you can’t make a payment due to income loss or illness. What’s your backup plan?

    Money isn’t worth fighting about—but it’s worth talking about

    Discussions about finances aren’t always easy. They might cause stress, tension and arguments with your partner. But, the more you practice communicating with honesty and intention, it does become easier. 

    None of this is to say your partner having a sub-par credit score should be a deal breaker. In fact, it’s fairly simple to start rebuilding credit. As professionally certified credit counsellors with Credit Canada, we often help couples understand their credit and address debt. If you need additional support, contact us today to book a free credit-building counselling session.



    Sandy Daykin

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  • Should you pay rent with a credit card? ‘It could rapidly spiral,’ expert warns

    Should you pay rent with a credit card? ‘It could rapidly spiral,’ expert warns


    Svetikd | E+ | Getty Images

    Housing is typically one of the biggest expenses in someone’s budget, and it’s natural to wonder about the best way to pay that bill.

    For renters, sometimes it’s possible to pay with a credit card. While you could earn rewards and build credit by doing so, experts say it’s typically not a smart move.

    “This is a very large payment. It could rapidly spiral in terms of additional interest rate costs,” said Susan M. Wachter, a professor of real estate at The Wharton School of the University of Pennsylvania.

    More from Personal Finance:
    Many young unmarried couples don’t split costs equally
    Here’s how Gen Zers can build credit before renting their own place
    What to know to make rent payments count for credit

    Your landlord might not even agree to accept payment via a credit card, as they may be subject to paying processing fees.

    They simply “may not want the hassle,” said Matt Schulz, senior credit analyst at LendingTree.

    Here are three things to consider before you charge your rent payment to a credit card.

    1. Processing fees chip away the rewards

    An appeal of paying your rent with credit might be earning rewards on that expense. The typical cash back card offers 1.5% to 2% back.

    But most third-party payment services and large property management companies charge credit card processing or transaction fees. Those can run between 1% and 3% of the rent charge.

    “The cost of that fee may eat into the value of any rewards you might earn, so it might not even be worth it,” said Melissa Lambarena, a credit cards expert at NerdWallet.

    The median apartment rent nationwide was $1,964 in January, according to Rent.com. That would generate nearly $60 in monthly credit card processing fees, or more than $700 over the course of a year.

    Make sure you review the terms before you decide which card to use. Processing fees vary, and there are some cards that do not charge them, such as the Bilt Mastercard.

    2. You run the risk of accumulating interest

    If you do not pay the card balance in full by the end of the statement period, you risk adding interest charges on top of your monthly rent.

    “Don’t pay rent with a credit card if you’re going to be charged interest,” said Ted Rossman, an industry analyst at Bankrate.

    Due to inflation, more people have been racking up and carrying debt, whether from credit cards or buy now, pay later loans. High interest rates can make some of these balances harder to pay off.

    The average interest rate for all credit cards by the end of 2023 was 21.47%, the highest annual percentage rate since the Federal Reserve began tracking in 1994, according to LendingTree.

    3. Your credit score may dip

    Using credit cards for large transactions can affect your credit utilization rate, the ratio of debt to total credit, which weighs heavily into your credit score, Lambarena explained.

    “Putting rent on your card’s credit limit could hurt your credit score,” she said. “It’s usually recommended by experts not to use more than 30% of your amount of available credit.”

    If you want to put the rent payment on your card, a good buffer is to make sure you have enough available balance. You can ask for a credit limit increase from your card issuer to minimize the effect to your score.

    Don’t miss these stories from CNBC PRO:



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  • What does opening or cancelling a credit card do to my credit score? – MoneySense

    What does opening or cancelling a credit card do to my credit score? – MoneySense

    To close a credit card, the balance is $0. If there’s a substantial balance on the remaining cards, it’s going to increase the credit utilization ratio. And, if the increase is high enough, it will hurt your credit score. This is because the closed card’s unused credit limit no longer provides balance in the relationship between your other credit balances and credit limits. What you owe elsewhere can have a bigger impact than if you had a zero-balance credit card.

    Another thing: Closing an account means the creditor will stop reporting on your behalf your credit history on that card. If the card showed positive credit history, such as responsible usage and making payments on time, that history will gradually fade away and no longer bolster your credit score. 

    The reverse can’t be said. If the card showed negative credit history, closing the account will not erase the negative impact on your score. 

    Generally speaking, cancelling a credit card won’t improve your credit score, and you shouldn’t close a credit card unless you have a good reason, such as not trusting yourself to use the credit responsibly.

    Buyer beware: Welcome offers

    Many credit cards come with a generous sign-up bonus that helps you earn cash back, points, miles or a reduced interest rate. Welcome offers can be a great way to save money, especially if you already had planned on spending the minimum threshold to earn them. However, proceed with caution. 

    Read the fine print. Despite the enticing welcome offer of a credit card, your credit score may drop when you apply for a new card as a hard inquiry will be performed during the application process. Although your credit score will only drop a couple of points and will likely recover after a few months if you make your payments on time, it’s still a hit to your credit.

    Remember that welcome offers are one-time deals. While some credit card sign-up bonuses may save you money up front, the reality is that any rewards you earn aren’t worth incurring additional bills if you’re already struggling with debt. You should only consider a new welcome offer if you have paid off your credit card debt in full. If you have any debt, focus on paying that down—not short-term wins like getting a lower and very temporary interest rate.

    Opening and closing credit cards can impact how you use credit, too. Open multiple new cards, and you may end up with more credit than you can feasibly handle or keep track of. In addition, the allure of welcome offers may distract you from your financial goals. There’s impact on your credit score, and it’s critical to think about how having more or less credit affects your ability to live within your means and pay off your debt in full each month.

    Doris Asiedu

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  • Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense” – MoneySense

    Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense” – MoneySense

    Jordan Heath-Rawlings shares your frustration. In November 2023, he launched In This Economy?!, a podcast that helps Canadians tackle financial challenges. Described as “Your guide to understanding an unpredictable economy,” the show explores topics such as inflation, employment, debt, home ownership and repaying CERB.

    Heath-Rawlings, who lives in Toronto, is a long-time Canadian journalist—he was a newspaper reporter, a founding editor of Sportsnet, and director of special projects at Rogers Media, among other roles. In 2018, he started Frequency Podcast Network, along with Canada’s first daily news podcast, The Big Story, which he still hosts (he also oversees 30-plus other shows). Below, Heath-Rawlings shares what he thinks about credit, debt, real estate and more—plus why he’s now a “huge points guy.”

    Check out In This Economy?!, available on these podcast players. New episodes are released on Thursdays.

    Who are your finance heroes?

    So, In This Economy?! is designed to come from a curious person, not someone who has studied the financial industry extensively and has formed opinions about it. I don’t really have a finance hero. Except, I’ll say this: My career as a sports journalist, including a lot of time writing about fantasy sports and gambling, has made me keenly aware of the concept of the “mass market miss”—a player or investment that doesn’t seem to match stereotypical norms, so it’s overlooked compared to others, creating easy value for those willing to value results over aesthetics. So, can I say, like, baseball writer Bill James or baseball executive Billy Beane?

    How do you like to spend your free time?

    I’m a homebody for the most part, so hanging around the house, watching sports, being with family. My partner is a travel junkie, though, so we try to find the time—and money—to take a few trips a year.

    If money were no object, what would you be doing right now?

    Golfing—somewhere warm. With my wife and daughter on the beach waiting for me to meet them afterwards. We’ll be doing this in a few weeks from now, and I’m already dreaming about it.

    What was your first memory about money?

    My first money memory—besides making like 25 cents per row weeding the garden for my grandfather—is my parents wisely not spending $200 to buy me Air Jordans that I would have wrecked in two weeks anyway. I grew up in the burgeoning sneaker era, when they were just becoming big-time status symbols, and I wanted what the cool kids had.

    What’s the first thing you remember buying with your own money?

    Oh, baseball cards. It is absolutely 100% baseball cards. And I still have them in a box in our basement. Sadly, I came of age during the absolute peak popularity for kids collecting cards, so they aren’t worth anything, save for the memories. But in 1988, I—and every other kid I knew—would have told you they’d have made me rich by now.

    MoneySense Editors

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  • 56 million credit cardholders have been in debt for at least a year, survey finds

    56 million credit cardholders have been in debt for at least a year, survey finds

    Although Americans helped stave off a recession in 2023 by spending enough to propel economic growth, it has come at a cost: Nearly half of consumers say they are carrying credit card debt, according to a new survey from Bankrate.

    The personal finance firm found that 49% of credit card users carry a balance from one month to the next. That’s up a full 10 percentage points from 2021. Of those who revolve their balances, 58% — 56 million people — have been in debt for at least one year, according to Bankrate. 

    The vast number of Americans racking up credit card debt isn’t a sign of reckless spending. The most common reason for not paying off their plastic every month is facing emergency or unexpected expenses, such as medical bills and car repairs, respondents told Bankrate, while many people also use their charge cards to handle daily expenses. 

    Overall, Americans owe more than $1 trillion on their credit cards — the first time consumers have surpassed that combined level of debt, according to the St. Louis Federal Reserve Bank. That debt has piled up as credit card rates have jumped and inflation continues to sap households’ purchasing power. 

    The average credit card annual percentage rate hit a record 20.74% in 2023, up 4.44 percentage points from early 2022, according to Bankrate.

    “Inflation is making an existing trend worse,” Bankrate senior industry analyst Ted Rossman told CBS MoneyWatch. “We’ve been seeing this for a while, with more people carrying more debt for longer periods of time. It’s moving in the wrong direction.”

    Bankrate based its findings on a November survey of 2,350 adults, including nearly 1,800 credit cardholders and 873 who carry a balance on their accounts. 

    Tips for paying off credit card debt

    Rossman offered a few steps consumers can take to start tackling their credit card debt . His top tip? Open a 0% interest balance transfer card that offers a grace period of 21 months during which no new interest is charged. 

    “It gives you a valuable runway to really make progress without interest weighing you down,” he said. 

    It’s also worth seeking advice from a non-profit credit counselor or reaching out directly to your credit issuer to seek more favorable terms, such as more forgiving payment due dates or a pause on repaying. “Sometimes they are willing to make accommodations, so it doesn’t hurt to ask,” Rossman added.

    Lastly, taking on a side hustle, selling belongings you don’t need, or otherwise trimming your budget can free up dollars to allocate toward paying down high-interest credit card debt. 

    “Credit card debt is the highest by a wide margin, so it has to be at the top of the list for debt payoff efforts,” Rossman said. 

    Megan Cerullo


    img-6153.jpg

    Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News streaming to discuss her reporting.

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  • Americans opened their wallets for holiday spending, defying fears of a pullback

    Americans opened their wallets for holiday spending, defying fears of a pullback

    Shoppers weren’t entirely tight fisted during the holiday season, despite the ongoing pressure of inflation on household budgets.

    U.S. retail sales grew 3.1% this holiday season, according to a Mastercard poll that tracks in-store and online retail sales. Spending on restaurants increased 7.8% from last year, while apparel and grocery-related purchases were up 2.4% and 2.1%, respectively, according to Mastercard. 

    Robust consumer spending bodes well for the economy’s present and future, according to Goldman Sachs. 

    “We continue to see consumer spending as a source of strength in the economy and forecast above-consensus real spending growth of 2.7% in 2023 and 2.0% in 2024 in Q4/Q4 terms,” economists with the investment bank said in a mid-December report.

    Consumers proved more willing to shell out on online purchases compared to in-store purchases, with online sales growing 6.3% this holiday season versus a  2.2% increase in sales at brick-and-mortar stores, Mastercard’s data shows. 

    But not all retailers profited from shoppers’ open wallets.

    Pockets of worry

    Consumers spent 0.4% less on electronics and 2.0% less on jewelry compared to the 2022 holiday season, as price-conscious consumers cautiously embraced seasonal sales, Mastercard’s data shows.  

    For many consumers, increased spending over the holidays may also bring more debt. About 2 in 3 Americans say their household expenses have risen over the last year, with only about 1 in 4 saying their income had increased in the same period, according to an October poll from The Associated Press-NORC Center for Public Affairs Research.

    The strong holiday shopping turnout reinforces the likelihood the Fed will achieve its goal of so-called soft landing, some analysts say. Even so, some forecasters predict that consumer spending could peter out later next year.

    “PNC expects a decline in consumer spending in the second half of 2024 as the U.S. economy enters into a mild recession,” PNC analysts said in a research note. “High interest rates and modest job losses will cause households to turn more cautious. However, there’s still about a 45% probability that the U.S. economy avoids recession and consumer spending growth slows, but does not outright decline.”

    The Mastercard SpendingPulse excluded automotive purchases.

    Elizabeth Napolitano


    elizabeth-napolitano-cbsmoneywatch.jpg

    Elizabeth Napolitano is a freelance reporter at CBS MoneyWatch, where she covers business and technology news. She also writes for CoinDesk. Before joining CBS, she interned at NBC News’ BizTech Unit and worked on the Associated Press’ web scraping team.

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  • The risks of credit repair companies in Canada – MoneySense

    The risks of credit repair companies in Canada – MoneySense

    Some companies claim they can repair your credit and solve your debt problems quickly. However, you can only rebuild credit and there’s no quick fix to do so. We’ll walk you through why you should be skeptical of companies offering credit repair services and explore other ways to rebuild and maintain strong credit. 

    The importance of strong credit in Canada

    It’s important to have a good credit score so you can get a loan, be approved for a credit card, buy a home and a car. And you want to get the best interest rates when doing so. A credit score may also determine whether a landlord approves your rental application, and employers might even consider credit histories in their hiring process. Having a strong credit score shows you are good at managing debt and credit. In contrast, bad credit suggests you are a risky bet to lenders because you may be having problems with money. 

    Why someone might reach out to a credit repair service

    The average Canadian owes more than $21,000 in consumer debt. When you have a lot of debt and other monthly bills to take care of, it can become difficult to manage and make all of your payments on time, especially amid high inflation and rising costs of living. However, if you don’t manage your payments on time, your credit score will take a hit. Feeling desperate in a financial situation can cause anyone to make a bad decision. But many people run into further financial problems by trying to repair their credit with a quick fix.

    How credit repair companies work

    Credit repair companies say they will repair your credit by removing negative information from your credit report, thus boosting your credit score—for a costly, upfront fee. They may also offer to negotiate with credit reporting agencies to improve your credit score or encourage you to take out a high-interest loan to pay off your debts. Be aware that these credit repair companies make money from fees, set-up costs and interest, so you may be left with even more debt without any changes to your credit score.

    These companies often take advantage of the fact that many Canadians don’t know you can’t remove accurate information from your credit report—even if it’s bad. You should be skeptical if a company says they can remove accurate, negative information from your history.

    Pay attention to the warning signs

    Many Canadians run into further financial problems as they attempt to “repair” their credit because they fall victim to credit repair scams. Credit repair services are different from not-for-profit credit counselling agencies. The latter are typically a free service offering non-profit financial education and advice. But back to the scams, here are the warning signs that a company offering credit repair services is likely a scam: 

    • They request an “upfront” payment (this is illegal under Canadian consumer protection laws)
    • They offer instant approval for loans or other credit products without fully understanding your financial situation
    • They call themselves a “credit repair company” 
    • They request payment by gift cards
    • They use high-pressure sales tactics
    • They say they “erase” your negative credit information
    • They don’t provide a transparent contract (or any contract at all)
    • They warn you against contacting a credit bureau

    How to rebuild your credit in Canada

    Accurate negative information on your credit report cannot magically go away; it’s there until it falls off your credit report, which takes about six years. If your credit report isn’t great, the only way you can go about “fixing” it is by rebuilding it with a positive credit history. You have to show your creditors that your financial habits have improved, which takes time. Here’s what you can do to get the ball rolling: 

    1. Review your credit

    It is important to review your credit report regularly by getting a free copy of your credit history from both Equifax Canada and TransUnion. Look over the report to see what’s documented and if the information is correct. For no charge, you can remove incorrect information by filing a dispute with the credit reporting company.

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  • One paycheck not enough: Digital bank Current finds almost half its customers have multiple jobs

    One paycheck not enough: Digital bank Current finds almost half its customers have multiple jobs

    The need for second — and often third — incomes is mounting, according to a top digital bank executive.

    Current CEO Stuart Sopp finds almost half of the firm’s payment customers have more than one job.

    “If you’re having a paycheck over the past year, 20, 25% of paycheck depositors have at least one extra job. A further 20% incremental from there have two jobs,” Sopp told CNBC’s “Fast Money” on Thursday. “They’re trying to make that money go further because of inflation.”

    From DoorDash to Shopify to side businesses, Sopp finds the number is higher than prior years because money doesn’t go as far.

    “Wage inflation is moderating quite substantially,” he said. “America has a sort of tail of two cities right now. Two groups: The wealthy and less affluent.”

    Sopp launched Current, which provides mobile banking without monthly fees and offers secured credit cards, in 2015. It originally focused on helping medium to lower income customers. His company Current reports almost five million members.

    He’s particularly concerned about less affluent consumers spiraling into debt to pay for basic necessities.

    “They’re being forced into risks like risky credit cards,” noted Sopp, a former Morgan Stanley trader. “Unsecured credit cards… are not suitable for everyone.”

    The Federal Reserve Bank of New York found credit card debt topped $1 trillion for the first time ever in the second quarter.

    “It’s going to be way bigger this year,” Sopp said.

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