Navigating Credit Card Choices and Pitfalls

Do the “7 Deadly Sins” apply to being a consumer? Yeah, in a way.

It's like gluttony and the overconsumption of goods, or pride when it comes to buying things solely to project a certain image or social status, neglecting actual need or value and exceeding what is truly needed or used. 

But let’s get out of the psychology of consumerism and think about the mistakes consumers make. The common pitfalls we all make are not comparing prices and features, falling prey to marketing tactics, not reading reviews and fine print, not negotiating or using available discounts and not taking advantage of return policies. 

Everyone can raise a hand on at least one of those, right?

But, the most important thing we tend to get wrong is leaving the accuracy of our credit reports to someone else. 

403,552 of you

In a new ConsumerAffairs review of complaints made to the Consumer Financial Protection Bureau (CFPB), the number of disputes about “incorrect information” in credit reports from TransUnion, Experian, and Equifax, rose from 200,273 in 2022 to 403,552 matches in 2023. 

And things are looking even sadder for 2024. So far – through Feb 26, 2024 – there have been 101,516 gripes filed about mistakes on consumers’ credit reports. At that rate, we could be looking down the barrel of more than 600,000 complaints by the end of this year.

All sorts of complaints

Credit reports have never been perfect, but with Americans buying things and taking out credit like crazy, more stuff is hitting the proverbial fan than ever before.

“The credit bureaus stated my [report] was properly investigated but how is that possible if the open date is inaccurate, the date last active is inaccurate, and the date last reported is not accurate,” complained one consumer.

Is it time for you to take another look at your credit reports?

If your credit score is decent – say above 600 – you probably don’t worry too much about what’s being reported.

But maybe you should. There are three frequent mistakes consumers make regarding their credit reports and with just a little effort, that 600’ish score could go up just enough to lower your credit card interest rate or your mortgage the next time you apply for one.

The most common mistakes on credit reports are:

• Personal information mistakes: And this is quite a catch-all, too – anything from a misspelling of your name or address to an incorrect date of birth or your Social Security number. 

• Account reporting errors: This is a more difficult can of worms because these involve inaccuracies related to individual accounts listed on your report, such as:

  • An account reported by someone as closed that might really be open, or vice versa.

  • Missed or late payments might be incorrectly reported, too, even if you made payments on time.

  • Incorrect credit limits, balances, or dates opened/closed can appear, as well.

• Identity theft: Fraudulent accounts opened in your name are showing up more and more, so stay vigilant.

• Duplicate accounts: Because of reporting inconsistencies between the credit bureaus, your account information might be listed multiple times on a report, so correct that, too.

Earn bonus points!

We’ve covered the basic mistakes consumers make with credit reports, but there are some reporting errors that you might find if you look a little deeper or you take care of them quicker.

The first one is not disputing errors promptly. The faster you dispute an error, the sooner it gets corrected and the sooner your credit score benefits. Leave a mistake on there too long and it’ll just make matters worse. 

Another is closing old accounts in good standing. Sometimes, we pay off credit cards and just leave things at that, but if we don’t close them completely, they still hang out there as active and can lower your score. 

Capital One is acquiring Discover Financial Services, in a deal that would expand the footprint of both credit card companies.

While a smaller player among credit card customers, Discover has its own payment network, which could be one reason Capital One pursued the deal. In the announcement of the deal, Capital One said it would move some of its credit cards to the Discover network.

Capital One founder and CEO Richard Fairbank believes the acquisition will provide a successful synergy.

“Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies," Fairbank said. "Through this combination, we're creating a company that is exceptionally well-positioned to create significant value for consumers, small businesses, merchants, and shareholders as technology continues to transform the payments and banking marketplace."

Different terms

Capital One and Discover credit cards have different terms and the announcement did not say whether Discover’s terms will stay intact. Maggie, of Winona, Minn., is one Discover cardholder who hopes Discover stays pretty much the same.

“I often find myself feeling unsatisfied with a lot of customer service experiences from companies…but every time I’ve contacted Discover I’ve had an amazing experience, always so helpful and nice I love it,” Maggie wrote in a ConsumerAffairs review. “I always feel understood and valued everytime I call and they seem like they genuinely care about their customers rather than just being there to solve your problem and hang up.”

Capital One said it plans to keep the Discover brand for current Discover accounts. Although it’s the smallest credit card company, Discover has a global payments network with 70 million merchant acceptance points in more than 200 countries and territories. 

In 2023, first-time homebuyers drove home sales, led by millennials.

However, a number of people in that generation soon discovered that their money didn’t go nearly as far as it used to because of rising mortgage rates, which was the likely reason why more than 17 million millennials and 4.5 million Gen Z’ers decided to call a rental unit their home and lose out on the benefits of home ownership.

Specifically, they lost out on the benefit of raising their credit score by paying mortgages on time. But have they?

Since rents are rising faster than home prices, shouldn’t those people have the same advantage? That question is starting to surface. It’s not well-publicized – nor is it always easy – but it is doable. 

Not easy vs. doable

The “not easy” side is that currently, renters can’t submit their payments directly to the credit bureaus for one thing. For another, some landlords and property managers do not report rent payments to credit bureaus.

“However, renters have the option to avail themselves of several free and paid services that will report rent payments to the credit bureaus on their behalf,” Severine Bryan, founder of Bryan Financial Empowerment LLC, told ConsumerAffairs.

“Free services include Self which reports to all three bureaus. Renters do not have to go through their landlord to use Self. It does have a paid tier that includes reporting utility and phone payments to the bureaus but those additional payments only report to TransUnion.”

Bryan offered two other “free” suggestions:

• Pinata, which only reports to TransUnion through this method,  but which landlords can use and report to all three bureaus.

• PayYourRent is also free to tenants and reports to all three bureaus. But, landlords might shy away from this since they pay any fees charged by PayYourRent.

As for paid rental payment credit reporting services, there’s Boom Pay, RentReporters and Rental Kharma.

Paid services that report to all three bureaus include Boom Pay. Bryan says the beauty of Boom Pay is that for an additional small fee, it will capture and report up to 24 months of payments before signing up. Rental Kharma, on the other hand, only reports to TransUnion and Equifax.

“Before signing up for any of these services, tenants should verify which bureau they report to,” Bryan cautions.

“This is especially important if they are in the market for a loan and the loan servicer uses one bureau over the others. They should also verify if the loan servicer includes rent payments in their loan processes.”

A credit card solution?

Some credit experts poo-poo using credit cards to pay rent, but Sebastian Jania of Ontario Property Buyers suggests that one of the more atypical credit card benefits being offered is a way that renters can use their rental payments to up their credit score. 

Jania alerted ConsumerAffairs to Plastiq, a company that will pay the landlord on or before the day that rent is due, and the owner of the credit card will have that balance along with a small fee added to their credit card for payment the next month. 

“By doing this one is able to use a credit card and show the credit card company that they are able to use this card responsibly and have it paid every month which will result in improving their credit score over time,” Jania told us.

“Further, as the credit card company sees that they are making consistent payments, they may offer them additional credit products or an increase in credit limit which will reduce credit utilization and ultimately result in an increased credit score.”

It turns out Wall Street was right. Stocks rallied last month on the growing belief that not only was the Federal Reserve done hiking interest rates, it would cut rates next year.

At the conclusion of the Fed’s December meeting, members of the Fed’s Open Market Committee (FMOC) released projections for 2024. Most penciled in three cuts in the federal funds rate, which determines interest rates on car loans, credit cards and banks’ prime lending rates.

Not surprisingly, stocks surged with the Dow Jones Industrial Average closing up 512 points, or 1.2%.

What it means

Here’s what that does to the investment environment:

• Savers will likely get less interest on their money. Yields on Treasury bonds fell on the news.

• Tech stocks, which led the November rally, gained even more.

• Oil prices rose after finishing the previous day at their lowest level since June.

• The price of gold, which had fallen over the last couple of weeks, posted a solid gain.

But it may be too soon for investors to make significant moves based on the Fed’s outlook. Oliver Rust, head of Product at Truflation, says the outlook is far from certain.

“With the labor market still running exceptionally hot and Truflation forecasting inflation will rise again in December, we expect policymakers will have to review their position and consider whether they need to increase rates again,” Rust told ConsumerAffairs.

There are still Fed ‘hawks’

“This would be a shock to the market, which is now overwhelmingly expecting the Fed’s next move to be an interest rate cut – though the majority now expect this to happen in May, rather than March. However, the market may be underestimating the extent of Fed Chair Jerome Powell’s hawkish stance.”

Rust also notes two of the incoming FOMC members next year also have hawkish views on monetary policy.

“This could further sway the committee toward another interest rate hike, should economic data suggest this is required,” he said. 

"In short, we are not seeing the economic slowdown required to bring inflation fully under control, which remains a core part of the Fed’s mandate. We expect Chairman Powell to remain firmly committed to this goal in 2024. If he does not see the necessary softening in the economic data in the new year, we believe he may still push for another 0.25% interest rate hike – and perhaps gain more support from his committee than he would have done this month.”

Generally, higher interest rates are a negative drag on stocks since they increase companies’ operating costs and can drag down profits.

The Federal Reserve Open Market Committee (Fed) ended its September meeting without increasing the federal funds rate but made clear its battle with inflation isn’t over.

“We want to see convincing evidence really that we have reached the appropriate level, and we’re seeing progress and we welcome that. But, you know, we need to see more progress before we’ll be willing to reach that conclusion,” said Fed Chairman Jerome Powell.

Other statements and documents suggest that even if the Fed doesn’t raise rates one more time, as expected, the policymakers plan to keep the rate where it is for months, making it more expensive to finance a car or truck purchase and pay down credit card balances.

Oliver Rust, head of product at independent inflation data aggregator Truflation, says the Fed’s decision shows it is being cautious.

“Overall, the economic picture remains murky, which explains the decision to pause,” Rust told ConsumerAffairs. “According to Powell, the Fed is now ‘in a position to be more careful’ and getting ‘fairly close’ to where it needs to be on interest rates. Faced with arguably the most important monetary policy decision since the rate hiking cycle began, this pause gives policymakers the chance to avoid a blunder, with Powell saying that achieving a soft landing still remains the Fed's primary objective.”

A soft landing would be a reduction in inflation without triggering a recession – historically, something hard to achieve.

Soft landing?

“However, with the economy on a strong path and unemployment stuck at historic lows, there is little chance of avoiding another interest rate hike,” Rust said. “At Truflation, we also expect inflation to remain sticky this year and maintain our projection of 4% CPI by year-end, which will put further pressure on the Fed.”

With new and used car prices expected to rise because of the United Auto Workers strike, higher financing rates may limit the kind of vehicles consumers can afford. Current rates range from 5.5% to over 28%.

The average credit card interest rate is 24.45%, with consumers with excellent credit paying less but those with poor credit paying a much higher rate. Both auto loan rates and credit card rates are based on the Fed’s federal funds rate.

Medical bills are the source of many consumer issues these days. They can lead to bankruptcy and ruin someone’s credit rating if they’re not paid.

Following up on its report “Medical Bills: Everything You Need to Know About Your Rights,” the U.S. PIRG Education Fund is warning consumers that the next time they’re faced with a hefty medical bill, they might find themselves pressured to sign up for a medical credit card. PIRG claims those cards are a win for the financial industry, benefiting from the millions of people who use those cards, but often a loss for the consumer.

PIRG’s latest report – “A bad deal: Why you don't want medical credit cards in your hand” – explains how medical credit cards work, why they add to the cost of a medical bill, and some alternative methods consumers can take to lower and pay off their medical bills. 

What are medical credit cards? 

A “normal” credit card and a “medical" credit card are kin, but they differ in an attractive way: deferred interest with 0% for an introductory period. And that angle is what companies pitch to consumers. 

The problem is that patients may not understand that “deferred interest” means that if they miss a payment, or can’t pay the full balance when it’s due, they’ll have to pay higher interest rates than most regular credit cards. 

According to the report, there's plenty of consumer-side pain. For one, there are loopholes in debt protection laws these cards can exploit.

Secondly, because they’re marketed inside of a healthcare office, the staffers who promote these aren’t prepared to fully explain or answer questions about the financial transaction. 

Thirdly, PIRG says consumers are powerless to keep these wolves keep away from your door. “The predatory terms of these financial products exacerbate the cost to the patient down the road. Patients need to know that they have other solutions available to them,” said U.S. PIRG Senior Director of Health Care Campaigns Patricia Kelmar. 

Listen to the advice of those who got hurt by a medical credit card

If you want proof, Evelina of El Cerrito Calif., has plenty in her review of Synchrony Financial’s CareCredit, the medical credit card she used to purchase her husband’s $5,400 hearing aids. 

Evelina’s not alone. In the 200 plus complaints about CareCredit to the CFPB, there are allegations of the company refusing to return overpayments, deceptive billing practices, and accounts closed without any explanation. 

CareCredit doesn’t have the market to itself. There's also AccessOne, PrimaHealth Credit, Wells Fargo Health Advantage, MedCredit Financial Services, and Comenity’s Alphaeon Credit Card. 

In response to this trend, several federal agencies have launched an inquiry into these high-cost specialty financial products, asking consumers to send in their stories. 

Consider the alternatives

PIRG says that there are four things consumers can do when they’re faced with a medical bill.

Verify your bill. Inside the ton of paperwork that you’ll get after a medical procedure, there should be an itemized list of what each thing costs. If you see something listed twice or a service that you didn’t receive or recognize, ask questions of both the provider and your insurance company.

Negotiate your bill. It doesn’t hurt to ask if you can get a discount and pay a lower amount, especially If you’ve been going to a doctor for a long time and they value you as a patient.

PIRG suggests that you can ask what the Medicare rate is and ask to pay that lower amount instead. “You should explain that you are willing to pay, but explain your financial limits,” PIRG suggests. “As with a payment plan, you should get the agreed-upon discount in writing.”

On top of referencing the Medicare rate, ConumerAffairs recently found an app that finds the cheapest price for medical procedures. You could use it to make more informed decisions when negotiating a price.

If it’s a non-profit hospital, ask about financial assistance. It’s a federal requirement for all nonprofit hospitals to have financial assistance policies, so if that’s where you’re getting your medical procedure done, ask if you qualify for free or discounted care. 

Despite the fact that the provider claims you have already been screened, PIRG says that you may still apply for this aid. “In some cases, financial aid is denied because the provider lacks the information necessary to know if you qualify, and your application can provide that missing information,” PIRG added.

Use another credit source. The first thing you shouldn’t do, says PIRG, is to even apply for one of these credit cards. In short, the credit card company “owns” you. They set the terms, conditions, and rate and you are pretty much powerless to affect any change. 

“We have to put an end to the peddling of medical credit cards in health care settings. When offered in a doctor’s office, or a hospital, patients might not be in the best state to make a decision about signing up for a high-interest card,” Kelmar said.

“MDs have the expertise to prescribe drugs -- not financial advice. You wouldn’t go to an investment banker for a medical diagnosis. Evidence shows that medical credit cards can worsen debt and even lead to bankruptcy. And your provider or hospital can’t cure that.” 

Here’s a reminder that it’s always good to regularly check your credit card accounts. In addition to possible fraudulent changes, a legitimate merchant might place an accidental charge.

Wegman’s, the upscale supermarket chain, has disclosed that some customers were double-charged when they made purchases using a credit card. The extra charges occurred both at in-store checkout terminals and online.

The double-charging occurred on transactions that were processed on Aug. 16 and were reported at more than 110 Wegman’s locations in the U.S.

One consumer posting on Facebook said she contacted Wegman’s after she noticed the identical charges and was told that it was a “system-wide” error. Other customers advised shoppers to check their bank statements, though it’s not clear if the glitch affected debit cards.

Not to fear, company officials said affected customers will get reimbursed. The company said it is working with payment processors to restore the money. A company spokesperson told media outlets that affected customers should get their money back quickly, depending on the cards’ issuers.

The spokesperson did not disclose a reason for the error.

A report by the Federal Reserve Bank of New York shows total credit card debt in the U.S. has reached $1 trillion for the first time. 

Credit card balances surged by $45 billion in the second quarter of the year as more Americans apparently relied on expensive credit to make ends meet. That 4% increase pushed total indebtedness to the highest gross value in Fed data, extending back to 2003.

Another report – this one from the credit bureau TransUnion – shows many of the consumers running up large credit card balances are student loan borrowers, whose monthly payments have been on hold since April 2020.

Unfortunately for them, however, those payments are set to resume within weeks. In addition to resuming those loan payments, many will also have to find a way to pay their credit card bills.

The burden of additional debt

“The majority of consumers with a student loan have not been required to make payments for the better part of three years,” said Liz Pagel, senior vice president and consumer lending business leader at TransUnion. “Payment amounts will vary, but many of these consumers have taken on additional debt since the last time they had to pay their student loans. It’s important for both lenders and consumers to be prepared for this new payment shock.”

The TransUnion report shows that 53% of student loan borrowers, relieved of having to make loan payments during the last three years, opened new credit card accounts. Thirty-six percent also took out auto loans.

“These additional credit products mean additional monthly payments, the accumulation of which may pose added challenges for households attempting to reintegrate student loan payments into their monthly budget,” Pagel said.

While the Department of Education has offered a 12-month moratorium before student loan delinquencies will have an impact on consumer credit files, interest will begin to accrue immediately so Pagel says it is in the best interest of consumers to resume payments right away.

What to do

Faced with a tighter budget, many student loan borrowers may be tempted to make only the minimum payment on their credit card bill, but personal finance experts warn that’s a costly strategy, especially with interest rates north of 20%.

The quickest way to put a dent in your credit card balance is to apply for a balance transfer credit card that offers 12 to 20 months of 0% interest. That means the entire monthly payment goes to pay down the balance.

The ConsumerAffairs research team has analyzed current offerings and selected these seven balance transfer cards as among the best. All seven charge a balance transfer fee, but the fees charged by the Quicksilver from Capital One and SavorOne Rewards from Capital One may be the lowest.

Once the interest-free period ends, borrowers can pay off the remaining balance with a personal loan because rates are generally lower than credit card rates. Learn more about personal loans here.

In a shock to the Biden administration and the financial markets, Fitch, a debt ratings agency, has downgraded the U.S. government’s credit rating from AAA to AA+.

The firm explained its move by pointing to the Congressional brinksmanship in early June that nearly resulted in the U.S. government defaulting on its debt. 

"In Fitch's view, there has been a steady deterioration in standards of governance over the last 20 years, including on fiscal and debt matters, notwithstanding the June bipartisan agreement to suspend the debt limit until January 2025," the agency said. "The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management."

Legendary investor Warren Buffet, chairman of Berkshire Hathaway, spoke up to calm the markets.

"Berkshire bought $10 billion in U.S. Treasurys last Monday. We bought $10 billion in Treasurys this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month" T-bills, Buffett said in an interview with CNBC. "There are some things people shouldn't worry about, this is one."

But it’s one thing for a billionaire not to be concerned. How about someone like you?

It depends

Personal finance experts say it all depends on your circumstances. If you have savings, it might actually be good for you in the long run if interest rates keep rising. But if you have lots of adjustable-rate debt, it might have a real downside at some point. But there are few signs of that on the horizon.

Matthew Schaller, MBA, CFA, CFP at Compardo, Wienstroer, Conrad & Janes at Moneta, in St. Louis, says there has been only muted bond market reaction so far.

“We are not expecting material changes to consumer debt, at least not as a result of the downgrade,” Schaller told ConsumerAffairs. “Mortgages are tied to the 10-year Treasury, which rose on the news of the downgrade vs. an expected drop.  The same goes for credit card debt and car loans, which tend to be influenced by the two-year Treasury.  

Schaller says the two-Year Treasury should have spiked if the market was truly worried about the U.S.'s fiscal state, but it only rose two basis points,  which he said is not an abnormal move in a given trading day.

“The downgrade news itself seems immaterial on interest rates, at least for now,” he added.  “Fitch’s main reasoning behind the downgrade discussed dysfunction in Washington. Which, quite frankly, there has been dysfunction in Washington for a long-time – it just seems this time it was enough of a reason to downgrade the U.S. debt.”

In spite of everything, Schaller says the U.S. economy is still showing resilience, “perhaps more surprisingly than most economists were predicting this time last year.”  

Have you ever taken the time to calculate how much you have to spend to earn a mile or a point in the loyalty rewards programs you’re a part of? It's really simple.

Most loyalty program points/miles are worth about a penny which means the reality of a rewards program will often cost you $50 to get a $5 coffee at Starbucks or tens of thousands of dollars to get a flight that would otherwise cost you $700. 

Loyalty programs continue to get even more expensive. For example, United Airlines just increased its requirements, with a one-way saver transatlantic award starting at 40,000 miles where it used to take only 30,000.

And they’re also becoming loaded with gamification because the bigger sticks and carrots they can get a consumer to chase bring in more revenue. Sorry, but offering actual value to a customer enrolled in those programs just doesn’t exist anymore.

How does one play the loyalty game and win? Good question. ConsumerAffairs asked loyalty program gurus – the people who play this game like it’s a real job – how someone can get the most out of their credit card loyalty programs. What they came back with was pretty insightful. Involved, too, so be ready to jump through some hoops.

First off, don’t be delusional

To woo consumers, companies are smart enough to know that there’s no upside in divulging the true value of points or the hoops and fine print that someone has to eventually face in cashing those in.

So companies throw lots of sign-up bonuses at us. “25,000 miles to sign up, no fee for the first year” come-ons costs the company nothing, but if they can get a consumer to bite, then the cha-chings start to roll. 

But, a big problem with loyalty programs is that most people don't really know – or investigate – what they're signing up for. 

“People keep signing up for these programs because they think they'll get lots of perks, even if they have to spend a bunch to get them,” Michael Lisovetsky, co-founder of the banking platform Zurp, told ConsumerAffairs. “There is an illusion that their entire travel experience will change for the better, but many are designed for frequent or high-spending travelers,” not the couple who flies to Sarasota once a year to see their grandkids.

Don’t be greedy, either. RatePunk CEO Justin Albertynas told us that “Applying for multiple credit cards within a short period can have a negative impact on your credit score. It's advisable to be strategic when considering joining more loyalty programs.”

How to better reap what you sow

When ConsumerAffairs put this question to the experts, the floodgates opened with input. It’s a safe bet that at least one of these will get an "a-ha" from anyone who’s part of a loyalty program.

Weigh the value of rewards vs. cash back. “Not everyone is a great candidate for a travel rewards credit card,” says Nick Ewen at ThePointsGuy. “There are a number of no-annual-fee, cash-back credit cards out there that award 2% back on every single purchase you make. If you don’t want to worry about earning miles or points to cover an entire flight, cashback gives you the flexibility to put money back in your pocket whenever it suits you, since you’re not limited to travel.”

Be flexible and only travel in the low season.RatePunk CEO Justin Albertynas said the deals are better when strict dates don’t limit your choices and when the destinations aren’t overcrowded with tourists during the most popular time of visiting. “It will help you get the best deals and save your travel rewards,” he suggested.

Only use the card where and when it’s worth it. Brendan Miller, CMO of Runa, agreed, saying that wise consumers will look for cards that give the best bang for the buck they spend in certain spending categories, such as gas or food. “Consider the types of rewards offered, redemption options, frequency of usage, and the points earning rates. Spreading your points - and interest levels - too thinly across a broad range of businesses risks minimizes the value-add from your hard-earned loyalty bonuses.”

Look at the route network before committing. An airline may offer you 100,000 miles to sign up, but that doesn’t mean squat if you have no interest in flying to the places it goes to or you don’t even like the airline, David Doughty, the CEO of Admiral Jet told us. “If someone’s preferred airline offers extensive coverage to the destinations they frequently visit or partnerships with other carriers that suit their travel needs, it’s worthwhile to accumulate miles and maintain their loyalty status even if the rewards are minor.” Otherwise, it could be a complete waste of time.

Use your card for big purchases. One of the hot stick-and-carrot angles is for a credit card to reward a consumer with an unbelievable number of miles if they spend a certain amount of money in a short period of time (like $3,000 in 3 months). In her review of travel cards, ConsumerAffairs’ Kathryn Parkman says the best use of those type cards is when you’re going to make a major purchase. “That way, you can be sure to hit the sign-up bonus and maximize the amount of points you gain right off the bat,” she said.

However, you need to be careful with these types of bonus offers. You may get 75,000 miles for spending $4,000 in three months on a credit card, but if it’s going to cost you 80,000 miles to fly to London and back, that means you have to spend even more money to get that award flight; and if you don’t use the miles but stick with the card for another year, the membership fee could be as much as $395.

Churning. Murtaza ​​Khanbhai, the founder of Reward Flight, told ConsumerAffairs about a community of consumers – called “churners” – who are dedicated to getting the most value out of these programs. It’s kind of like playing the stock market, but for those readers who like that kind of excitement, here goes:  “They sign up for these credit cards for large signup bonuses and then cancel them,” he said. “When done properly you can fly in business and first class for a fraction of the regular price. For those not interested in traveling you can also redeem them for cashback offers, often upwards of $500.” Where are these communities, pray tell? ​​Khanbhai said there’s a group on both Reddit and FlyerTalk.

What are the “extra” perks? On top of the welcome bonus, Ewen says consumers should consider what, if anything, they’ll get past that stage. 

One of his favorite perks is waived checked bag fees. “If you live in an airline’s hub (e.g. Charlotte for American, Atlanta for Delta) and you take at least a couple of flights per year, an airline credit card can be a major money saver,” Ewen told ConsumerAffairs. He said that most of those allow the primary cardholder to check a bag for free on all domestic flights, and many times that perk also extends to multiple companions on the same reservation. 

“Let’s say you live in Atlanta, and you and your spouse check a bag on just one round-trip domestic flight every year. You’d have to pay $120 ($30 per person each way) for this privilege. However, if you have the Gold Delta American Express card and pay a $95 annual fee, those baggage fees are automatically waived for you and up to eight travelers on your reservation.”

However, he throws out a caution flag on that suggestion, saying that some companies make perks unnecessarily difficult to utilize, so read the fine print before you sign on the dotted line.

With inflationary headwinds stubbornly persisting, Americans are increasingly adding to their credit card balances. A new report from the St. Louis Federal Reserve Bank shows balances on credit cards and other revolving credit products are fast approaching $1 trillion.

That’s a reversal from three years ago when COVID-19 lockdowns resulted in a dramatic drop in credit card spending. Credit card balances actually declined to $750 billion in 2021. Consumers have added nearly $250 billion to their credit card accounts in just two years.

Making matters worse, the Federal Reserve’s campaign to raise interest rates to reduce inflation has boosted the average credit card interest rate to 24%, the highest since the 1980s. Personal finance experts concede the tasks can be challenging but say there are a few tools that can help an overburdened consumer reduce their debt.

“If you're struggling to pay down your balance, use a 0% balance transfer card to save on interest,” said Andrea Woroch, a personal finance author. “This will buy you more time to pay off your balance without interest piling up and could save you a lot of money and give you relief in your monthly budget to afford higher prices.”

While that can help, remember that many balance transfer cards charge a fee, based on a percentage of the transferred balance. Most fees are 3% but some may be as high as 5%. ConsumerAffairs has researched the best balance transfer cards here.

Personal loans

Taking out a personal loan to pay off a credit card balance is another option. In most cases, the interest rate on a personal loan is significantly less than a credit card. 

To pick the best lender for you, you’ll want to compare features, including annual percentage rate (APR), repayment terms, fees and loan amounts. Again, ConsumerAffairs researchers have reviewed lenders and picked the best eight offers.

Once you reduce interest charges, Markia Brown, certified financial education instructor at Money Plug, says you should avoid the mistake of sliding back into bad habits.

“This can manifest in several ways, such as overspending, accumulating high-interest debt, inadequate savings, and lack of investment for the future,” told us. “To avoid these pitfalls, it is crucial to establish clear financial goals, create and follow a budget, prioritize saving and investing, and be disciplined with spending habits.”

With inflation eating away at paychecks, you may be sinking deeper into debt. If you are, you aren’t alone.

A report by the Federal Reserve Bank of New York shows total household debt rose by $148 billion, or 0.9% to $17.05 trillion in the first quarter of 2023. As something of a surprise, credit card debt didn’t increase very much.

Instead mortgage balances climbed by $121 billion and stood at $12.04 trillion at the end of March. Auto loan and student loan balances also increased to $1.56 trillion and $1.60 trillion, respectively.

While credit card balances were flat in the first quarter, at $986 billion, that runs counter to the typical trend. Fed economists note credit card balances usually go down in the first quarter of most years.

Tony Dwyer, chief market strategist at Canaccord Genuity, believes an increase in consumer spending on credit cards is only beginning, flashing a warning sign for American households as well as the U.S. economy. In an interview with CNBC, Dwyer said consumers are still spending only because they have available credit.

‘Unsustainable’

“At some point, you’re going to deplete your cash,” Dwyer said. “At some point, the money supply data, the movement of money out of deposits into money market funds, and the use of credit cards are going to hit a level that is unsustainable and I think we’re pretty close to it.”

In an environment of rising interest rates, consumers cut back on other types of debt. Mortgage refinancings were sharply lower because homeowners with 3% mortgage rates were not eager to start paying 6%. That means home equity is staying in the home and not being taken out to spend on other things.

The volume of new auto loans was $162 billion, a reduction from pandemic-era highs but still elevated compared to pre-COVID volumes. Again, interest rates may be keeping some people from purchasing a new vehicle.

Holding onto cars longer

This week S&P Global Mobility reported that the average age of vehicles on U.S. roads hits 12.5 years, another record. The report said there are almost 122 million vehicles in operation that are over 12 years old.

High interest rates, along with inflation, may be making it harder for Americans to keep up financially. The Fed’s report shows the share of current debt becoming delinquent increased across nearly all types of debt. The delinquency transition rate for credit cards rose by 0.6% and 0.2% for auto loans.

Sometimes, having a little coaching and information can help consumers get a handle on their finances when debt starts to rise. Check out what ConsumerAffairs learned when we rated credit counseling agencies.

It may be time to take a new look at your credit report – especially if you are among half of the Americans who have any kind of medical debt. The Consumer Financial Protection Bureau (CFPB) says that many consumers who've taken on some form of medical debt in the last year have protections they need to know about. 

The biggest subset of that pool is the 40+ million people who might have unpaid medical bills. For them, the U.S. Congress, federal agencies, and others have stepped up to pass the No Surprises Act to help protect Americans from certain unexpected medical bills, such as those surprise medical bills from out-of-network providers for “emergency services.”

The second group of consumers who are getting some relief are those who’ve seen negative information pop up on their credit reports related to a medical expense. For them, the CFPB has laid down the law to debt collectors and consumer credit reporting companies that they can’t collect, furnish, or report any invalid medical debt.

In the wake of the pandemic, Equifax, Experian, and TransUnion were tasked with removing all paid medical debts from consumer credit reports, those less than a year old, and all medical collections under $500. That last step went into effect on April 11, 2023, and with this change, the CFPB estimates that roughly half of those with medical debt on their reports will have it removed from their credit history in the upcoming months.

Those three companies have taken to this task expeditiously, too. When ConsumerAffairs checked on their collective progress, TransUnion claimed that nearly 70% of the total medical collection debt tradelines reported to the Nationwide Credit Reporting Agencies (NCRAs) have been removed from consumer credit files. 

Making sure your debt isn’t still being reported

To prove they’re doing what they were told, Equifax, Experian, and TransUnion are offering free online credit reports once a week through AnnualCreditReport.com. The CFPB says consumers with medical debt would be wise to order one from each and double-check if they’ve been removed like they’re supposed to be. 

The agency offered this advice to be sure:

• If you previously had a medical collection under $500, a paid medical collection, or a collection less than a year old on your credit report, check to make sure they no longer appear on your reports. Be aware, however, that this doesn’t include credit card collections, even if you used your credit card to pay for a medical expense under $500.

• Also, while you’re looking at your reports, check for any other information that might be inaccurate. Here’s a list of the typical inaccuracies on a credit report.

• If you find a medical collection under $500, a paid medical collection, a collection less than a year old, or errors on your report, you can dispute that information with the credit reporting company.

If you run into problems

Another olive branch the credit reporting companies are offering is an extension of the time it takes to dispute, negotiate, or pay for any outstanding bills before they can be reported. Consumers in those situations now have one year from the time they saw a doctor before they’re allowing medical debt to appear on their credit report. 

For those who are unable to pay their medical bills, they may qualify for financial assistance programs, aka “charity care.”

If all else fails, the CFPB says it's got our collective backs. “We expect that the No Surprises Act, the recent actions by credit reporting companies, and the CFPB’s own actions and guidance will reduce the challenges many families face after they receive medical care,” the agency said.

“If you find invalid medical bills on your credit report or if you’re having issues disputing other medical bill errors with the credit reporting companies, submit a complaint to the CFPB.”

There are a good number of class action settlements that are winding down and the window for consumers to file for their share of the settlement is closing with it -- as early as in the next week or two.

ConsumerAffairs found these settlements that end soon, courtesy of ClassAction.org. Click on the name of the company to get to the settlement website.

Other class action lawsuits in the beginning stages

There are a number of what could be profitable settlements waiting for consumers if some of the class action lawsuits that are being filed come to fruition. Make note of these and keep an eye out for how you can apply for your portion of the settlement.

Twitter: ClassAction.org says that attorneys are investigating whether a class action lawsuit can be filed in light of allegations that Twitter said it was collecting information from users for account security purposes but secretly used the data to target them with ads.

Diet Pepsi: If you’re a Diet Pepsi drinker, heads up. ClassAction says that attorneys are investigating whether Diet Pepsi contains toxic chemicals known as PFAS and, if so, whether a class action lawsuit could be filed over the issue.

Roundup: Several lawsuits have been filed claiming that the herbicide Roundup a) can cause cancer, and b) that the manufacturer was lax in warning people about the risk. 

Ford Motor: ClassAction also reported that drivers have reported problems with their vehicle’s transmissions when starting, accelerating, and shifting. Attorneys are now investigating whether a class action is possible.

Taylor Swift is a successful pop star with a string of million-selling albums to her credit. But it turns out she has some investor savvy as well.

In 2021 FTX, the now bankrupt and defunct crypto exchange, approached Swift about signing a $100 million endorsement deal. Several other celebrities had already done so.

Swift didn’t sign and now we know why. Adam Moskowitz, one of the lawyers handling a class-action suit against several high-profile FTX promotors, says Swift was the only person to ask a very important question.

Moskowitz, appearing on "The Scoop" podcast to discuss the lawsuit, said Taylor turned to the lawyers and asked if the FTX securities were registered. She was told they were not.

At that point Swift backed out of the deal and, in doing so avoided becoming a defendant in the lawsuit. Tom Brady, Shaquille O’Neal, and Larry David signed the deal and now face a lawsuit.

Big losses

Investors in the FTX exchange should probably have asked that question as well. Investors lost an estimated $8 billion and FTX founder Sam Bankman-Fried faces federal fraud charges.

Operating from the Bahamas with little to no regulation, FTX “loaned” investors’ deposits to a sister company, Alameda Research, which made a number of risky investments, resulting in big losses.

A security is defined as a tradable asset that has value, such as a stock or bond. Securities sold in the U.S. must be registered with the Securities and Exchange Commission (SEC). The SEC has accused FTX of selling an unregistered security in the form of FTT, its cryptocurrency.

Swift may have inherited some of her investment smarts from her father. According to Business Insider, he was an investment adviser with Merrill Lynch for 30 years.

With the economy bouncing all over the place, consumers have been bouncing their credit all over the place, too. Hoping to find some breathing room, people have turned to Buy Now Pay Later (BNPL) and balance transfers as options.  

BNPL has been much derided by both financial experts and the Consumer Financial Protection Bureau (CFPB), but recently there’s been an increase in balance transfers, and one financial guru tells ConsumerAffairs that option is a double-edged sword.

“Balance transfers are both a good and bad thing,” Cyndie Martini, the CEO and Founder of Member Access Processing (MAP), said, laying most of her concerns at the feet of “credit card churning” that sucks people into the balance transfer vortex.

And churning is certainly attractive. It can give a consumer the impression that they can open a new credit card account and score some sort of benefits like zero-percent or low-interest balance. There might even be a bonus like airline credit cards often do, dangling the carrot of tens of thousands of miles that could be used for free travel.

The ramifications of balance transfers

Martini – in big, bold letters – says that before taking the balance transfer route, consumers need to consider what they’re getting into.

Don't overextend yourself, it's not free money. “Balance transfers come with certain costs and limitations. Generally, you'll have to pay a balance transfer fee - usually 3% or 5% of the total transfer,” she said. “Therefore, know that a credit transfer is not free money to extend paying off your open balance – it's simply discounted.”

Your credit score can be impacted. Really? Really. Martini said that unbeknownst to many people, their credit score is impacted based on the total limit of combined cards. As an example, she offered this narrative: “For example, if you have two cards with a $10,000 limit on each card, your credit score will be affected in the same way if you have four cards with $5K limits on each. The effects of a balance transfer may be hard to predict, but it's important to arm yourself with as much important information as possible before you transfer any open balances.”

Understand why you want to transfer your balance to a new card. Yes, that’s “why” and not “why not.” “Your credit card score will also be impacted each time you sign up for a new card to transfer your balance onto because the credit card company will have to run a credit check on the account when you sign up,” Martini said. But, if having simply a “good” credit score rather than a "Holy Grail" perfect credit score is good enough, then a transfer balance may be a worthwhile consideration. 

Plan for when you run out of free interest. Let’s say you have a 6-month interest-free offer when you transfer your limit to your new card, but you still have $10K in debt. “Then it's better to pay off the debt balance rather than continuing to transfer your open balance to new cards,” she recommended.

In its review of balance transfers, the CFPB also offered its insights on what happens when the "free interest" dries up. If anyone uses the same new credit card to make new purchases, they need to understand that they won’t get a grace period for those purchases and will have to pay interest until they pay the entire balance in full, including the transferred balance. Worse yet, if you’re more than 60 days late on a payment, the credit card company can increase your interest rate on all balances, including the transferred balance.

Pay your balance within your interest period. If you don't pay your balance in full within this period, the credit card company may charge you for the 6-month free interest in total. Oops. Most people don’t want to take the time to read a credit card policy before they leap into one, but Martini said that the devil is in those details more times than not and it’s worth poring over all the ifs, ands or buts.

Do the math. Martini said that if you have a significant amount of credit card debt, the 3-5% balance transfer fee is absolutely worth paying when transferring your balance to a card that has a 0% intro APR offer, but only – and this is important – if they still need time to pay off the balance. However, she said that if you can pay off your balance immediately in full on your current card, that is ideal because you'll save on any new interest fees as well as a balance transfer fee. 

If after considering all of these points you decide a balance transfer card makes financial sense, ConsumerAffairs has looked at some of the best.

How bad do consumers think credit reporting agencies are? Plenty bad. According to a new analysis by the U.S. PIRG Education Fund, complaints to the U.S. Consumer Financial Protection Bureau (CFPB) about credit reporting problems nearly doubled from 2021 to 2022.

At the top of this dubious list: the so-called “Big 3” credit bureaus -- TransUnion, Equifax and Experian. That trio received more complaints than any other financial firms in 2022 – 604,221 out of 3,420,113 total complaints.

Credit reporting agencies stink up the place when it comes to reviews at ConsumerAffairs, too. Equifax had the most reviews over the last year and 98.1% of those were 1-star. TransUnion and Experian basically tied with the second most reviews with 93.3% of TransUnion’s reviews being 1-star and 86.9% of Experian reviews earning the lowest rating.

"I’ve studied credit reporting complaints for over 30 years, yet I cannot comprehend how little the credit bureaus’ poor treatment of consumers has changed,” said Ed Mierzwinski, senior director for federal consumer programs at U.S. PIRG Education Fund. “When Americans describe a system rigged against them in the stories they file into the CFPB database, it’s unfortunately not surprising -- I’ve seen it all before.”

Many people are griping about the same issues

Among the key findings of PIRG’s “Big Credit Bureaus, Record Complaints: a look at increases in CFPB consumer complaints 2021-2022” report is that many consumers have the same gripes --  student loans, checking and savings accounts, and credit card or prepaid card complaints.

New financial technologies cracked the Top Ten for the first time, with consumers up in arms about frauds and scams and virtual currency like Bitcoin, as well as standard services like credit repair and money transfer categories.

On a per-capita basis, consumers in Georgia, Delaware, Florida, the District of Columbia and Alabama filed the most complaints.

How can consumers make use of the CFPB’s database?

ConsumerAffairs has been using the agency’s database for about a year and it’s been very helpful in giving us insights into problems such as with Buy Now Pay Later.

We reached out to the CFPB to find out how a consumer can make the best use of the database and one of the beauties of the system is that someone can look at the complaints of a certain company and see how that company responded.

For example, one consumer filed a complaint against TD Bank, saying they asked the bank to close a checking account but the account stayed open, accruing fees. The record shows the bank responded in a “timely fashion” and the complaint was “closed with monetary relief.”

The agency said that in conversations with stakeholders, the database is typically best for gaining insights into problems people are experiencing in the marketplace.

To aid consumers, PIRG is also releasing a short video showing how easy it is to use the database.

The CFPB encourages consumers to file complaints

The CFPB is required by law to monitor consumer complaints. While more is not necessarily the merrier, anytime a consumer files a complaint, it provides the CFPB with important information about the types of challenges consumers are experiencing with financial products and services and how companies are responding to consumers’ concerns. 

The agency didn’t specifically name situations where complaints led to it filing an action against a specific company, but it’s possible that its investigation against Venmo and its concerns over “negative option” subscription programs likely were connected to consumer complaints.

"For the CFPB to do its only job, protecting consumers, as effectively as possible, it’s important to hear directly from people what’s going wrong,” said U.S. PIRG Education Fund Consumer Campaign Director Mike Litt. “The complaints in this database act like an alarm system. When the CFPB reads them, it’s alerted to problems, who the culprits are, and what actions it needs to take.”

Using a credit card and making timely payments usually increases your credit score. However, making purchases with a debit card does not. That’s because you aren’t “borrowing” the money when you make a purchase, it comes straight out of your bank account.

But leave it to the new wave of fintech financial services companies to find a workaround. Extra card has introduced the Extra debit card and company executives say using it responsibly will raise your credit score. Here’s how:

A regular debit card is issued by your bank. It’s the same as writing a check, but more efficient.

The Extra debit card has some features of a credit card. For example, it pays rewards. But it is linked to your bank account, just like a regular debit card issued by your bank.

When you make a purchase with the Extra debit card, Extra pays for the purchase immediately, then withdraws the amount of the purchase from your bank account. When you make an on-time payment, Extra reports the payment to Equifax and Experian – two of the three credit reporting agencies.

The company has released research that found that over the course of one year, Extra card members who practiced good credit habits while successfully using the product as recommended, experienced an average overall credit score increase of 48 points and were twice as likely to get approved for an auto loan or a credit card.

Road to higher credit score?

Company officials say the card could be a way for a consumer with marginal credit, who might not qualify for a credit card, to raise their score so they can access credit on better terms.

"We seem to be in an era now where tech-bro negligence is at an all-time high, which was one of the main reasons why conducting a study like this and providing proof points for Extra's first-of-its-kind product is more important than ever," said Cyrus Summerlin, co-founder & chief brand officer of Extra. "As an uncertain economy continues to affect customers, I would love to see a reset in fintech startup culture that celebrates impact made, more than just money raised.”

Using an Extra debit card carries a monthly or annual fee. The Extra Credit Building program costs $8 a month. The Extra Credit Building and Rewards program costs $12 a month or $108 for the entire year. 

If you’re paying more money each month to keep your credit card account current, but are seeing the loan balance continuing to rise, you’re in good company. A new report from the Federal Reserve Bank of New York said that’s the situation for a growing number of people.

By the end of 2022, credit card balances totaled $986 billion – an increase of $61 billion over the previous quarter. If that seems like a big number, it is. It’s the largest increase in credit card debt from one quarter to the next since the Fed began collecting that data in 1999.

It doesn’t stop with credit card debt. The report shows overall household debt, which includes mortgages, car loans and student loans – combined with credit card balances – surged to $16.9 trillion by the end of the year.

"Credit card balances grew robustly in the fourth quarter, while mortgage and auto loan balances grew at a more moderate pace, reflecting activity consistent with pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed. "Although historically low unemployment has kept consumers' financial footing generally strong, stubbornly high prices and climbing interest rates may be testing some borrowers' ability to repay their debts."

It’s happening

Actually, there’s evidence that is happening. A report by Moody’s Analytics shows that by the end of the year, nearly 10% of car loans extended to people with subprime credit scores were 30 days or more behind on payments at the end of 2022.

Car prices inflated last year and auto loan rates rise every time the Fed raises its federal funds rate, putting the squeeze on more people.

“The households that were on the financial ledge to begin with might have been tipped to the point where it’s hard to keep up on the car loan and everything else, and people have to make some very hard decisions,” Pamela Foohey, a professor at Cardozo School of Law, told the Wall Street Journal.

Sandwich generation

While fears of a recession have begun to recede, it doesn’t help the growing number of people who are struggling under a mountain of debt. A study by New York Life shows members of Gen X – a demographic that usually has older children and aging parents – use their credit cards the most. 

“While financial health and confidence for Americans may differ for myriad factors, it’s worth noting that women and Gen Xers, or those within the “Sandwich Generation,” are likely parent-caregivers, handling both parent or guardian and unpaid adult caregiving roles, often leading to greater levels of stress,” said Suzanne Schmitt, head of Financial Wellness at New York Life. 

Balance transfer credit cards with several months of 0% interest are a good option to quickly put a dent in a credit card balance. So is a personal loan, which often has an interest rate half of what credit cards charge.

The ConsumerAffairs Research Team has checked out both. Here’s what he found out about balance transfer cards and here’s the scoop on personal loans.

When does “approved” or “pre-approved” mean just that?

In a ConsumerAffairs review of Credit Karma's credit card offers, Emily, of Macon Ga., said she found there were quite a few hoops to jump through. She said the loans the company pitched her as “approved” required filling out an application that promises it won't hurt your credit scores as well as APR and monthly payments which look great up front but turn out to be “crazy high.”

And what Emily experienced, the Federal Trade Commission (FTC) apparently found happening across the entire consumer credit landscape with Credit Karma. Following a public comment period, the agency finalized a consent order settling charges that Credit Karma deployed “dark patterns” to misrepresent that consumers were “pre-approved” for credit card offers – pre-approved as in as much as a 90% sure shot of getting a good deal on a loan. 

Unfortunately, many of the people who applied for the credit offers weren’t as credit-worthy as they should be and wound up with nothing unless they wanted to bite off more than they could chew on monthly payments. 

However, the FTC said Credit Karma benefited because it was able to gather over 2,500 data points on each consumer, including credit and income information. Credit Karma then used that information to send targeted advertisements and recommendations for financial products, like credit cards.

Credit Karma disagrees, but will pay a fine. Is that good enough?

The FTC’s consent order requires the company to pay $3 million that will be sent to consumers who wasted time applying for these credit cards. It also agreed to stop making deceptive claims.

“We fundamentally disagree with allegations the FTC makes in their complaint, but we reached this agreement to put the matter behind us so we can maintain our focus on helping our members find the financial products that are right for them,” a Credit Karma spokesperson told ConsumerAffairs.

But as recently as December 2022, consumers were still complaining about the company’s pitches.

“Got an offer for a guaranteed approval on a product where they would pay me $50 if I was not approved. So, I applied, hard inquiry made on my credit within seconds, and I was not approved,” Jason, of Media Ohio wrote. 

But that’s where he felt Credit Karma failed to follow through on its offer. 

“I then contacted them to get my $50 and they told me that I could not receive it because I did not qualify and that they could not find any applications for credit, he said. 

It’s important for consumers to complain when they feel like they were wronged

Jason doesn’t have the same clout as the FTC, but his finger-waving is what the FTC wants to hear about. It asks anyone and everyone to let it know when they run up against something that doesn’t seem fair and honest by submitting a concern at its complaint website.

Not only is it worth doing it for the sake of protecting other consumers, but in Credit Karma’s case, the ones who complained will share in that $3 million fine. 

As inflation raises the cost of living, consumers are trying to keep up by putting more purchases on credit cards and allowing balances to grow. That is a cause of concern at the Federal Reserve, which is trying to fight inflation by raising interest rates.

In a new report, the Federal Reserve Bank of New York found credit card balances increased by $38 billion from the second quarter of last year to the third quarter. That coincides with sharp increases in the Consumer Price Index (CPI).

The Fed has two concerns. First, it would rather consumers spend less on products and services to help lower inflation. But a second concern is that, as high-interest credit card balances swell, fewer consumers will be able to make timely payments.

The Fed data doesn’t show which consumers pay off their credit cards in full each month and those who let their balances grow. However, the data does show the younger the consumers, the more debt they had in the third quarter.

Can consumers continue to make payments?

“The real test, of course, will be to follow whether these borrowers will be able to continue to make the payments on their credit cards,” the authors wrote.

In August, LendingClub Corporation, in partnership with PYMNTS.com, released its periodic study of consumer spending patterns and found that 61% of consumers spend all of their money between pay periods. That was up from 52% a year ago.

That makes living paycheck-to-paycheck the most common financial lifestyle in the U.S., with increasingly more high-income consumers now entering that category. Some, an estimated 13%, actually spent more than they earned in the previous six months by tapping savings or going into debt.

That presents a huge problem when prices of nearly everything are rising. It isn’t possible to keep up that kind of spending without an increase in income or an increase in debt.

Balance transfer or personal loan?

To reduce credit card debt, some consumers who can qualify for a balance transfer credit card might consider opening an account that offers a year or more of 0% interest. Another alternative is to take out a three-year fixed-rate personal loan and use the money to pay off a high-interest credit card.

The average interest rate on a credit card is approaching 21% but some are much higher. According to NASDAQ, the average interest rate on a three-year personal loan is less than 13%.

The payments may be higher but you get out of debt faster. A five-year loan might offer lower payments but carries a significantly higher interest rate.

A personal loan may also be a good choice if you need to pay off a large balance because it offers a fixed interest rate. Credit card rates will rise each time the Fed hikes interest rates.

Ever claim you didn’t make a purchase that shows up on your credit card? If you have and you actually received the product, it could come back to haunt you.

A new survey by fraud prevention firm Sift reveals that chargeback dispute rates have skyrocketed 35% in the last year. However, the more shocking number is that nearly one in four of the consumers who filed a chargeback claim admit to committing “friendly” fraud, at an average of $192.53 per claim.

“As the economy cools down from historic highs, consumers are looking to save money however they can, luring many to resort to first-party fraud,” said Sift Trust and Safety Architect Brittany Allen. Allen said that the big three fraud categories are also among the largest spending categories and include clothing and electronics.

Typical friendly fraud scenarios

Friendly fraud can show up in any number of ways according to Chargebacks911.

The innocent versions might come from a mom who sees unknown charges on the family’s cell phone bill which she disputes, only to find out later that her son made several in-app purchases on a game that he plays on his phone. “Oops, sorry.”

In fact, things that appeal to children are the most frequent drivers of unauthorized family purchases, according to ChargebackGurus: in addition to in-app purchases in video games, there’s streaming video and music, one-click shopping options on sites like Amazon, and website subscriptions.

Other not-so-guilty versions are where:

• The consumer has buyer’s remorse and, instead of contacting the merchant to convey that, they go the chargeback route instead.

• The item or service wasn’t delivered.

• The item or service was not as described (counterfeit, wrong color, etc.).

• The merchant didn’t cancel a recurring payment when requested.

The sinful versions revolve around a cardholder trying to get something for free. Cyber-shoplifting, if you will.

Defrauders might wait a couple of weeks before calling the credit card’s issuing bank and claiming that they don’t know what the charge is. They request a chargeback and, effectively score a freebie. 

Circling back to when children innocently make charges in-app that mom and dad don’t know about, there's also a wrongful flip-side called “first-party fraud” where family members – usually male, in their 20s, and struggling to make ends meet,  knowingly make a purchase without telling the cardholder. 

Another dishonorable version according to ChargebackGurus is when a customer wants a refund for whatever reason and the merchant won't give it to them. In many of those cases, the consumer files a dispute with the credit card company because they think that if the merchant ripped them off in the first place, the merchant would only lie or stonewall them if they asked for a refund directly.

Other consumers pay the price

Anyone who does even one friendly fraud chargeback is hurting their fellow consumer. That may sound like a stretch but with these chargebacks costing merchants more than $132 billion each year to eat the costs associated with fulfilling a chargeback, they have little choice but to shorten return windows, raise prices, and charge for returns to try and recoup those losses.

Unfortunately, tackling the issue gets even more tricky when a merchant’s customer becomes a fraudster. Until a customer is caught red-handed, merchants have little choice but to acquiesce because they don’t want to run the risk of losing a customer who may, in fact, be honest. 

Whether they’re an honest customer or a deceitful one, the customer is in the driver’s seat and they use that to their advantage. Allen said the majority of consumers – 83% – are less willing to buy from a brand in the future if they have to file a fraud-driven dispute, and 50% say they’d never shop with a seller again if it failed to resolve their dispute within 30 days.

Playing with fire

Friendly fraud is a temptress. If a cardholder gets away with an underhanded chargeback, 40% are likely to do it again within 60 days. One mother-daughter duo became so enamored with the scheme that they disputed charges with 14 credit card companies to defraud everyone from Chanel to the Dollar Store to the tune of $850,000. They were last seen in court in handcuffs.

Anyone who thinks friendly fraud is their proverbial ship coming in is playing with fire and their own financial reputation.

If they’re discovered, there’s a lot that can happen, none of it good. Ken Tumin, the founder of bank account comparison site DepositAccounts, says that people who commit friendly fraud get hit from two sides.

The merchant may choose to blacklist the consumer in which the consumer is no longer able to make purchases from the merchant.

The bank may close the account of the consumer if they think the consumer may be committing chargeback abuse. A closure like that could result in a drop in a consumer’s credit score, but even more concerning is that person may have a tough time finding another bank that will welcome them with open arms.

Banks can make that heat hotter, too

Tumin said that bank account closures can also be recorded into ChexSystems, a company that provides information about the use of deposit accounts by consumers. “Someone who has too many negative marks in ChexSystems may find it difficult to open a bank account,” he said.

And the temperature can go up even higher.

Anyone thinking that a false chargeback is less serious than true fraud – such as stolen cards and identity theft – may want to consider another defense. Merchants will claim that they have to protect themselves from significant financial losses caused by chargeback fraud and, as the mom and daughter deceivers found out, the courts are showing no fear in taking their gloves off. 

If you’ve committed friendly or chargeback fraud, it may be time for a good, hard look in the mirror – unless you think you look good in orange. 

According to law firm Bachner & Associates, PC, making a false chargeback in most states is punishable with a fine or imprisonment. In general, the penalties for credit card fraud vary from one to three years in jail and a fine of $1,000 to $10,000. 

American consumers owed nearly $1 trillion in credit card debt in the third quarter, according to data from the Federal Reserve Bank of New York. With the just-past Christmas holiday, that total is likely to go even higher.

One problem with credit cards is that unless you consult your online account two or three times a week, it’s hard to keep track of spending. So, many Gen Z consumers have started using a “new” budgeting trick that turns out not to be new at all.

It’s called “cash stuffing.” Lily W., a 22-year-old who offers personal finance advice on TikTok, says she lived on credit cards while attending nursing school. When she graduated, her balances totaled $17,000.

Lily, who goes by the handle @lilyrnbudgets, recently told Yahoo News that she paid off the entire $17,000 in just three years, thanks to cash stuffing. Instead of buying things with a credit card, Lily has switched to a cash system, which she explains in this video.

Actually, cash stuffing is an old-school system used by many older generations at some point in their lives. Personal finance radio personality Dave Ramsey advocates much the same budgeting system to his listeners, only he calls it the “envelope system.”

The envelope system lets you separate cash into different envelopes for different spending. After labeling each envelope with a category of spending, you go to a bank or ATM and withdraw the budgeted amount and place the cash into each envelope.

Limit some spending categories to cash

When you head to the supermarket, you leave your credit card in your wallet and take the amount of cash you think you’ll need. When you return, you replace any unspent money. At the end of the week, before you put the next week’s cash in the envelope, you take any leftover money and put it in savings.

The system might not be necessary for every spending category and may prove most helpful for the categories where you tend to go overboard.

The secret to this system’s effectiveness is the tight control it exerts over spending, making you think long and hard about every purchase. Because when the money in an envelope is gone, spending in that category has to stop until the following week.

When it comes to using Buy Now, Pay Later (BNPL) for any 11th-hour holiday gift purchases, the Federal Trade Commission (FTC) says consumers should stop now and think about it later.

Not that BNPL isn’t a good option for some, the agency suggests, but it can also lull consumers into buying more than they can truly afford. And if someone isn't careful with their usage of BNPL, there could be a nasty downside.

If Buy Now, Pay Later is new to you, it’s simply a credit option where a payment schedule splits your purchase amount into a specified number of payments. For example, you pay the first one at checkout, and then one payment every two weeks for six weeks.

“Using Buy Now, Pay Later can be convenient, and usually free from interest charges,” the FTC said in an email to ConsumerAffairs. “Still, if you choose Buy Now, Pay Later, there are a few things you may want to watch out for.”

Limit the number of BNPL purchases. Because you can make multiple Buy Now, Pay Later purchases through different services or merchants in a short time, it’s easy to end up with more debt than you intended, or can afford, the FTC says.

An associated problem with items bought using BNPL is if an item gets returned. The agency warns that even though you may be able to return the merchandise – and may eventually get credit – your loan repayment agreement may require you to continue to make payments while you are returning or disputing a purchase until your return or dispute is resolved.

“And, because there are three different companies involved – the Buy Now, Pay Later company, the seller, and your financial institution – it can be challenging and stressful to resolve a problem.

Don’t think of this as a “quick fix.” “Using Buy Now Pay Later may immediately feel like the better option but it can lead to a financial hangover once reality sets in come January,” Trey Loughran, CEO at Purchasing Power, a company that offers credit using a payroll deduction component, told ConsumerAffairs.

Loughran said that in addition to the terms and conditions, they need to pay extra attention to the number of agreements they may be making. 

“Failing to make an agreed-upon payment for a Buy Now Pay Later can have compounding effects – requiring the consumer to pay late fees and potentially impacting someone’s credit score,” he said. “At the end of the day, Buy Now Pay Later solutions are another form of credit and consumers need to be conscious not to overextend themselves.”

Are you aware of the connection between BNPL and your bank account? Most consumers are used to getting credit card statements and having a grace period to pay those, but BNPL works differently. Buy Now, Pay Later products generally require installment payments to be set up for automatic payments, usually debited from your bank account instead. 

You might be hit with multiple late fees. Again, another difference between credit cards and BNPL that many consumers are blind to – the use of interest vs. fees.

“Some Buy Now, Pay Later services charge multiple late fees for a single missed payment, or try more than once to collect automatic payments from your checking account if they don’t go through. This could mean you pay higher late fees than you expected or incur multiple overdraft fees,” the FTC said.

Do you like being hounded by calls from creditors if you’re late in paying? When ConsumerAffairs reviewed the FTC’s database of complaints regarding BNPL, there were numerous worrisome narratives from consumers.

Those included complaints about receiving calls and letters from collection agencies, being “retaliated against” by a BNPL company after a complaint was filed, and claims made that BNPL accounts existed for some consumers even though they had never applied for one.

Being hassled is no fun, so add that to your “do I really need to put this purchase on BNPL” list.

Please, please, please buy more. Speaking of being hounded, the FTC says that many Buy Now, Pay Later services and apps use your data and shopping history to encourage you to buy more and spend more.

"Buy now, pay later"? How about "Buy now, and there could be hell to pay later"?

A stern warning is being sent to consumers that there are all sorts of pitfalls to deal with when it comes to buy now, pay later (BNPL) – maybe more than the typical consumer is used to seeing from other finance methods like credit cards or personal loans.

“Realize that BNPL plans don’t offer the federal protections that come with purchases you make by credit card. If an item purchased with BNPL is faulty, lost or stolen, that does not mean you will have protection against having to repay the BNPL loan,” said Hannah Rhodes and Teresa Murray, U.S. PIRG’s Consumer Watchdog team, in their pitfall protection bulletin.

“The federal government offers that safeguard for credit card users.”

Hidden fees, interest, and debt collection

Rhodes and Murray said the complaints are mounting against BNPL companies – and it’s not just one thing, either. Hidden fees, interest, and debt collection, and customer service are all factors that are angering BNPL users.

Surveys also show that a successful BNPL demographic target is young people, who may not understand the business model. In addition, increasing the size of the “basket” leads to consumers buying more stuff that they don’t need and can’t afford.

Know what you’re signing up for

Rhodes and Murray say that with higher inflation and tighter budgets for many this holiday season, it's likely that more consumers will consider Buy Now, Pay Later offers, many without fully understanding them. 

BNPL works like this:

• You make a purchase and agree to pay off the bill in four installments over six weeks.

• You make the first payment at checkout using a debit or credit card.

• The remaining three payments will come every two weeks, whether you have the money in your checking account or available on your credit card or not. If it’s “or not,” be prepared for possible overdraft or over limit fees of $30 or more.

Best case and worst case scenarios

The best case scenario is paying it off on time with no fees and no need to return the item. Worst case scenario? Hmm... Actually, we should make that plural because there’s more than one thing that could go wrong.

“Shoppers run into problems when there are terms and conditions they didn't read or understand, or when they make several purchases using BNPL and haven't budgeted to juggle all of the payments that are lined up like planes on an airport runway,” the watchdogs said.

“Then there are the consumer protections you're forgoing by not paying with a credit card to begin with. And you need to hope the item isn't defective or that the recipient of the gift doesn't want to return or exchange it. You may not be able to get a refund or an exchange, no matter the reason.”

The downsides to BNPL can quickly snowball and haunt a consumer for a long time, Trey Loughran, CEO at Purchasing Power, a company that offers credit using a payroll deduction component, told ConsumerAffairs.

"Failing to make an agreed-upon payment for a Buy Now Pay Later can have compounding effects – requiring the consumer to pay late fees and potentially impacting someone’s credit score," he said.

"At the end of the day, Buy Now Pay Later solutions are another form of credit and consumers need to be conscious not to overextend themselves."

When Federal Reserve policymakers raised the federal funds rate another 0.75% this week, the focus was on Wall Street, where the move was panned by investors. Stock prices fell sharply once again.

There was less focus on consumers – particularly on those carrying large credit card balances. But they are being affected by the series of rate hikes as much as anyone.

The federal funds rate directly affects what banks pay for money – a cost that is passed on to borrowers. Each time the Fed hikes, banks charge more in the form of higher interest.

That is especially true for the interest rate on credit cards, which was already high before the Fed began to increase interest rates in an effort to rein in inflation. The average variable credit card rate is now 18.77%, the highest since February 1993, according to Bankrate.com. At the beginning of 2022, the rate averaged 16.30%.

The difference in those two rates amounts to about $20 a month in added interest on a $10,000 balance. That might not sound like a lot but for consumers making only the minimum payment each month, it can be painful.

A study by the Brookings Institute found that about three in 10 credit card borrowers make monthly payments at or near the required minimum. Paying only the minimum each month greatly lengthens the payoff time and results in large interest charges. Adding charges to the balance each month only makes the payoff longer and more expensive.

“It is the debt that consumers say they are most worried about,” Gary Koenig, vice president of financial security at AARP, told Yahoo Money. “With interest rates on credit cards rising, I would expect to see this number rising too in the months ahead. It is a very difficult situation for many consumers.”

Alternatives

Fortunately, consumers carrying high-interest credit card debt have a couple of good options. The first is to apply for a balance transfer card offering a year or more of 0% interest. 

By making large monthly payments cardholders can put a dent in their balances because the entire payment goes to paying off the principal. ConsumerAffairs has identified the best balance transfer credit cards here.

A second option is to apply for a personal loan, using the proceeds to pay off a high-interest credit card. According to a study by the St. Louis Federal Reserve bank, there has never been a wider gap between rates on personal loans and credit cards.

According to the latest data, which was for August, the average interest rate on 24-month personal loans was 10.16%, significantly below the average credit card rate. Like other types of loans, rates will vary based on your credit score and how much you need to borrow. 

The ConsumerAffairs Research Team vetted 24 loan companies with annual percentage rates (APRs) less than 36%. Check out our findings here.

One of the best early warnings of identity theft is finding something unexpected on your credit report, such as a loan for a car that isn’t yours. 

During the pandemic, the three major credit reporting agencies began allowing consumers free access to their credit reports on a weekly basis and have jointly announced that free access will continue through 2023.

"The rising cost of living in the wake of COVID-19 has created economic consequences felt by many Americans," the CEOs of Equifax, Experian, and TransUnion said in a joint statement. "Our industry is committed to helping people better position themselves for strong financial futures. Credit reports play an important role in financial health, and providing weekly reports for consumers at no charge is another way that we can support financial education and stability for people across the U.S. at this critical time."

At a time when identity theft crimes are increasing, regularly reviewing credit reports can alert consumers to unauthorized credit activity in their name. Names, birthdates, and Social Security numbers are sold regularly on the dark web. 

A criminal who purchases this information can take out loans and apply for credit cards using a stolen identity. The victim might not become aware that this has happened until months later.

How to dispute erroneous information

Reviewing credit reports can also alert consumers to inaccurate entries that can drag down a credit score. Consumers may appeal to the credit agencies to have the erroneous information removed.

The Consumer Financial Protection Bureau (CFPB) says consumers can submit a dispute to the credit reporting company by phone, by mail, or online. 

“Explain the error and what you want changed,” CFPB advises. “Clearly identify each mistake separately, state the facts, explain why you are disputing the information, and request that it be removed or corrected.”

• Online access to Equifax’s dispute form can be found here.

• Online access to Experian’s dispute form can be found here.

• Online access to TransUnion’s dispute form can be found here.

Credit reports document consumers’ credit history and should be a factual record of credit activity and payment history. They are important because they are used by lenders, creditors, service providers and other businesses to extend financial opportunities and other offers to people. 

To access free weekly credit reports, go to www.annualcreditreport.com.

Consumers who think that Buy Now Pay Later (BNPL) loans are a perfect way to buy something on time should perhaps think a little more. After seeing BNPL grow tenfold over the past three years, the Consumer Financial Protection Bureau (CFPB) went on a mission to find out if those type loans have anything that could harm the consumer in any way.

On top of issues like the risk of fraud and the impact on credit scores, the agency concluded in its new report that while the marketing of Buy Now, Pay Later loans can make them appear to be a zero-risk credit option, there are several other things that pose a risk for consumer harm.

BNPL loans may seem similar to credit cards, but…

CFPB Director Rohit Chopra called BNPL a “close substitute for credit cards,” and that’s exactly how some consumers view the loan since it, like a credit card, allows a consumer to split a retail transaction into smaller, interest-free installments and repay over time.

In a typical BNPL loan, a consumer might purchase a $500 item and pay it back in four equal installments, with the first installment paid as a down payment due at checkout, and the next three due in two-week intervals over six weeks.

The CFPB seems to be comfortable with that, but there are things that borrowers might not know going on inside the minutiae of a BNPL loan that concerns the agency.

First out of the CFPB’s chute of concerns are the inconsistent consumer protections BNPL loans offer. The agency found that while it’s standard for credit cards to offer protection, not all BNPL loans do. These include a lack of standardized cost-of-credit disclosures, minimal dispute resolution rights, a forced opt-in to autopay, and companies that assess multiple late fees on the same missed payment.

The second concern is data harvesting and monetization. With an eye toward the digital age and especially younger consumers, many Buy Now, Pay Later lenders have shifted their business models toward everything being done via an app, which the CFPB contends allows companies like Affirm, Afterpay, Klarna, PayPal, and Zip to build a valuable digital profile of each user’s shopping preferences and behavior. 

'Harvesting and monetizing consumer data'

“The practice of harvesting and monetizing consumer data across the payments and lending ecosystems may threaten consumers’ privacy, security, and autonomy,” the agency said. “It also may lead to a consolidation of market power in the hands of a few large tech platforms that own the largest volume of consumer data, and reduce long-term innovation, choice, and price competition.”

In addition to data accumulation, the CFPB said it’s concerned about debt accumulation, too – especially when it puts a consumer at risk of overextending a reasonable amount of credit. 

When the agency unpacked Buy Now, Pay Later procedures, it found that the process is “engineered” to encourage consumers to purchase more and borrow more. 

“As a result, borrowers can easily end up taking out several loans within a short time frame at multiple lenders or Buy Now, Pay Later debts may have effects on other debts. Because most Buy Now, Pay Later lenders do not currently furnish data to the major credit reporting companies, both Buy Now, Pay Later and other lenders are unaware of the borrower’s current liabilities when making a decision to originate new loans,” the agency said.

Is a reset necessary?

Even though Buy Now, Pay Later providers are subject to some federal and state oversight, the CFPB thinks there’s more that could be done to protect the consumer. The CFPB says it has enforcement authority over providers of credit, and it has authority to supervise any non-depository covered persons, such as a Buy Now, Pay Later provider, in certain circumstances. 

Protections vary from state to state, too. For example, some states do not require licensing or registration for Buy Now, Pay Later products with no interest or finance charges.

To try and keep BNPL from going off the rails any further, the CFPB said it will continue to address individual consumer harms as it finds them, then offer advice or issue rules to ensure that Buy Now, Pay Later lenders adhere to many of the baseline protections that Congress has in place for credit cards.

As part of this review, the CFPB said it is committed to guaranteeing that Buy Now, Pay Later lenders – just like their credit card company next of kin – are subjected to appropriate supervisory examinations.

Halloween’s still far away, but some Credit Karma users have already got a treat they weren’t exactly asking for. The Federal Trade Commission (FTC) says that the free credit and financial management platform tricked consumers with allegedly false “pre-approved” credit offers, only to wind up denying a third of those.

Credit Karma wasn’t just throwing out the occasional come-on, either. The FTC said the company deployed “dark patterns,” including claims that a consumer’s odds were 90% that they would be approved if they applied for the offers they were presented. Unfortunately, in some of those instances, Credit Karma dangled that carrot in front of consumers who had no chance of being approved.

The agency’s order requires Credit Karma to pay $3 million that will be sent to consumers who wasted time applying for these credit cards and to refrain from making deceptive claims.

A war of words

“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”

As you might expect, Credit Karma says the FTC has it all wrong.

“We fundamentally disagree with the FTC’s allegations about marketing terms that aren’t even in use anymore, but ultimately we reached this agreement to avoid disruption to our mission and maintain our focus on helping our members find the financial products that are right for them,” said Susannah Wright, chief legal officer at Credit Karma. “Our industry-leading technology provides the transparency our members need to shop for financial products with more confidence.”

The company went on to say that the FTC’s allegations are focused on Credit Karma’s historical use of the term “pre-approved” for a “small subset of the credit card and personal loan offers available on Credit Karma’s platform prior to April 2021.”

Approval odds?

In Credit Karma’s statement, the company said that the FTC’s allegations “do not challenge the approval odds language” it’s had in place since April 2021, including through the present.

But, if you ask ConsumerAffairs reviewers about their “approval odds” with Credit Karma, they have a different story – one that happened since April 2021, too.

“When you apply for the cards Credit Karma recommends for you under the heading of ‘Excellent Approval Odds,’ the benefits are explained such as 0% interest for 12 months, or a $200.00 bonus for your application, are modified and withdrawn once the application is submitted,” claimed Emily, of Macon, Ga., in her review of the company.

Emily’s not alone, either.

“Credit Karma and One Main listed me as having ‘outstanding ‘ approval odds of a $5500 loan at 11% interest. I was approved for the loan but when I spoke to the lender, they said 26% interest, not 11%,” wrote Mia of Franklin Tenn. 

“I would have never (have) dinged my credit report if I knew this was a possibility. I am livid. Do not ding credit based on the loan/credit card offers Credit Karma provides if you're [sic] biggest concern is the accuracy of the interest rates.”

With inflation shifting into overdrive during the second quarter of the year, consumers turned to credit cards and personal loans to help them get by. A new report suggests that lenders were happy to help.

TransUnion’s Q2 2022 Quarterly Credit Industry Insights Report shows that the number of consumers with credit cards and personal loans reached record highs, in part because lenders extended credit to more consumers in the subprime category.

Some personal finance experts might see that as a cause for concern in uncertain economic times, but Michele Raneri, vice president of U.S. research and consulting at TransUnion, says it’s not necessarily a red flag.

“Consumers are facing several challenges that are impacting their finances on a day-to-day basis, namely high inflation and rising interest rates,” Raneri said. “These challenges, though, are happening against a backdrop where employment opportunities are still plentiful and jobless levels remain low.”

Getting credit for the first time

Raneri says the fact that lenders are extending credit to more subprime borrowers – some of whom are getting credit for the first time – is actually a positive development. So far, she says the data doesn’t reveal any sign of trouble.

“While delinquencies generally rise after a period when more non-prime borrowers secure loans, the rates of delinquency remain mostly at or below pre-pandemic levels, particularly for cards and personal loans,” she noted. 

In the second quarter of the year, 161.6 million consumers had access to a credit card, up from 153.3 million a year earlier. Twenty-one million consumers had a personal loan during that period, an increase from 18.7 million in the second quarter of 2021.

The report shows that many of the new borrowers were among the youngest consumers. Loans to Gen Z consumers increased by 31.6% between the first quarter of 2021 and the first quarter of 2022. The subprime segment’s total balances grew by 51.7% year-over-year, which is the highest growth rate ever achieved. 

How to find the right loan

Consumers who are accessing credit for the first time should research both credit cards and personal loans before deciding which one meets their needs. Both are unsecured loans, but the interest rates can vary widely. The average interest rate on credit cards is currently around 20%, but it's much higher for consumers in the subprime category and those who are new to credit.

The interest rate on personal loans tends to be lower. The rate on personal loans could be as low as 6%, but it will be higher for consumers who are tapping into credit for the first time. Still, the rate on personal loans is usually lower than on credit cards.

ConsumerAffairs’ guide to “The Best Credit Cards” breaks down cards for different uses and different credit standings. There are also thousands of verified reviews.

Our guide to “The Best Personal Loans” provides hundreds of verified reviews about personal loan lenders and explains how they work. For example, personal loans are structured more like traditional loans than revolving credit, with set repayment terms.

VantageScore, a provider of credit scores to lenders, has reportedly decided to drop medical debt from its calculations – a move that could raise many consumers’ credit scores.

The Wall Street Journal reports that the company’s move goes farther than those recently announced by Equifax, Experian, and Transunion – the three credit reporting agencies that jointly own VantageScore.

In March, the three credit reporting agencies announced that medical debt turned over to collections but later repaid will be removed from a consumer's credit report. Under current practices, it remains as part of a consumer's credit history.

The Journal reports that VantageScore is taking it a step further. The company will remove all medical collections from the data used to determine a credit score. Company executives told the Journal that it has found medical debts are not a good indicator of how consumers handle other debts.

Medical debt often can’t be avoided

According to the Kaiser Family Foundation, two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an emergency or sudden medical need. After two years of the COVID-19 pandemic and a detailed review of the prevalence of medical collection debt on credit reports, all of the credit reporting agencies are now changing the way they view medical debt.

“Especially given the impact that Covid-19 had on consumers, having medical debt isn’t necessarily reflective of someone’s ability to pay back a loan,” VantageScore CEO Silvio Tavares told the news outlet.

VantageScore’s action expands on moves by its parent companies. In July, Equifax, Experian, and TransUnion began deleting information about medical bills sent to collections if the bills had later been paid. The three firms also put off including new unpaid medical debts to credit reports for a full year after being sent to collections. Previously, there was a six-month waiting period. 

Starting next year, the three credit reporting agencies said they would remove unpaid medical debt if it is less than $500. While it’s a step in the right direction, federal regulators say it doesn’t go far enough.

The Consumer Financial Protection Bureau (CFPB) said the steps taken by the three credit reporting agencies probably won’t help that many people. In February, before the credit reporting changes took effect, the CFPB estimated that about $88 billion in medical bills were listed on 43 million credit reports.  

As inflation rose in the second quarter, so did consumer debt. The New York Federal Reserve reports that total household debt rose by $312 billion, or 2%, to reach $16.15 trillion.

That number includes mortgages, which increased by $207 billion and stood at $11.39 trillion as of June 30. More concerning was the growth in credit card debt.

The Fed’s report shows that balances recorded their biggest year-over-year percentage increase in more than twenty years. With inflation increasing each month, consumers may have been spending more but not getting as much for their money. For example, the average price of gasoline hit a record high of $5.01 a gallon during the second quarter.

So far, consumers appear to be able to handle the increase in debt. The Fed report shows that transitions into delinquency ticked up but remained very low when compared to historical levels.

Renters facing hardships

While some consumers aren't feeling the impact of rising debt, a report from Bank of America suggests consumers who rent their homes are facing rising economic pressure -- not just from inflation but also from a sharp increase in the average rent. Bank of America's internal data suggests that median rent payments increased by 7.4% year-over-year in July. 

According to internal Bank of America data, all income groups are feeling the impact of higher rents. The biggest increase in rent was among households with income between $51,000-150,000.

Younger consumers appear to be getting squeezed the most by higher rent inflation. The median payment was up 16% year-over-year in July for Gen Z. That compares to just 3% for baby boomers.

Reasons for optimism

The study’s authors say there are some reasons to remain positive about consumers’ ability to deal with inflation. They point out that gas prices declined in July and are still lower this month. At the same time, households are still socking cash away in savings accounts, with the savings rate still high and borrowing at normal levels.

Like the report from the New York Fed, Bank of America noted that credit card spending per household increased by 5.3% year-over-year but was down from 5.7% in June.  

“With U.S. Consumer Price Index (CPI) inflation at 9.1% in June and Personal Consumer Expenditure (PCE) inflation at 6.8%, it appears ‘real (inflation-adjusted) spending’ continues to be under pressure,” the authors wrote.

Credit reporting company Equifax is facing serious blowback after it admitted that a “coding error” sent lenders erroneous credit scores for millions of consumers.

Out of the millions impacted by the mistake, some 300,000 consumers’ credit scores were off by 25 points from where they should have been. Equifax noted that those consumers were in the minority and only represent about 12% of all the credit scores released from March 17 to April 6.

The company said it’s been working with customers affected by the error, but officials did not go into specific details about how those issues would be fixed to rebalance the credit scores of those consumers.

“Obviously any data quality issue is a big issue for us. We take it very seriously, and it's one we are going to make sure we are going to fix," the agency stated.

Altering credit decisions

Twenty-five points might not seem like that much, but it's enough to push a score from "good" to "fair" -- and a "fair" credit score could cost consumers hundreds of dollars when applying for things like home mortgages.  

“We know that businesses and consumers depend on our data, and Equifax takes this technology coding issue very seriously. For those consumers that did experience a score shift, initial analysis indicates that only a small number of them may have received a different credit decision,” Equifax stated.

Equifax said it’s on track to move an additional 30% of Equifax environments to the new Equifax Cloud by the end of 2022. Officials say that should provide a better infrastructure with “better detective and preventive controls, which will be positive for both customers and consumers.”

You may notice that you’re receiving more credit card offers in the mail. In spite of inflation and fears of a slowing economy, credit card companies are ramping up efforts to sign up new customers.

The Wall Street Journal reports that American Express, Capital One, and Discover have all committed new money to their marketing budgets, suggesting that executives at these lenders believe consumers will continue to spend.

In fact, consumers are still spending despite recession fears. JPMorgan Chase reports that consumers spent more than $271 billion using plastic in the second quarter. That’s 33% more than they spent in the fourth quarter of 2019, just before the COVID-19 pandemic.

Many consumers are charging more but not paying off the balance. VantageScore reports that Gen Z consumers increased credit card balances by 30% in the second quarter.

Check your credit

With banks so willing to lend, what should consumers look for when considering a new credit card? According to ConsumerAffairs' research, your current financial situation and credit history should determine the best credit card for you.

First, check your credit score. The cards with the best terms are usually reserved for consumers with good to excellent credit.

Next, think about how you will use the card. If you have a high-interest card with a balance, getting a balance transfer card with a long introductory 0% interest rate may be most advantageous.

Many credit cards offer generous rewards, but pending legislation could put those perks in jeopardy. A Senate bill would give businesses more credit processing options, which would likely reduce the fees credit card companies collect with each purchase.

Should the bill become law, Scott Lieberman, founder of TouchdownMoney.com, says there could be some unpleasant repercussions for consumers with generous rewards cards.

“Capping credit card fees may make issuers skittish about their lucrative rewards programs,” Lieberman told ConsumerAffairs. “They’ll need to reevaluate Customer Lifetime Value (CLV) for folks with rewards cards as the card fees paid by others might no longer be enough to offset the bonus programs.”

The interest rate may carry more importance

Every time the Federal Reserve hikes the federal funds rate, it puts upward pressure on credit card interest rates. If you think you’ll carry a balance, applying for a card with a low interest rate, or even a 0% introductory rate, might save more money than a cashback rewards card. A low credit score usually means a higher interest rate, but there are credit cards specifically marketed towards consumers with less-than-perfect credit.

Consumers who are rebuilding their credit might consider a secured credit card. The account is secured by an upfront deposit, which sets the credit limit. Just be sure that the card issuer reports payments to all three credit agencies. Not all secure lenders do.

Finally, when researching credit card offers, take advantage of ConsumerAffairs’ guide to the Best Credit Cards to help reach a decision.

With inflation putting the squeeze on consumers, many are finding that their credit card debt is getting unmanageable. It’s especially difficult since interest rates tend to go up every time the Federal Reserve hikes the federal funds rate.

Applying for a balance transfer credit card with a year or more of 0% interest can help pay down credit card debt faster. As an alternative, Rocket Mortgage has introduced a new home equity loan that it says could save homeowners thousands of dollars if they used the equity in their homes to pay off their credit card balances.

"Our goal is to consistently create financial products that help our clients achieve their goals," said Bob Walters, CEO of Rocket Mortgage. "In the current market, short-term interest rates have risen sharply - making it much harder to pay off credit card debt. With our new home equity loan, clients can improve their lives by having a payment they can more comfortably afford."

Credit card interest is now averaging around 20%. The interest on a home equity loan is around 5%. Credit card debt is unsecured, so lenders charge more to cover their risk. A home equity loan is secured by the equity in the house. 

Americans have lots of home equity

According to the Federal Reserve, Americans currently have nearly $28 trillion in home equity. America’s total household debt stood at $15.84 trillion as of the first quarter of this year; that number is $1.7 trillion higher than it was at the end of 2019, before the COVID-19 pandemic. The Fed report also shows that credit card balances have risen since last year.

Rocket Mortgage says homeowners can access $45,000 to $350,000 of their home's equity in 10- or 20-year term, fixed-rate loans. The stipulation is that borrowers must maintain at least 10% equity in their homes. 

Because home equity loans are secured by the equity in a home, borrowers need to carefully consider all of the risks. The consequences of default are much higher than defaulting on a credit card bill.

To make it easier to understand home equity loans and pick the right lender, ConsumerAffairs has assembled an extensive guide here. To put it together, we reviewed the top lenders and compiled details about their loan packages. We also have thousands of verified consumer reviews about the top companies to help inform your research and choices.

The Federal Reserve’s meeting this week is almost certain to end with another large hike in a key interest rate. Meanwhile, rates on personal loans and mortgages – loans used by consumers – are falling.

Consumers with good credit scores received lower rates in the last seven days on both three- and five-year personal loans, according to financial website Credible.com. For example, consumers with a credit score of 720 or higher got a rate of 10.71% on a three-year personal loan, down from 11.01% a week earlier. Those applying for a five-year loan got an average rate of 13.59%, down from 13.81% the previous week.

Personal loans have become popular alternatives to credit cards because of their lower interest costs. The typical credit card carries an interest rate of around 20%, even for people with good credit scores.

Banks' lending costs rise every time the Fed raises its federal funds rate. Those costs are often passed along to borrowers – including those who carry a credit card balance. 

Mortgage rates also fell

Mortgage rates are also trending lower. According to Forbes, the average 30-year fixed-rate mortgage rate started this week at 5.73%, down from 5.88% a week earlier. Mortgage rates are not influenced directly by the Fed’s action but by the yield on the 10-year U.S. Treasury bond. That rate, which spiked in recent months and nearly doubled mortgage rates, has declined in the last week.

Consumers who are seeking either a personal loan or a mortgage should shop carefully among lenders for the best terms. Fortunately, researchers at ConsumerAffairs have done a lot of the leg work to help you make your decision.

The right personal loan lender may vary based on your credit score and how much you need to borrow. ConsumerAffairs vetted 24 loan companies with annual percentage rates (APRs) of less than 36% to help you make a choice. Check out our guide, with thousands of verified consumer reviews, here.

We have also assembled a comprehensive guide for choosing a mortgage lender. The ConsumerAffairs Research Team vetted 66 mortgage companies that were reviewed by more than 5,478 people in the last year. To find the best lender for you, read our guide to compare loan types, eligibility requirements, rates, and terms here.

Gassing up the car for a Fourth of July road trip? Make sure you have plenty of money in your bank account or an ample credit limit.

It’s not just the cost of the fuel you have to worry about. When you use a credit or debit card at the gas pump, the gas station takes temporary possession of enough of your money or credit to cover even more than your purchase and holds it until the purchase settles.

With the price of gasoline and diesel fuel at record highs, The Wall Street Journal reports those “holds” can amount to $175. While most of the time the money is returned in a couple of hours, there are cases where it can take longer.

Visa and Mastercard began allowing the larger holds earlier this year when gas prices surged. At $5 a gallon, filling up a truck or SUV can cost over $100.

When gas prices were $3 a gallon or less, the holds were much smaller. Now that the price is over $5 a gallon in several states, the larger hold on a debit card purchase could mean trouble if the consumer has $100 or less in their bank account.

“When you set a hold that is a high number, it increases the likelihood that a consumer will overdraft because of that hold,” Jeff Lenard, vice president of strategic industry initiatives at the Association for Convenience & Fuel Retailing, a trade organization, told the Journal. “However, if you set a number that’s too low, you also risk not getting paid for that transaction.” 

What to do

For consumers buying gas with a credit card — especially one with a low credit limit — there is a similar risk. A $50 gas purchase using a card with only $125 in credit limit remaining might seem safe, but it isn’t. The $175 hold, even for a couple of hours, will result in an overdraft charge.

Before you head out on a holiday trip that will require a refueling stop, it’s a good idea to check your bank balance if you’re paying with a debit card. By logging into your credit card account, you can make sure you have enough credit to cover the hold.

If you think you’re dangerously close to the edge, carrying plenty of cash to pay for fuel could offer some peace of mind.

A new study suggests that consolidating credit card debt can be a shrewd move that can pay off in several ways. In addition to the belief that paying off bills in time can improve credit scores, LendingTree’s latest analysis of the yays and nays of credit card consolidation found that those who consolidated at least $5,000 in credit card debt found their credit scores rose an average of 38 points in as little as a month. 

In fact, the study concludes that the more credit card debt someone pays down with a personal loan, the higher their credit score jumps. Let’s say you pay down $10,000 or more in credit card debt. In that case, credit scores go up an average of 49 points. The inverse is true, as well. The study found that taking out a loan to pay down anywhere from $1,000 to $5,000 in credit card debt, borrowers gained an additional 17 points, on average, in a single billing cycle.

While taking out a personal loan to pay down credit card debt can seem a bit like robbing Peter to pay Paul, LendingTree chief credit analyst Matt Schulz said it’s definitely worth the effort.

“A higher credit score is a big, big deal because there are few things in life that are more expensive than crummy credit,” Schulz said. “It can cost you thousands of dollars in the form of higher interest rates on loans, higher insurance premiums and more. It can even keep you from getting that new apartment you’re hoping to rent.”

But Schulz cautioned that even though credit card debt consolidation will likely cause someone’s credit score to go up, there’s more upside to eliminating debt altogether.

“Eliminating that debt can be nothing short of life-changing,” Schulz said. “It can free you up to build an emergency fund, save more for retirement, work toward buying a home or paying for your kids’ college. It’s a big, big deal.”

Where to get the consolidation loans and what to consider

Schulz said that for consumers who have the highest incomes and the best credit scores, getting a personal loan from a bank is the best way to go. “These are probably folks with significant experience with lenders and at least a few other items on that credit report. Those folks have a lot of other data points on their credit report that are influencing their credit score, so one change, even a big one like paying down all that debt, may not be as impactful for them as it would be for someone newer to credit,” he said.

ConsumerAffairs investment advisor Barbara Friedberg agreed. She said that the most clear-cut way to obtain a debt consolidation loan is through a bank or other debt consolidation lending institution. 

Friedberg said that if consumers can’t – or don’t want to – go the bank route, there are three other ways to get out of credit card debt.

0% balance transfer card: Balance transfer credit cards allow consumers to consolidate their debt by transferring the debt of multiple credit cards to one balance transfer card. Friedberg notes that some of those cards include 0% interest offers along with sign-up bonuses and cash-back rewards.

Home equity loan: “Homeowners can take out an amount of money based on the equity they have in the home, determined by the amount of money paid into the mortgage over the value of the home,” Friedberg said, adding that a home equity loan can be taken out to make home improvements, pay large bills or settle other debts.

401(k) loan: One unique approach Friedberg offered is for people who have a 401(k) set up through their employer. For those folks, they can borrow against that account. “Because a 401(k) is a personal retirement savings account, this is essentially borrowing from yourself. Because you’re withdrawing money from an account, not borrowing new money, a 401(k) loan will have no impact on your credit score. 401(k) loans typically require full repayment within five years,” she said

That 401(k) loan idea comes with a warning flag, though. Friedberg said that, most likely, there will be a small interest tacked onto a person’s repayment plan, and they also risk hurting their overall retirement savings plan. For those whose jobs may be shaky, Friedberg raised her warning a little higher. “If you lose your job, you’ll be required to pay back the 401(k) loan by the time your federal income taxes are due for the year,” she said.

The Bank of America Institute reports that Bank of America customers with debit and credit cards increased their spending by 9% in May. On the surface, that looks like good news.

But a closer look suggests that consumers aren’t necessarily spending more on discretionary items. In many cases, they’re simply spending more to buy the same amount of gasoline and groceries.

For example, spending at the gas pump as a share of total card spending surged to 7.8% for the week ending May 28, up from 6.4% in February. For households earning less than $50,000 a year, the average share of gas spending rose to 9.5%.

"Our card data shows continued growth in consumer spending, but inflation is challenging households' purchasing power," said David Tinsley, senior economist for the Bank of America Institute. "That said, spending on services like travel and entertainment remained strong and households continued to have higher savings than they did before the pandemic. Overall, we still remain cautiously optimistic for the U.S. consumer."

Economic ‘perfect storm’

Sajan Devshi teaches business and economics and operates Learndojo.org. He says the economy faces a “perfect storm” of consequences beyond the control of policymakers.

“Inflation has skyrocketed due to the huge amounts of money injected into the world economies due to COVID-19 across the globe,” Devshi told ConsumerAffairs. “When you have an over-supply of currency pumped in with low levels of productivity, which is effectively what happened with COVID as many businesses were unable to operate, inflation increases exponentially and we are seeing this globally now.”

While inflation was rising in late 2021, the Russian invasion of Ukraine and resulting sanctions on Russian oil this year sent oil prices spiraling out of control. The resulting jump in gasoline prices has been a major driver of inflation.

“Gas and energy prices play a huge role in the structure of the modern economy,” Yoni Mazor, chief growth officer at GETIDA, told us. “The prices of driving cars, booking flights, shipping products, and much more get greatly affected by the rise of gas prices. This is definitely contributing to the overall level of inflation and hits the pockets of consumers and their daily spending in many ways.”

Inflation, meanwhile, shows no sign of slowing down. On Friday, the Labor Department reported that consumer prices increased 1% from April to May and are 8.6% higher over the last 12 months.

There’s no question we are in turbulent economic times. Inflation is at a 40-year high, and shortages of everything from cars to baby formula are keeping consumers on edge. 

A new survey suggests that consumers expect help from their credit card companies and digital payment apps but don’t feel they are getting it. According to a series of recent studies of bank and credit card mobile apps and online users by J.D. Power, overall satisfaction with most digital channels has declined as usage has increased.

The studies tracked overall customer satisfaction with banking and credit card providers’ digital offerings. Jennifer White, senior consultant for banking and payment intelligence at J.D. Power, said they reveal a lot of volatility in customer satisfaction scores.

“Based on their experiences with other consumer apps and websites that anticipate their needs and offer a highly personalized customer experience, bank and credit card customers are expecting more from their digital solutions,” White said. “The tough economic climate has amped up the urgency of those expectations.”

Decline in financial health

In less than a year, the percentage of consumers who could be defined as “financially healthy” has dropped 10 percentage points, to 43% from 53%. The percentage of consumers identified as “financially vulnerable” has increased to 32% from 25%. Bank customer satisfaction scores are 113 points lower, on average, among financially vulnerable customers than among financially healthy customers, the survey found.

Customers appear to be more satisfied with banks’ websites than with their apps. Website satisfaction scores improved slightly, but satisfaction with apps plunged by 17%.

Among national banks, Capital One ranked the highest in banking mobile app satisfaction, followed by Chase and Wells Fargo. Discover ranked the highest in credit card mobile app satisfaction, followed by American Express.

ConsumerAffairs reviewers weigh in

Among consumers posting reviews at ConsumerAffairs, here’s how reviewers generally rate those five companies using our 5-star rating system:

• Capital One - 3.8 stars
• American Express - 3.3 stars
• Wells Fargo - 3.2 stars
• Chase - 3.0 stars
• Discover - 3.0 stars

Nathaniel, of Sayre, Penn., recently posted a ConsumerAffairs review of Capital One that reflects what the JD Power surveys found.

“I would start by saying Capital one is the best card company out there for the middle-class struggling trying to repair their credit,” Nathaniel told us. “I found them to be the best for me. No annual fee. A little high on the interest side but approved is what we all want. A fresh start. A chance for the hardworking American. I have always been approved when others say sorry.”

The J.D. Power surveys identified one key area where banks can improve their scores. The authors recommend that banks need to find ways to increase personalization for app users.

Among retail bank customers who visit their bank’s branch, 73% say they have a personal relationship with that bank. Among those who primarily use the bank’s digital channels, that percentage falls to 53%.

Key Bank reports that another 4,343 of its customers have moved from a secured credit card to a traditional account after they were able to significantly raise their credit scores.

Since 2018, the bank has operated a program in which consumers with poor or no credit can build up their credit standing through the use of a secured credit card. This is important because many of these consumers would otherwise be unable to qualify for a credit card.

A secured card works the same way that a regular credit card does, but there's one big difference. With a traditional “unsecured” card, the lender has no collateral in case of default. 

To open a secured credit card account, a consumer deposits a sum of money – often around $500 – into a bank account to serve as collateral in the event of default. They make purchases with the card and, if they pay their bills on time, earn points with the credit reporting agencies. In the process, they also tend to develop good financial habits.

Among the latest group of “graduates,” Key Bank says 69% had no FICO credit score at the time that they opened an account. Another 31% were designated as having low FICO scores at origination. At the end of the program, the bank says the average improvement in credit score for those in the low category was 81 points.

"Our graduates are in a greater financial position coming out of this program," said Mitch Kime, KeyBank executive vice president of Consumer Client Growth. "With their newly improved standing, they are better positioned in applying for loans, more banking opportunities, and in some cases, better insurance rates. All of it adds up substantially towards creating a financially healthy life for themselves."

Shop carefully

Many other banks offer secured credit cards, but consumers should shop carefully because some may carry much higher fees than others. Danni White, a member of the ConsumerAffairs credit card research team, says a secured credit card can be a useful tool for a significant portion of the population.

“If your credit score is too low for you to get approved for a personal credit card, then a secured credit card might be your path to rebuilding your credit history,” she wrote.

Secured credit cards are available with no annual fee. However, these cards tend to have interest rates that are greater than 20%, even though the account is secured and there is no risk to the lender.

That should encourage users to pay the account in full each month. That helps save money on interest charges while helping to develop good financial habits.

The Federal Reserve has begun to raise its federal funds rate, one of the reasons Wall Street is in the midst of a tailspin. But the change in policy is also affecting consumers who have run up large credit card balances.

Credit card interest rates move in sync with that key interest rate, and those already-high credit card rates have begun to move even higher. The experts at Bankrate predict that the average credit card interest rate will hit a record of 19% later this year.

Rising rates mean the minimum payment that cardholders must pay each month will likely also go up. Credit card companies charge between 1% and 5% of the balance as a minimum payment.

Only paying the minimum payment each month means most of the payment goes to interest, extending the time it will take to pay the balance down to zero. When the interest rate goes up, even consumers paying more than the minimum will face a longer payoff period.

According to personal finance experts, credit card debt is one of the biggest obstacles to building wealth. It can make it more difficult to purchase a home or pay for an emergency expense.

Lock up the cards

Jay Zigmont, a certified financial planner and founder of financial advisory company Live, Learn, Plan, says literally locking your credit cards away can help get you on the right track.

“When you don't have debt as an option, you are required to live within your means,” Zigmont told ConsumerAffairs.

To live within your means, Zigmont says you need a budget. It’s important that the budget is tailored to the individual and prioritizes “needs” over “wants."

“You need a roof over your head and basic transportation,” he said. “You may want a nicer house or a new car. Watch out for things that you 'feel you deserve.' Most often when people say they 'deserve' more, it is because of outside influences including friends, family, and social media.”

Paying off new credit card charges in full each month is also necessary to avoid expensive debt. Consumers who are already struggling with a credit card balance can pay it down faster by transferring the balance to a credit card that charges no interest for a year or more.

Check out ConsumerAffairs' guide to the best balance transfer cards for more information.

Mortgage rates are going up -- and thanks to Federal Reserve action, so are the rates on credit cards. But the average rate on personal loans is going down, according to Credible.com.

Last week, the average rate for qualified borrowers – those with a credit score of at least 720 – fell by 0.17% to 10.85%. In contrast, the average credit card rate for new accounts was 18.32% last month.

A personal loan is normally used to make a big purchase or consolidate high-interest debts, such as credit cards. The borrower seeks a specific amount of money that is paid back over a specified time period with a fixed monthly payment.

Unlike a mortgage, which can only be used to buy a house, or an auto loan, which can only be used to purchase a vehicle, personal loans can be used to buy a variety of things. That's why they have become a popular type of loan since they were introduced.

Cheryl Ann of Kalispell, Mont., turned to personal loan lender Best Egg late last year to get out from under high-interest debt.

“With the stress of Christmas and moving into a new home, credit card bills piling up caused spending $800 a month paying just for credit card bills,” Cheryl Ann wrote in a ConsumerAffairs review. Best Egg has taken that stress away with a personal loan. Something I can manage and get rid of my debt. The process was simple.”

Income and good credit are major factors

The rate that lenders charge for a personal loan is determined by several factors, including income. But the borrower’s credit score is a significant factor. The higher the credit score, the lower the interest rate. 

For example, Experian says a borrower with “super-prime” credit – a score between 781 and 850 – could get a rate as low as 6.59%. Someone with “deep subprime” credit – a score between 300 and 499 – would pay a rate of 15.3%, which is lower than many credit card rates.

That’s why it pays for borrowers to work on raising their credit scores before applying for a personal loan or any other type of loan. The easiest and most productive step is to pay all bills on time every month. Consumers who reduce their credit card debt, which will increase their amount of available credit, will also see an increase in credit scores. 

It’s also a good idea to obtain a copy of your credit report from all three agencies – Experian, Equifax, and TransUnion – and look for incorrect information that could be dragging down your score.

Credit card networks are raising “swipe fees,” a move that will increase costs for businesses and will almost certainly be passed along to consumers in this inflationary environment. However, the networks are getting pushback from retailers and members of Congress.

Executives from Visa and Mastercard appeared before a Senate committee this week to explain last month's increase in interchange fees, which are collected on every purchase to compensate banks for antifraud efforts and pay for rewards programs.

Officials from both companies said they are sensitive to the issues facing small businesses. Executives from Visa said the company is reducing fees for most small businesses, and Mastercard officials said they have reduced fees on transactions below $5.

But industry estimates show that businesses that accept Visa and Mastercard will still pay more in fees. By some estimates, the increases could be as much as $475 million.

‘Sweetheart deal’

“The credit and debit card systems are not competitive marketplaces,” said Sen. Richard Durbin (D-Ill.), who wants new regulations to promote competition. “It’s a sweetheart deal for the dominant networks, for the biggest banks, and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price.” 

The National Retail Federation (NRF) agrees. A representative of the trade group told the committee in a letter that businesses that accept credit cards – small businesses in particular – need more choices.

“Ongoing and unwarranted increases in swipe fees are especially damaging to small retailers,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “We have heard many stories from small retailers about the extreme challenges posed by the current payments system and Visa and Mastercard’s continuing monopoly. It is small retailers who are calling for swipe fee reform more than any other segment of our industry.”

The pandemic’s effect

The pain small businesses feel may have increased significantly since the start of the pandemic. Since the spring of 2020, consumers have used payment cards more than cash. There was even a coin shortage that prompted consumers to use plastic if they didn’t have exact change. 

When a greater percentage of purchases are made with credit cards, a business pays a swipe fee on an increasing percentage of its sales, reducing its profit margin.

“When we first opened our business, credit card transactions accounted for approximately 40% of our business,” said John Morman, owner of Celtic Tides gift shop, in Lexington, Va. “Now the credit card share is about 80% of transactions.”

To make matters worse, Morman says the fees have risen and that the time taken before funds appear in his business’ account gets longer. 

Consumers are also shouldering part of that burden. The NRF estimates that the average American family pays over $700 a year in price hikes that businesses impose to cover swipe fees.

Online shopping is convenient for consumers, but criminals like it too. Since they don’t need to physically possess a stolen credit card, they can easily make what appears to be legitimate purchases if they have a consumer’s credit card information, which is often bought and sold on the dark web.

To combat the problem, Mastercard is teaming up with Microsoft on a new technology to more easily verify that the purchaser is who they say they are. The companies say merchants will lose less money to fraudsters and consumers will enjoy a more seamless transaction experience.

According to the companies, a digital fraud that has emerged in recent years is “first-party fraud.” That’s when a legitimate purchase is made online but then later disputed. First-party fraud is estimated to cost merchants worldwide as much as $50 billion.

"Shopping online should be simple, quick and secure but that isn't always the case,” said Ajay Bhalla, president, Cyber and Intelligence at Mastercard. “We're committed to developing advanced identity and fraud technology to help enhance the real-time intelligence we provide to financial institutions around the globe. This builds on our longstanding commitment of working across the industry to provide advanced technologies that enable trust, and help build a safe and thriving digital ecosystem for all."

Digital Transaction Insights

Mastercard says it has already taken steps in that direction. It has combined its Digital Transaction Insights solution with next-generation authentication that allows for real-time decision-making.

That system links Mastercard's network insights with the merchant's own data to confirm that the consumer is who they claim to be. It also provides financial institutions with additional intelligence needed to optimize their authorization decisions.

For consumers, it could mean fewer texts from their credit card company asking if they made a particular purchase. Mastercard says Digital Transaction Insights is already used across a wide range of online checkout functions, from click-to-pay transactions to digital wallets.

Microsoft brings its Dynamics 365 Fraud Protection to the table. Its proprietary risk assessment leverages adaptive AI to enable real-time fraud detection by identifying risky behaviors.

According to Microsoft, this will help credit card issuers make better decisions when it comes to requests for authorizations, chargebacks, and refunds. The result, it says, is a smoother process for consumers and fewer losses for merchants.

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against one of the three largest U.S. credit reporting agencies, TransUnion, for violating a 2017 order that is intended to protect consumers from deceptive marketing tied to their credit scores.

The agency claimed that even though TransUnion agreed to stop duping consumers four years ago, it disregarded the order’s stipulations and instead continued employing “deceitful digital dark patterns” in order to sweeten its revenue stream to the tune of $3 billion for 2021. Its complaint alleges that TransUnion also violated other consumer financial protection laws, such as the Fair Credit Reporting Act and the Electronic Fund Transfer Act.

“TransUnion is an out-of-control repeat offender that believes it is above the law,” said CFPB Director Rohit Chopra. “I am concerned that TransUnion’s leadership is either unwilling or incapable of operating its businesses lawfully.”

In response to the suit, TransUnion said it made efforts to appease the CFPB.

"Despite TransUnion’s months-long, good faith efforts to resolve this matter, CFPB’s current leadership refused to meet with us and were determined to litigate and seek headlines through press releases and tweets. The CFPB’s unrealistic and unworkable demands have left us with no alternative but to defend ourselves fully."

Failure to maintain consumer trust

Consumers typically feel that they can count on credit reporting agencies to create accurate credit reports to help banks, credit card companies, and other lenders ascertain how creditworthy they are and how much debt they can safely handle. However, the CFPB cites consumer reports in saying that TransUnion has struggled to maintain that trust. At least one ConsumerAffairs reviewer feels the same way.

“I got on the Transunion website to access my free credit report. But because of their deceptive website, I ended up signing up for a subscription that costs $25 a month without realizing it,” wrote Janissa from Wayan, Idaho.

“Nowhere on the page did it say anything about a charge. I thought I was just creating a free account in order to see my credit report. BEWARE when using Transunion!”

Trap doors and hidden tricks

What Janissa alluded to may be one of the “dark patterns” that the CFPB referred to. The agency said companies sometimes build in hidden tricks or trapdoors to get consumers to inadvertently click links, sign up for subscriptions, or purchase products or services. Worse yet, these dark patterns can complicate or hide information that makes it harder for consumers to do simple tasks like canceling a subscription service.

One example the agency gave relates to the free credit reports Americans are entitled to – in TransUnion’s case, annualcreditreport.com. Officials say TransUnion asked consumers to verify their identity by entering in information from a credit card on the site.

Where TransUnion crossed the line in the CFPB’s mind is that it then integrated deceptive buttons into the online interface that gave the consumer the impression that they could also access a free credit score on top of viewing their free credit report. But when reality kicked in, clicking that button actually signed consumers up for recurring monthly charges that used the credit card information they had provided.

Caught in TransUnion’s web?

The CFPB is seeking monetary relief for consumers, as well as compensation for unjust gains, injunctive relief, and civil money penalties. However, consumers need to know that the CFPB's action is not a final finding or ruling that the defendants have violated the law.

Individuals, including current or former employees, with information related to any misconduct by TransUnion can report it to the CFPB by e-mailing whistleblower@cfpb.gov or by calling the Whistleblower Tip Line at (855) 695-7974. You can learn more about being a whistleblower here.  

With inflation ratcheting higher to start 2022, a new report from the Federal Reserve shows consumers tapped into a massive amount of credit in February.

Consumer debt increased by almost $42 billion between January and February to a total of nearly $4.5 trillion. That works out to an 11.3% annual increase and far outpaces the 2.4% growth rate in January.

Not surprisingly, credit cards played a major role in the increase. The Fed’s report shows that revolving credit, which includes credit cards, increased by nearly 21% to about $1.1 trillion. Revolving credit debt rose by just 4% in January.

The growth in credit card debt just as inflation kicked into high gear may be an ominous sign.

Rod Griffin, senior director of Public Education and Advocacy at Experian, says it is easy for consumers to get overwhelmed by credit card debt if they don’t have spending under control, a task made harder by rising prices.

“This is a responsibility that always needs attention,” Griffin told ConsumerAffairs. “It is really difficult to build a plan to pay off debt or accumulate savings if you don’t know where your money is going and how much of it is available.”

Griffin says consumers should look at their debit and credit card statements, track their income and expenses, and automate savings if possible.

“If they cannot pay the balance in full each month, consumers should aim to keep their total credit card balance under 30% of their credit limit to maintain a good credit score,” he said.

Credit card rates are headed higher

The news may get worse in the months ahead. Even if consumers don’t increase their credit card debt beyond February’s surge the cost of servicing it will continue to rise. The Fed has signaled that its plans to continue raising the federal funds rate this year to combat inflation. Unfortunately, whenever that rate goes up, so do credit card interest rates.

WalletHub recently reported that the average credit card interest rate is 18.32% for new offers and 14.51% for existing accounts. Carrying a balance at those rates will make it difficult to pay off – especially since the average rate is expected to move even higher.

PayPal is rolling out a new credit card that pays cash back on purchases. The card, issued by Synchrony, provides unlimited 3% cash back when paying with PayPal at checkout.

The 3% reward is applicable for purchases made online, on a mobile device, or in-store with a PayPal QR Code. It pays unlimited 2% cash back on all other purchases anywhere Mastercard is accepted.

PayPal cites data showing that more than 60% of American consumers are now shopping both online and in-store across multiple spending categories. As their shopping patterns change from the pandemic, the company believes shoppers are eager to maximize rewards, especially now that inflation is on the rise.

The new card has no annual fee, no category restrictions, and can be added to a customer's PayPal wallet for use at checkout.

"Our customers shopped across 34 different categories last year showcasing the diversity of their needs and interests, and we wanted to build a credit product that was flexible and better matched rewards with their spending behaviors," said Susan Schmidt, vice president of Consumer Credit at PayPal. "The new PayPal Cashback credit card was designed so PayPal customers can earn rewards and get cash back for everyday purchases no matter what categories they spend in that month." 

PayPal's card evolution

PayPal’s digital wallet has always required users to have a credit card to which purchases can be applied. It wasn’t long before the company saw the value in supplying the credit card too.

PayPal and Synchrony signed a deal in 2018 to extend their existing co-brand consumer credit card program agreement, making the latter an exclusive issuer of the PayPal Credit online consumer financing program in the U.S. through 2028.

“Together with PayPal, we continue to build on the seamless integration that has been a hallmark of our partnership, allowing us to enhance rewards to our customers and improve the user experience," said Bart Schaller, CEO of the Digital Platform at Synchrony. "Plus, it's easy to use and manage – the new PayPal Cashback credit card is sure to be a customer favorite." 

The new card takes the place of the existing PayPal 2% Cashback credit card. Eligible cardholders will automatically be upgraded into the new 3% cash back card structure. The company says other consumers may apply using the PalPal app or at www.paypal.com/cashback.

When buy now, pay later (BNPL) services first appeared in the marketplace, many people praised them as a solution to mounting high-interest credit card debt. But now, at least 77 consumer and community groups are raising serious concerns.

The groups have signed a comment letter to the Consumer Financial Protection Bureau (CFPB) and are asking it to provide oversight and regulation of these products. The letter warns that BNPL is contributing to an explosion in consumer debt.

“BNPL products have largely evaded oversight by federal and state regulators,” the groups stated. “Although these products could have a place in meeting consumer needs if they operate as promised, they pose a risk to consumers and should be covered by basic consumer protections.” 

How BNPL works

The theory behind BNPL is simple. Instead of putting a purchase on a credit card, adding to a high-interest balance, a consumer uses a BNPL app to finance the purchase. The consumer pays 25% as a down payment and makes three more payments every two weeks until the purchase is paid off.

But the consumer groups claim it isn’t working out that way for many BNPL users. The groups claim that within the industry, there is a lack of meaningful underwriting to determine if the consumer can afford the purchase.

In the letter to the CFPB, the consumer groups claim that some BNPL services have hidden fees and no clear disclosures. In short, the groups point out that debt is debt, and when consumers take on more than they can handle, they get in trouble.

“Marketing of Buy-Now-Pay-Later credit is enticing, with promises of instant approval and no impact on a consumer’s credit,” said the groups in the letter. “However, many providers are not conducting meaningful underwriting to assess a borrower’s ability to repay, allowing consumers to accumulate unaffordable amounts of debt.” 

Falling behind on payments

A September 2021, survey by Credit Karma found that 44% of Americans had used a BNPL plan. Of those consumers, 34% said they have fallen behind on payments.

Those missed payments have had significant consequences. Of those who admitted to having missed at least one payment, 72% said they believe their credit score declined as a result. Nearly a third said they experienced “significant” declines in their credit score.

ConsumerAffairs’ research team has reviewed the growing field of BNPL apps and identified a few of the top competitors. Commonly praised characteristics include a good online reputation, rate transparency, and a generous availability of services.

Some BNPL apps also don’t charge interest and set spending limits for users, based on their credit history. For example, Sezzle does a soft credit pull to determine if you qualify, so applying doesn’t affect your credit score.

Robinhood, the free stock trading app that rocked the stock market through much of 2021, is offering a new financial product aimed at millennials and others who are new to stock trading.

The company is launching a debit card that gives users the option of rounding up each purchase to the next dollar and depositing the change in an account that goes toward the purchase of an investment asset.

The company said it is introducing the Robinhood Cash Card as a means to help a new generation start investing while they are purchasing the things they need.

“The Cash Card builds on our mission to democratize finance for all by giving debit card customers the same benefits and rewards that were once reserved for credit card holders,” Robinhood wrote in a blog post.

Free stock proved popular

The company’s early efforts to entice young customers appear to have paid off. It recently launched a promotion that awards new account holders with a free share of stock – a promotion that resonated with Eric, of Winston-Salem, N.C.

“I like the fact that you get a free stock, but I would like to see some kind of tutorial or introduction to stocks,” Eric wrote in a ConsumerAffairs review. “For those of us who don't know anything about it but want to try it out. I really don't use it much anymore but it is a good platform to learn on your own without losing a ton of money. Most importantly it's free!!!” 

Jennifer, of Fresno, Calif., told us she thinks Robinhood is a good platform for investors, whether they are new to investing or not.

“What I think the best part is that they tell you whether professional analysts think it’s a good time to buy, hold or sell and what percentage of said analysts think so,” Jennifer wrote in her review. “For that reason, I give it two thumbs up.”

Cryptocurrency is included

Juan, of Astoria, N.Y., is generally pleased with Robinhood’s current offerings, especially information that might help make a good investment decision.

“They also show news about the economy and about the stocks you are buying, which is very helpful for deciding when to buy or sell, but the crypto market is very limited so may not be the right app for people looking for crypto,” Juan wrote.

Juan may be pleased to learn that the new debit card not only allows investments in equities but also in cryptocurrencies. Other benefits include a weekly bonus of 10% to 100% of the accumulated investment cash, capped at $10.

Robinhood gained popularity in early 2021 when stock traders, communicating on Reddit message boards used the app to bid up several beaten-down stocks like Gamestop, AMC, and Hertz.

The three credit reporting agencies – Experian, Equifax, and TransUnion – have announced a change to consumers’ credit reports. All three companies will change the way they report medical debt collection.

If medical debt has been turned over to collections but is later repaid, the debt will be removed from the consumer's credit report. Under current practices, it remains as part of the consumer's credit history.

According to the Kaiser Family Foundation, two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an emergency or sudden medical need. After two years of the COVID-19 pandemic and a detailed review of the prevalence of medical collection debt on credit reports, the credit agencies said they are making changes to help people focus on their personal wellbeing and recovery.

“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion, in a joint statement. “As an industry, we remain committed to helping drive fair and affordable access to credit for all consumers.”

Widespread issue among consumers

An analysis of reviews posted at ConsumerAffairs shows that medical bills are a persistent source of financial trouble and a major drag on credit scores. In a review of Credit One Bank, Melissa, of Millsboro, Del., told us she was unhappy with the bank’s credit card because of an annual fee. However, she knew canceling it would harm her already damaged credit.

“Unfortunately, my credit is just being rebuilt because of medical bills and I have no choice but to pay the fee and keep the card for now,” she wrote in her review.

Shasta, of SeaTac, Wash., said she was in the same situation when she was unable to raise the limit on her Citi card because her previous 800-plus credit score was in a downward spiral.

“This was also the score range I maintained before losing my job and incurring medical bills beyond my ability to re-pay, resulting in being forced into bankruptcy,” Shasta told us.

Effective July 1

The change in credit reporting at all three agencies will go into effect on July 1, 2022. After that date, paid medical collection debt will no longer be included on consumer credit reports. 

The credit bureaus say they are also taking an additional step. The time period before unpaid medical collection debt would appear on a consumer’s report will now be increased from six months to one year to give them more time to work with insurance and/or health care providers to address their debt before it is reported on their credit file. 

In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports.

The Consumer Financial Protection Bureau (CFPB) has been critical of the way credit agencies have reported consumers’ medical debt, noting that millions of Americans have unexpectedly been hospitalized for COVID-19 and are taking on debt while they receive needed care. 

CFPB research has shown that Americans have accumulated at least $88 billion in medical bills since June, making medical debt the most common entry on credit credits. Independent research has also shown that medical debt is a major contributor to bankruptcy.

In a new study of consumer finances, the Consumer Financial Protection Bureau (CFPB) found that medical debt is harming consumers' credit scores and adding significant amounts of money to their personal debt. 

The agency suggests that some 43 million Americans have medical debt on their credit reports, and that debt totals around $88 billion nationwide.

Medical-related debt isn’t something the average person plans for because it often comes about as a result of unexpected and emergency events. But when it does, it can hit hard and put Americans in a doom loop between their medical provider and their insurance company.

The CFPB says consumers often have to deal with aggressive debt collection and coercive credit reporting that forces them to pay medical bills they may not even owe. Once medical debt shows up on a credit report, the repercussions can be far-ranging and felt across all races and ethnicities, but most acutely by minority and low-income communities.

“These practices can impose serious costs on people’s financial, physical, and emotional health. Having a medical debt collection tradeline on a person’s credit record can make it harder to get credit, rent or buy a home, or find a job,” the CFPB stated in its report. 

“Some people are pushed into bankruptcy by medical bills that they cannot pay. Some avoid seeking health care out of fear of medical debt. And some find that the stress of having medical debt—and being contacted by medical debt collectors – worsens their mental health, contributing to conditions like anxiety, depression, and even suicide.”

What the CFPB is doing about the situation

Armed with data from the new study and efforts from states to protect patients from staggering medical bills, the CFPB has decided it needs to step up its efforts to ensure consumer credit reporting is not used overbearingly to force patients and their families to to pay debatable medical bills. Specifically, the agency intends to address the following factors:

Reasonable practices: The agency wants to ensure that credit reporting companies have reasonable procedures in place to keep medical debt information accurate. It plans to take action against furnishers who report inaccurate information.

No surprises: The CFPB says it will support the work of the U.S. Department of Health and Human Services to ensure that patients are not coerced into paying bills in excess of the amounts due. That's especially true in situations where the billed amount violates the No Surprises Act. That act protects consumers who are covered under group and individual health plans from receiving surprise medical bills from most emergency services and non-emergency services from out-of-network providers at in-network facilities.

Tell consumers what financial assistance is available: Regulators will investigate how best to facilitate patients’ access to financial assistance programs offered by medical providers, including at the point of collection and credit reporting.

Continue researching the situation: The CFPB says its latest study is just a start and that it will conduct additional research on medical billing collection practices and their impact on patients and families.

Look for ways to end the current problem: Finally, the agency said it will determine whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.

Extra expert advice

ConsumerAffairs reached out to Stephanie Genkin, a medical debt expert, to get her take on the CFPB’s report. She assures consumers that medical debt is given less weight on credit reports than other kinds of delinquencies. However, she said there are three things people can do when facing medical cost issues:

• Don't argue with the debt collector. Ask for written confirmation of the debt so you can dispute it if it is inaccurate.

• Negotiate a reduced payment. Debt collection agencies buy medical debt for pennies on the dollar, so consumers can often try to work with collectors to reduce the burden of their debt.

• Try a "pay to delete" strategy. Genkin says consumers can get written confirmation that a collector will notify all three credit reporting agencies to delete the reporting of their debt once it is paid off.

Amazon and Visa reached a truce on credit card swipe fees this week, an issue that had the two industry leaders at odds in the U.K. through most of 2021.

If the service fees are an issue for a major player like Amazon, imagine what they are for small businesses that may still be struggling from the effects of the COVID-19 pandemic. At Giovani’s restaurant in suburban Richmond, Va., a sign implores customers to pay in cash, claiming that swipe fees are greater than the restaurant’s rent during many months.

Louis Hoch, president and CEO of payment solutions firm Usio, Inc., says the problem for small businesses can be traced to the pandemic, which he says changed how consumers make their purchases.

“Consumers preferred using cards for payments than handling cash that they perceived might carry the infection,” Hoch told ConsumerAffairs. “Overall, the merchants experienced higher card usage for payment of their services and, as a result, their processing volume increased which also increased their payment processing expense.”

Fee increase in April

But the worst may be yet to come for small businesses that accept credit cards. Cindy Smith, head of Payments at payment network Veem, said the credit card processors postponed an increase in swipe fees that would have gone into effect last year. Those increases take effect in April.

Unless consumers begin making more cash purchases, small businesses will face higher costs. But Smith believes the shift to electronic payments is deeply embedded.

“I think long-lasting changes that altered the way people pay and get paid will continue to stick around long after COVID,” she told ConsumerAffairs.

Consumers could pick up the bill

Caught between credit card swipe fees and rising inflation, some small businesses may feel stuck. If they raise prices, they risk losing customers. So some are rewarding customers who pay in cash.

Others, according to Money magazine, are asking their customers to pay their swipe fees by tacking on a service charge on credit card purchases. These fees typically range from 1.5% to 3.5%.

While some consumers may start making more trips to the ATM to take advantage of cash discounts, Kelsey Sheehy, small business specialist at NerdWallet, doesn’t see that as a trend, especially since so many transactions are now completed online.

“In-person payments…plunged during the pandemic, falling from 91% to 34% between October 2019 and April 2020,” Sheehy said. “While face-to-face transactions have rebounded to some degree, shoppers are still reaching for their credit cards and smartphones over cash.”

Amid competition from fintech firms, Bank of America – one of the largest credit card issuers in the U.S. – is introducing a new way to pay for things.

The company is rolling out its new online payment solution called "Pay by Bank." The new feature allows consumers who are making online purchases to pay directly from their bank accounts instead of using a credit card or debit card. 

The company says Pay by Bank transactions are based on the concept of “open banking.” They take place in real-time and require no credit card or debit card details. Bank of America says this makes online checkout simpler, faster, and more secure.

Bank of America seems to have a pretty good reputation among consumers for its security. Hector, of Las Vegas, told us he’s pleased with how Bank of America handles the security of his credit card account.

“Card controls are excellent because you can stop any online or atm activity anytime,” Hector wrote in a ConsumerAffairs review. “I feel my account is safe. You can only access account info from your own device.”

No storage of customer data

Bank of America says Pay by Bank is even safer than payment card transactions because there is almost no storage of customer data. Because a card is not required and it is an online “account to account” payment, companies do not need to obtain and store customer card data.

The system leverages the customer's bank authentication network for added security. And as a bonus for consumers, the transaction does not levy a card processing fee.

The system is rolling out first in the U.K., but it will be available in the U.S. in the months ahead. Once it is fully implemented, many e-commerce merchants will offer Pay by Bank at checkout. After selecting that option, the customer authenticates the payment by using their existing login credentials through their online banking platform.

Once authenticated, the payment is sent directly from the customer's bank to the company's account. The customer is returned to the checkout page and the transaction is complete.

"The launch of Pay by Bank is part of our continuous cycle of technology investment that helps us to keep clients at the cutting edge," said Matthew Davies, co-head of Global Corporate GTS Sales and head of GTS EMEA at Bank of America. 

Davies predicts that Pay by Bank will make online shopping easier and more secure for consumers while helping merchants set themselves apart from their competitors.

Americans borrowed money at a near-record pace in 2020, just a year after they sharply reduced credit card debt. A report by the New York Federal Reserve found that all types of household debt, from mortgages to auto loans and credit card balances, ballooned by $1 trillion, the largest increase in 14 years.

In addition to mortgage growth, the report showed that auto loan originations were big drivers of household debt. That, in turn, is a product of inflation. As the prices of new and used vehicles have surged since the start of the pandemic, consumers have often taken on more debt to purchase a car or truck.

Largest increase since 2007

Mortgage balances remain the largest component of household debt, rising by $258 billion. Credit card balances increased by $52 billion, while student loan debt actually declined by $8 billion, remaining roughly flat in nominal terms at the end of 2021 after almost two decades of steady increases.

"The total increase in nominal debt during 2021 was the largest we have seen since 2007," said Wilbert Van Der Klaauw, senior vice president at the New York Fed. "The aggregate balances of newly opened mortgage and auto loans sharply increased in 2021, corresponding to increases in home and car prices."

The report’s authors say new extensions of installment credit were at historically high levels in 2021 for both mortgages and auto loans. They note that mortgage originations were at $1 trillion in the fourth quarter of 2021. It contributed to a historic high in annual terms, with over $4.5 trillion in mortgages having originated over the course of 2021.

Managing debt is key

How consumers manage that debt may determine whether an increase in loan volume is a threat to the economy. After shopping around, Bob, of Annapolis, Texas, secured a debt consolidation loan through Sofi and is happy with the outcome.

“Got offers from other lenders at 20% or more (how does a D/C loan at 20% make any sense ?),” Bob wrote in a ConsumerAffairs review. “Sofi came through with an offer at a reasonable rate, much to my surprise, and I jumped on it. All done through website and email. Speed, accuracy, easy.” 

The report found that more consumers like Bob may need help managing their debt, noting that the credit scores of newly originated mortgages have declined in recent quarters from the beginning of the pandemic.

However, average scores remain elevated and suggest that newly opened mortgages and a higher share of refinances appear to be solid. The volume of newly originated auto loans was $181 billion during the fourth quarter, primarily because consumers were forced to borrow more to purchase ever-more-expensive cars and trucks. 

The report found that aggregate limits on credit card accounts increased by $96 billion and now stand at $4.06 trillion, $160 billion above the pre-pandemic level.

The Federal Trade Commission (FTC) has reached a settlement with the consumer credit reporting agency Equifax over a 2017 data breach in which hackers accessed the personal data of 147 million people.

The company has agreed to a global settlement with the FTC, the Consumer Financial Protection Bureau (CFPB), and 50 U.S. states and territories. The settlement includes up to $425 million to help people affected by the data breach.

What affected consumers will receive

The settlement administrator has already begun contacting those who filed valid claims, and Equifax has agreed to offer eligible claimants a free four-year membership in Experian IdentityWorks, an identity theft protection service. As a plus, Equifax also agreed not to require users to provide payment info to enroll, nor do they have to cancel the service when it ends.

All anyone who received a notice has to do is visit the Experian IdentityWorks website and enter the Activation Code from the email or letter they received. They can also call 1-877-251-5822.

Time is of the essence, though – the activation code has to be used by June 27, 2022, at the latest. 

The FTC also warns consumers to be on the lookout for scammers who might be trying to leverage the opportunity to get their hands on some personal data.

“Legitimate emails about this settlement will come from Equifax Breach Settlement Administrator,” the FTC said. “The administrator will not call you.”

Claiming expenses related to the data breach

Those who did not apply for the settlement still have an opportunity to do that. Consumers can file a claim for expenses incurred between January 23, 2020, and January 22, 2024, as a result of identity theft or fraud related to the breach. That includes any of the following:

• Losses from unauthorized charges to your accounts.

• Fees you paid to professionals, like accountants or attorneys, to help you recover from identity theft.

• Other expenses you incurred while recovering from identity theft, like notary fees, document shipping fees, postage, mileage, and phone charges

To file an “extended period claim,” Equifax has set up a special website here that consumers can use.

Recovering from identity theft

The FTC went another step further in the consumer’s favor. The agency said those who never filed a claim for other benefits but were affected by the data breach and discovered misuse of their personal information can get free identity restoration services.

To access this benefit, all consumers have to do is use the look-up tool to confirm that they were affected by the breach. The confirmation page provides a phone number and engagement number to get free help with identity restoration.

For more information about identity theft, visit ConsumerAffairs' site here.

In addition to more expensive food and gasoline, the interest rate on your credit card balance could be going up soon. 

As it concluded its January meeting, the Federal Reserve Open Market Committee made clear that it plans to increase its federal funds rate, perhaps as early as March. The Fed has kept that rate near 0% since the early days of the pandemic.

Fed Chairman Jerome Powell said raising the rate is one of the tools that policymakers will use to bring down inflation, which is currently running hotter than the Fed would like.

“This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the economic effects of the pandemic,” Powell said at a Wednesday news conference. 

That message was clear for Wall Street, where stocks sold off sharply while Powell was taking questions from reporters. With higher interest rates, investors believe stocks can’t be valued at current levels.

Clear implication for consumers

For consumers with a credit card balance, the implications are also clear. While very few types of loans are linked to the Fed’s federal funds rate, the interest rates charged on credit card balances are. 

That means if you pay the same amount each month on your credit card bill, more of the payment will go towards interest and less will go towards paying down the balance. The Fed did not announce a rate increase at Wednesday’s meeting, but market analysts expect a rate hike to be announced at the Fed’s meeting in March.

Unfortunately, it’s not likely to be a single rate increase. If the goal is to tamp down inflation, a series of rate hikes may be required, eventually bringing the key interest rate back to around 1% – which is still very low by historical standards.

Rates won’t go up immediately

Credit cardholders may not notice the change right away. Usually, it takes a month or two for lenders to adjust their credit card rates, which are already among the highest interest rates that consumers face.

The average interest rate on credit card debt is currently around 18%. But that’s just the average rate – people with less-than-stellar credit can pay 25% or more in interest.

With credit card rate increases a few months away, now may be a good time to aggressively pay off balances. Using a balance transfer card that charges no interest for the first few months is a good way to make progress.

ConsumerAffairs’ Credit Card Buyers Guide is a good place to start when researching the best card to use for a balance transfer.

Many of us obsess over our credit scores. After all, those numbers are important when you buy a home, purchase a car, or apply for any kind of loan.

But some people don’t have a credit score because they have no credit history. They’ve never applied for a credit card and have no other types of debt. For these consumers, Experian – one of three credit agencies – will reportedly let them write their own credit report.

According to the Wall Street Journal, Experian’s new program is called “Go,” and it's similar to another program called Experian Boost. Boost links additional payment and banking information to help consumers raise their credit scores.

For example, if a person pays their electric bill and video streaming charges on time each month, that information – not currently part of a traditional credit report – is added to their history, thus raising their credit score.

Experian told the Journal that, on average, consumers who add non-debt accounts to their newly created credit reports go from having no FICO score to one of about 665. 

The program is designed to make “unbanked” consumers more visible to financial institutions and give them an improved chance of being approved for a loan. At the same time, Experian benefits by having more data on more consumers.

Good results with Boost

Jairo, of Cleveland, Ohio, signed up for Boost and is glad he did.

“I personally increased my score by 40 points in my first 3 months," Jairo wrote in a ConsumerAffairs review. "You can optionally link your bank account for better results. By doing that I have increased my score by 19 points.”

Having a credit report can be a two-way street. It’s good if you have a good credit track record, but it's not so good if you aren’t careful with your money. Sholanda, of Browns Mill, N.J., tells us she worked with Experian to raise her 515 credit score.

“I had quite a few negative items,” Sholanda wrote in a ConsumerAffairs review. “After paying off some things and disputing items my score went up significantly.”

Craig Boundy, head of Experian North America, told the Journal that having credit information on more consumers makes the company more successful, not only in selling Experian services but also by offering credit cards that have the best chance for approval.

A turn of the calendar often brings New Year’s resolutions, and improving credit scores often carries a big payoff in consumers’ financial lives. After all, credit scores determine what interest rate you get on mortgages and car loans. It can also determine whether you get the job or apartment you want and what kind of credit card you carry in your wallet.

Knowing what impacts your credit score the most is useful information to have. Rod Griffin, senior director of consumer education and advocacy for Experian, says paying your bills on time and managing debt are two of the biggest factors credit agencies consider.

“The most important thing you can do to maintain or improve your credit scores is to pay your bills on time and keep your credit card balances low,” Griffin told ConsumerAffairs. “Your payment history and credit utilization rate are the two most important factors used to determine your credit score. Catching up on missed payments is the single most important thing you can do to improve your credit scores.”

Keep an eye on credit utilization

Michael, of Littleton, Colo., saw his FICO score drop 19 points after he accepted a credit card solicitation from Chase Bank. In hindsight, he should have considered a card with a higher debt limit.

“My credit limit on that particular card was $1200,” Michael wrote in a ConsumerAffairs review. “Several months later, I decided to use the Chase Bankcard for an online purchase of $359.”

That’s when Michael saw his score drop. It likely had something to do with the fact that the single purchase utilized 30% of his available credit on that particular card.

“Credit card debt impacts your credit utilization rate, which can have a significant effect on your credit score,” Griffin said. “Carrying high credit card balances raises your credit utilization rate, which will bring down your credit scores. On the flip side, keeping your credit card balances low reduces your credit utilization rate, which is a good thing and will have a positive impact on credit scores.”

Pay off the balance every month

Some people who use a credit card for all their monthly purchases make multiple payments each month in order to keep the balance low. Griffin said that really isn’t necessary if you pay off the entire balance when the bill arrives.

“The balance on the billing statement is typically the balance shown in your credit history,” Griffin said. “Paying prior to the end of the billing cycle may reduce the amount shown on the billing statement and that is reported in your credit history. That may reduce your overall utilization rate. Generally, paying the balance in full each month will ensure the best outcome for credit scores.”

In 2018, Experian launched a program called Experian Boost. Participating consumers can get credit for timely payments for bills on cell phones, utilities, and video streaming services – payments that are not typically reported to credit agencies. But for anyone trying to improve their credit standing in 2022, Griffin says consistency is the key factor when it comes to paying bills on time and keeping your balances low. 

While the credit card market seems to get a new rewards card every month or so, Bank of America is beefing up the perks across its portfolio of credit card and other financial services products.

“Our Preferred Rewards program is designed to encourage our clients to bring more of their financial lives to Bank of America,” John Sellers, rewards executive at Bank of America, told ConsumerAffairs. 

At the top, the bank has added new tiers of rewards for high net worth and ultra-high net worth clients. Among the rewards are mortgage and home equity rate discounts. They also get access to a 75% credit card reward bonus.

“That means members can increase their rewards points from two per dollar on dining and travel purchases and earn up to 3.5 points per dollar unlimited,” Sellers said. “This is on top of the additional rewards, such as no-fee services, rate boosters on savings accounts, and interest rate discounts on auto loans.” 

Retail, Preferred, Small Business, and Wealth Management clients qualify for tiered benefits based on the balances they maintain in their Bank of America deposit accounts and/or Merrill investment accounts, the company said.

An increase in points

Last month, Bank of America launched a new Premium Rewards Elite credit card offering a range of lifestyle and travel benefits designed to reward clients and complement cardholder spending habits. 

The base reward at launch was two points for every $1 spent on travel and dining. Cardholders can now earn 3.5 points per $1 spent on travel and dining purchases and 2.62 points per $1 spent on all other purchases when enrolled in the bank’s Preferred Rewards at the Platinum Honors, Diamond, or Diamond Honors tiers.

“The outstanding travel and lifestyle perks of Premium Rewards Elite make it an exciting addition to our suite of award-winning credit cards," said Jason Gaughan, credit card executive at Bank of America. "We're proud to offer this new card designed to further reward and enhance the client experience."

In the near future, Gaughan said Bank of America will launch Partner Rewards, a loyalty program available to its credit and debit cardholders that he says will provide greater flexibility in how clients redeem exclusive partner offers and rewards.

Once enrolled, cardholders can select the card that will be associated with the rewards program. It will also give cardholders more choices when it comes to how they receive rewards.

Credit bureau Equifax has announced that it will begin including buy now, pay later (BNPL) payment information in its credit reports, a move that it says will expand credit for consumers.

The company said it acted after its research of anonymized consumer data from a BNPL provider showed that people who pay their BNPL loans on time could potentially increase their FICO Score – helping consumers to both build and rebuild credit.

"Equifax will be the first credit reporting agency to formalize a standard process for reporting BNPL tradelines for inclusion on traditional consumer credit reports," said Mark Luber, a top executive at Equifax. "We are committed to helping people live their financial best, and recognize the role that BNPL services can play in helping people build stronger financial profiles."

BNPL, also known as point-of-sale financing, is an increasingly popular way for consumers to access alternative financing options for online or in-store purchases. They typically involve short-term, interest-free installment payments offered at checkout.

Possible downside

Including these transactions on Equifax credit reports could have a downside if consumers who use BNPL financing don’t make payments on time. And there’s evidence that happens a lot.

A recent study by Credit Karma found that 44% of respondents had used BNPL services to make a purchase. Of those who have used BNPL services, 34% have fallen behind on one or more payments.

Younger consumers may be more likely to miss payments. According to the study, more than half of Gen Z and millennial respondents who have used BNPL services say they have missed at least one payment, compared to 22% of Gen X respondents and just 10% of baby boomers.

‘New version of old layaway plan’

With the increased use of BNPL services, regulators are concerned that consumers are taking on unmanageable debt. The Consumer Financial Protection Bureau (CFPB) has launched an investigation into how these programs affect consumers’ finances. In particular, the consumer watchdog wants to learn how payment providers use customer data.

“Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately, too,” said CFPB Director Rohit Chopra.

The CFPB stated that it has asked Affirm, Afterpay, Klarna, PayPal, and Zip to provide information so that the agency can report to the public about industry practices and risks. Typically, a BNPL service allows a customer to defer payment in full for a purchased item. The consumer usually pays 25% upfront and then pays 75% over two two-week intervals.

CFPB regulators say the ease of installment buying may encourage consumers to spend more money than they would otherwise.

Consumers shopping in a brick-and-mortar chain store this holiday season may be presented with an offer at checkout: Apply for the store’s charge card and receive an immediate discount on the purchase.

It might sound like a tempting deal, but there are a few things to consider first. The financial services firm myFICO says opening a new store charge account could negatively affect your credit score.

It’s a card you may only be able to use at the store in question. Since it isn’t getting regular use, myFICO says it’s easy to overlook a payment, and late payments can drag down your credit score. The credit limit may also be fairly low, so if that first purchase uses most of the available credit – and you carry a balance for a while – your credit score can take a hit.

Higher interest rates

Ted Rossman, a senior industry analyst at CreditCards.com, says there can be other drawbacks that make store cards less useful to consumers than a standard credit card. For one thing, he says store cards typically charge a higher interest rate.

“We recently averaged the midpoints of the APR (annual percentage rate) ranges offered by credit cards associated with the 100 largest retailers and came up with 24.35%, well above the 19.92% we measured on 100 popular general-purpose credit cards using the same methodology,” Rossman told ConsumerAffairs. “Both are high, but retail card APRs are often higher than general-purpose cards, and they top out at 29.99%.

Getting a small discount probably isn’t worth it

Rossman says store credit cards can make sense if you plan to pay in full to avoid the higher interest charges. But another consideration is how frequently the card will be used. And he agrees that there can be negative consequences to credit scores.

“Opening and closing too many credit card accounts can hurt your credit score, so be selective,” he said. “A 10% discount on a large purchase might make sense if you can avoid interest, especially if you’re loyal to the store and will get ongoing benefits. A 10% discount on a smaller purchase isn’t really worth it.”

But when all these positive factors line up, myFICO says a store card can help consumers improve their credit score, just as a traditional credit card can. If the issuing bank reports the account to the major credit bureaus, the account should show up on your credit reports. 

The key, of course, is to make payments on the account on time every month.

Affirm – a buy now, pay later (BNPL) payment network – has borrowed a page from the credit card industry and is launching a cash-back rewards program for its users.

Until now, users of the Affirm app have mostly employed the system to spread purchase payments out over a period of weeks. But when users pay for their purchases in full, Affirm will now reward that.

“With the average consumer planning to spend nearly $650 on gifts this holiday season, we’re excited to offer a way for shoppers to earn while they spend,” said Greg Fisher, chief marketing officer at Affirm. “Now whether consumers want to pay in full and earn cash back or pay later by choosing a schedule that’s best for them, Affirm can offer that choice and flexibility.”

“Natural next step”

The rewards program allows users of the Affirm app to automatically earn a percentage of every eligible purchase in rewards, which can later be redeemed for cash and deposited directly into their Affirm account. To encourage early adopters, Affirm is providing an extra reward on transactions through December 15, giving users an extra $20 reward on their first eligible cash-back purchase.

“A rewards program is a natural next step for buy now, pay later companies like Affirm that are looking to attract more loyal customers,” Nerdwallet’s Annie Millerbernd wrote in an email to ConsumerAffairs. 

“While cash back is a benefit for consumers who use the same BNPL company again and again, it is still a feature that comes with many credit cards. A key feature that BNPL companies lack is credit for making on-time payments, which most credit cards do have.”

More consumers are using BNPL services

BNPL services have recently grown in popularity with consumers who are concerned about running up huge credit card balances. With BNPL transactions, there is a schedule of payments that ends with the purchase being paid for in full, often with no interest charges. Even though BNPL services are often better for consumers than carrying a high-interest credit card balance, Millerbernd says users should be aware of the risks.

“The risk with BNPL is that you could buy more than you originally planned and overextend your finances, or make too many purchases and struggle to keep track of your payments,” she said. “Though cash back is an exciting addition for consumers, it doesn’t erase the risk of overspending.”

According to a CNBC/Momentive Small Business Survey, 7% of shoppers said they will use a BNPL service as a payment method for holiday purchases during the holiday season.

​If new credit card applications are any indication, consumers are ready to start spending again. The Federal Reserve Bank of New York reports that Americans are seeking credit at the highest rate since before the pandemic.

In the Fed’s survey, almost 27% of U.S. consumers said they had applied for a new credit card in the past 12 months. A year ago, the percentage was just 16%.

People with lower credit scores appeared to be the most active when it came to applying for new credit. At the beginning of the pandemic, this group of consumers was the most likely to have accounts closed or credit limits reduced by their lender.

With the economy recovering, lenders apparently now have a different view. Application rates for credit card and credit limit increase requests were sharply higher among those with credit scores below 680. 

The increase follows what appeared to be a robust marketing effort by banks earlier this year. The Wall Street Journal recently reported that banks increased their credit-card marketing spending in the third quarter, flooding mailboxes with new credit offers.

Read the fine print

Doug, of Acton, Mass., said he received a promotional offer from TD Bank that contained some fine print. He said the offer specified that applicants had to open a new personal checking account and could not have had a checking account in the previous 12 months.

“I did not have a personal checking account,” Doug wrote in a ConsumerAffairs review. “I did have a credit card, and apparently for them, credit card equals checking account.”

Doug said his application was denied, but he isn’t alone. Despite banks’ promotional push, Ryan, of Pearland, Texas, tells us that American Express apparently decided it was better off without his business.

“They canceled my card, without contacting me,” Ryan wrote in a ConsumerAffairs review. “Unless you owe them money, they will boot you out the door.”

The Fed’s report suggests that consumers plan to seek increases in all types of credit in the months ahead, and not necessarily because they’re planning a vacation or major purchase. The report found that consumers are feeling less financially secure, with more respondents saying they are less likely to be able to cover a $2,000 emergency expense.

Consumers who use a rewards credit card earn an average of $757 per year, according to a new survey commissioned by shopping platform Slickdeal.

Cards that pay rewards, whether in the form of cash or points toward future purchases or travel, have gained popularity with consumers in recent years. Cashback rewards cards reward some types of spending more than others, giving consumers a wide range of options when selecting a card.

In order to maximize benefits, people in the survey reported spending an average of six hours researching a single credit card before submitting an application. Three out of four people in the survey report using their card enough to hit the minimum spend requirement to receive reward benefits and points. 

"Credit cards aren't just another way to pay for your purchases,” said Louie Patterson, senior personal finance editor at Slickdeals. “If you choose the right rewards cards and you're strategic about how you use them, you can earn tremendous benefits such as free flights, hotel stays, or even cashback." 

Rewarding experiences

The survey found that more than half of rewards credit card users spent their rewards on a new experience, such as trying out a new restaurant, attending a concert, or traveling.

Travel appears to be a favorite category, with 55% of cardholders using rewards to pay for a large portion of a vacation. When they cashed in airline points, they were able to pay for a five-hour flight, on average.

"Once you've done the research on the right rewards card for you, there are a number of ways to maximize the benefits,” Patterson said. “Make sure you pay off the balance in full, look for opportunities to pay with your card for monthly fees such as insurance, cable, and cell phone bills, and be on the lookout for opportunities to earn bonus points, which may be awarded for specific types of purchases." 

Things to consider

When applying for a rewards credit card, consumers should not only consider what type of rewards would be the most beneficial; they should also be mindful of fees. Travel rewards cards, in particular, can carry a hefty annual fee that can wipe out some or all of any earned rewards.

Cards that pay cash back are among the most popular rewards cards and are the least likely to charge an annual fee. ConsumerAffairs has researched the best cashback cards and provides thousands of verified reviews.

For years credit card companies have reaped the benefits of consumers’ shift to online shopping — this is because nearly all virtual shoppers pay with a credit card. But, lately, consumers have found an alternative.

Buy now, pay later (BNPL) services are growing in popularity, and industry analysts say they're now competing with credit cards for consumer spending. There are a growing number of BNPL apps, and more merchants, including Amazon, are embracing the payment plan.

BNPL is actually an old-fashioned concept. In the days before credit cards, consumers often financed major purchases on the installment plan. Today, most BNPL services allow consumers to pay for a purchase over several weeks, making interest-free payments every two weeks until the purchase is paid for.

Some personal finance experts have praised the concept as a way for consumers to manage their money. Not only do they avoid high interest rates, but they also avoid adding to growing balances since the purchase is paid for in a short amount of time. 

Popularity among young consumers

The concept has been embraced by young consumers, which is a reason both Walmart and Amazon now offer BNPL plans.

"Buy now, pay later solutions, in general, resonate with younger customers," Julia Unger, Walmart's vice president of financial services, said in an interview with Investor's Business Daily. "They don't view BNPL as debt. They see it as a payment plan, which is a little bit different. If you have millennials that are choosing BNPL solutions instead of credit cards, we want to make sure from an acceptance standpoint that we're offering the right solutions to customers."

Walmart, partnering with BNPL fintech Affirm, offers BNPL on certain categories, including home furnishings, jewelry, and musical instruments. Most consumable products are not eligible for the financing plan.

Amazon gets on board

Late last month, Amazon also struck a deal with Affirm to provide financing on certain products. Amazon is now allowing customers to break up purchases of $50 or more into smaller payments.

Some established payment platforms, such as Square and PayPal, have recently begun offering BNPL services after acquiring companies that operate BNPL apps.

According to Investor's Business Daily, BNPL is growing exponentially. It cites data from eMarketer projecting that more than 45 million people in the U.S. will use BNPL services in 2021, up 81% from 2020.

Even though BNPL avoids the high interest rates of credit cards, consumers who don’t make their agreed-upon payments can and do fall behind. Earlier this month, Credit Karma reported that a survey it commissioned showed 44% of consumers had used BNPL — of this number, 34% reported being behind on payments.

Credit One Bank has issued a new travel rewards card with perks that specifically reward users when they choose experience-related travel.

The new card rewards users with up to five times more points when they spend money at national parks, recreational parks, museums, and professional sporting arenas, among other venues. The company says the Wander Card is its first travel-focused credit card and gives card members flexible ways to earn and redeem points for meaningful experiences.

"The Wander Card rewards travelers for getting out to explore this country's beautiful destinations and helps cardmembers reap rewards at the planned and impromptu stops and experiences along the way," said David Herpers, senior vice president of product at Credit One Bank. 

Herpers says the Wander Card is not a typical travel rewards card. It does not involve miles, loyalty programs, executive lounges, or global escapes. Rather, it targets a different group of travelers -- one that has emerged in force in the wake of the COVID-19 pandemic.

“We are filling an important gap in the market by giving road trippers, stadium tailgaters, amusement park fanatics and everyday adventurers the opportunity to earn more rewards on the things they love," Herpers said.

The card’s perks

The new card’s perks include:

• An $80 statement credit for the purchase of a qualifying National Park Pass, valid at more than 2,000 recreation areas across the U.S., if used within the first year.

• The chance to earn up to five times more points at recreational parks and amusement parks, including national parks, museums, and professional sporting arenas

• The chance to earn up to three times more points at restaurants and lodging, including campgrounds and resorts.

• The chance to earn a single point on all other purchases.

The card also offers a discount on Thousand Trails camping passes and a discount on regular-price rides on Maverick Helicopters.

Annual fee

Like many travel rewards cards, the Wander Card carries an annual fee. In this case, the charge is $95. Before applying for the card, consumers should make sure the discounts and perks will add up to cover the yearly cost.

The interest rate isn’t the lowest you’ll find in the industry either. Variable APR for purchases and cash advances is 23.99%, and the minimum interest charge is $1. 

Rewards points can be redeemed for statement credits, gift cards, and merchandise across a variety of travel, entertainment, and retail categories. All Credit One Bank card members receive free online access to their Experian credit score, Zero Fraud Liability, and automatic reviews for credit line increases. 

Consumers who are considering applying for a travel rewards credit card should check out ConsumerAffairs’ selection of the best cards in that category. Our research contains thousands of verified reviews to help you pick the right card for you.

Venmo, the payment app owned by PayPal, has added a new feature to its credit card. Starting soon, users will be able to use their cash-back rewards to purchase a variety of cryptocurrencies.

According to the company, customers can use their cash-back rewards to auto-purchase Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Once purchased, the digital currency remains in the customer’s account until they choose to spend it.

Venmo says there are no transaction fees associated with the purchases. A cryptocurrency conversion spread is built into each monthly transaction.  

"The introduction of the Cash Back to Crypto feature for the Venmo Credit Card offers customers a new way to start exploring the world of crypto, using their cash back earned each month to automatically and seamlessly purchase one of four cryptocurrencies on Venmo," said Darrell Esch, a senior vice president at Venmo. "We're excited to bring this new level of feature interconnectivity on the Venmo platform, linking our Venmo Credit Card and crypto experiences to provide another way for our customers to spend and manage their money with Venmo."

Venmo is the second fintech company to link its credit card to the world of cryptocurrencies. Last month, Upgrade launched a credit card that pays rewards in bitcoins. 

The Upgrade Bitcoin Rewards Card is an update of the company’s existing Upgrade Card, with the added feature that rewards are paid in the volatile cryptocurrency. Users earn unlimited 1.5% Bitcoin rewards on every purchase as they make payments. 

Getting started

To use a Venmo credit card to purchase digital coins, users navigate to the Venmo Credit Card home screen, select the rewards tab, and then click on “get started.” Once customers have agreed to the terms, they will be able to select their crypto of choice.

Cardholders can return to the rewards screen at any time to turn the auto-purchase feature on or off -- or even change the cryptocurrency they would like to purchase during the month.  

Using auto-purchase, a cardholder’s cash-back rewards are automatically converted into the digital currency of their choice. Since the values of these digital coins can be volatile, the amount of cryptocurrency that’s purchased through rewards may vary from month to month.

Once purchased, the cryptocurrencies remain in the customer’s account until they choose to sell them, converting them back to dollars.

Consumers who took some economic hard knocks during the pandemic may be trying to repair their credit. MyFICO, the originator of FICO credit scores, is offering some advice when it comes to credit cards.

Having a credit card, keeping the balance low, and paying the bill on time, will boost your credit score in most cases but consumers should understand the difference between different types of payment cards.

Prepaid credit cards, sold in the gift card rack at retail stores, may look like a credit card and you can use it like one but it doesn’t do a thing for your credit score, according to the experts at MyFICO. Because you preload it with your own money it actually has nothing to do with credit and transactions are not reported to the credit agencies.

Here are key differences between a credit card and a prepaid card:

• You do not need to fill out an application to open a prepaid credit card;

• A lender will not check your credit report or perform a credit inquiry when you open a prepaid card;

• Prepaid credit card accounts do not appear on your credit report with any of the major credit bureaus;

• Prepaid credit cards are not considered in your FICO Scores.

Secured credit card

The reason a credit card is so important to your credit score is that it is an unsecured loan. The lender is trusting the borrower to pay it back. The lender wants to make sure the borrower is creditworthy.

For that reason, opening a credit card account may be difficult if you have a low credit score or no credit history. But MyFICO says there is an alternative -- something between a credit card requiring a high credit score and a prepaid card, which at least allows you to make online purchases.

A secured credit card is similar to a prepaid card because the user is putting up their own money in advance. But there’s an important difference.

With a prepaid card, the consumer loads the card with cash and spends it until the balance is zero. With a secured credit card, the consumer deposits the cash with the lender. If the deposit is $500, then the credit limit each month is $500.

As long as the user makes the payment on time each billing cycle, they can continue using the card, keeping the balance below the amount of their deposit. If they don’t pay off the entire balance each month, the lender will charge interest -- just as it would for a regular credit card.

Stepping stone to a regular credit card

Most lenders offering secured credit cards report payments to the credit bureaus. However, not all do, so it is worth asking when considering an application.

After using a secured credit card and making on-time payments for a year, many lenders will offer customers a chance to apply for a regular credit card and the deposit will be returned. At that point, a consumer should carefully consider the pros and cons of different cards, depending on what they purchase most.

A good place to start researching cards is the ConsumerAffairs Credit Cards Buyers Guide, which has thousands of verified reviews of a wide range of credit cards.

The Federal Trade Commission (FTC) has reached a settlement with two Florida companies that it accused of covering up a student debt relief scam that defrauded thousands of students and their families out of $62 million.

Regulators say Moneta Management, LLC, Moneta Management, Inc., and their CEO Michael Todd Greene knowingly provided false and deceptive information to credit card and ACH processors. By doing that, a scam being run by Brandon Frere and three other companies was allowed to continue unchecked. Luckily, that scam was shut down back in November.

“Defendants knew, should have known, or consciously avoided knowing that the information they provided payment processors was false and that the Frere Scam was defrauding consumers,” the FTC’s reports stated. 

“Even in the face of account application rejections and account terminations by processors, excessive unauthorized return and chargeback rates, and consumer reports alleging deceptive practices on the Frere companies’ Better Business Bureau (BBB) profiles, Defendants continued to work in concert with Frere and his companies to fraudulently obtain and maintain merchant accounts for the Frere Scam.”

As part of the agreement, Greene and his companies will be barred from providing payment processing services or acting as a sales agent or independent sales organization ever again. The settlement also imposes a $28.6 million judgment against the defendants, which has been reduced due to an inability to pay the full amount. 

American Express has announced that owners of its Platinum Card will get to enjoy several new permanent travel and retail benefits in addition to its existing benefits. 

The new everyday perks will come at the cost of a higher annual fee of $695 -- up from $550. However, American Express estimates that the new suite of benefits represents a value of up to $1,400 each year. 

The company is also offering new cardholders a bigger welcome bonus that may help offset the cost of the higher annual fee. Consumers can earn 100,000 Membership Rewards Points when they spend $6,000 on purchases in the first six months of card membership.

New benefits

Effective immediately, the following new credits and discounts are available to both new and existing card members:

• Up to $200 hotel credit. An annual $200 statement credit for prepaid bookings at Amex Fine Hotels + Resorts or The Hotel Collection properties made through American Express Travel. Fine Hotels and Resorts bookings include perks such as free breakfast, guaranteed late checkout, room upgrades, and early check-in when available. 

• An annual $179 credit for a Clear membership. Clear is an expedited security screening program that can cut down on the time spent waiting in lines at U.S. airports and stadiums. A membership typically costs $179 per year, but Platinum Card members will receive a credit for that amount.

• Up to $240 in digital entertainment credits. Statement credits will be issued on eligible purchases or subscriptions with Peacock, Audible, SiriusXM, or The New York Times. These credits are available in portions of up to $20 each month throughout the year.

• Up to $300 Equinox credits. Cardholders can receive up to $300 annually (up to $25 per month) in credits toward Equinox gym memberships or digital subscriptions to on-demand fitness classes through the Equinox+ app. Enrollment to the gym is required to activate this benefit.

• Discount on a private jet access program. Cardholders are eligible for up to 40% off a Premium Private Jet Program membership with Wheels Up, a private jet charter company. Card members will also get a $500 or $2,000 credit added to their Wheels Up account to use toward their initial flight within the first year depending on the selected Wheels Up membership.

• Exclusive Global Dining Access by Resy. The Platinum Card offers access to exclusive reservations at some of the world’s top restaurants. American Express says Resy will also offer cardholders access to premium events and other perks, like priority notification and VIP status.

Customer reviews

ConsumerAffairs readers give the Amex Platinum Card an overall 4-star rating. Cardholders say they appreciate its ease of use and the company’s willingness to resolve issues. 

“Being an avid traveler for work and pleasure the Amex card provides me with ample opportunities to trace more, earn more miles on things I buy every day and also gives me peace of mind against fraud,” writes Andrew of Tea, S.D. “The fact that I’m able to gain Delta points on buying groceries and through end of July if I shop at local stores they are giving me 4x the points makes the card great but they are also promoting shopping small.” 

However, some cardholders have pointed out that the perks aren’t as valuable to those that only travel occasionally. 

“The rewards take a lot of miles to get. You have to travel a lot to access them,” writes Kimberley of Brownstown Twp, Mich. “The free checked bag and early boarding are a plus and the free companion pass are the perks that can be utilized easily. The yearly payment is steep for the occasional traveler.” 

A number of new credit cards have hit the market since the beginning of 2021, and the two latest cards are designed for entertainment consumers. Six Flags and WWE have issued co-branded cards offering rewards and perks for their customers.

Six Flags Entertainment Corporation, the world's largest regional theme park company, is partnering with Credit One Bank on a new Visa rewards card, which is available now.

The card features exclusive offers and benefits at 24 participating Six Flags parks in the U.S. The rewards include three times rewards points on all purchases at the park, including admission, food, and merchandise.

Cardholders will also two times the points on gas, groceries, and hotel spending. All other purchases with the card will get one point for each dollar spent.

There’s also a 10% automatic cashback rewards program at participating merchants through the More Rewards Program. The card carries a $39 annual fee that is waived for consumers with excellent credit.

"If you are a thrill-seeker and want to earn rewards just by using your credit card at a Six Flags park or filling up the tank on the drive there, then our Six Flags Rewards Visa is the credit card you've been dreaming of. It provides unique benefits that have been specifically tailored for theme park enthusiasts," said John Coombe, senior vice president of marketing, Credit One Bank.

WWE Champion Credit Card

Credit One Bank is also partnering with WWE on the co-branded WWE Champion Credit Card, providing rewards and perks for wrestling fans. The card offers:

• 3% cashback rewards on eligible internet, cable, satellite TV, and mobile phone services

• 2% cashback rewards on eligible dining purchases

• 1% cashback rewards on all other purchases

• WWE merchandise discounts

• Up to 10% cashback rewards from participating merchants through the More Rewards Program

“WWE has the most passionate fans in the world, and we are proud to give them an opportunity to not only earn cashback rewards but get exclusive opportunities on WWE merchandise and experiences with the new WWE Champion Credit Card," said Stephanie McMahon, WWE’s chief brand officer.

The WWE Champion Credit Card carries a $49 ann