Credit cards

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 annual fee. Consumers should carefully consider how they would use a card with an annual fee and compare it with other cards that have no annual fee.

ConsumerAffairs has done the research and verified thousands of reviews to help you find the right credit card here. 

The economy is reopening, restaurants are at full capacity in most places, and retail stores are beginning to get crowded.

But look closely at your credit card receipt after your next night out or shopping trip. Chances are, there could be a credit card surcharge tacked onto your bill.

According to MyFico, businesses that were hard hit during the pandemic are trying to regain their footing by adding a surcharge to credit card purchases to help cover the swipe fee. Networks like Visa and MasterCard make money by charging fees to businesses every time a consumer pays with a credit card.

These fees can vary but most often range from 1.5% to 3.5% of the transaction. This cuts into a business’s profit margin, especially when it’s a small purchase.

When times are good, the business may absorb the fee or add it to the purchase price. But in highly competitive businesses they don’t always think they can do that. Adding a surcharge is a way to recoup the fee without raising prices or lowering profits.

They weren’t always legal

Surcharges weren’t always legal. A series of court decisions, including a 2017 ruling by the U.S. Supreme Court, made it legal for businesses to tack on credit card surcharges in every state except Colorado, Connecticut, Kansas, Massachusetts, and Puerto Rico.

Consumers can get around the surcharge by paying cash, something that fell out of favor during the pandemic. Some small businesses may display a sign at the cash register requesting cash payments instead of plastic.

Fortunately, surcharges are not applied to debit card purchases. Paying with a debit card keeps the convenience of plastic while avoiding the surcharge.

Some consumers may overlook surcharges as insignificant. After all, a 3% fee on a $20 purchase only adds 60 cents to the bill. If you’re using a rewards credit card that pays 3% cashback, you’ve broken even. Some consumers may consider it a worthwhile payment to help their favorite restaurant get back on its feet.

Businesses don’t normally advertise the fact they tack on a surcharge. There’s usually no way to know until you’re made that first transaction, then closely examined the receipt.

Key Bank reports the number of consumers who have “graduated” from its secured credit card to an unsecured card has doubled over the last year. It’s yet another sign that many consumers improved their credit standing during the pandemic.

Key Bank’s secured credit card program is designed for consumers with no credit score or a very low one. The consumer deposits an amount of money -- $500 is typical -- and that money serves as the credit limit.

Cardholders use the card for small everyday purchases such as gas and groceries. The balance never goes over the amount of their security deposit. Since the balance stays low, it’s easier to get into the habit of paying the balance in full each month.

Key Bank reports its May 2021 graduating class from the Secured Credit Card Program included a record 4,513 clients, double the size of last year’s class. Nearly 3,000 people in the program had no credit score when they began. Those with low credit scores saw an increase by an average of 78 points in six months.

‘Financial wellness foundation’

"Given the economic uncertainty of the past year, we believe it's more important than ever to help our clients build a strong financial wellness foundation," said Mitch Kime, Key BAnk’s head of Consumer Lending and Payments. "The Key Secured Credit Card is just one of the many tools we make available to ensure that clients can see bright financial futures and stay on the path toward their personal financial achievements, starting with sound credit."

The “graduates” may now trade in their secured credit cards for unsecured cards. The deposit they made a year ago is returned when they do so. As long as the cardholders continue to pay their bills on time, their credit scores will continue to rise.

Key Bank’s report is in line with other data showing consumers did a better-than-expected job of managing credit during the pandemic. The predicted wave of credit card defaults never materialized. In fact, consumers’ credit card debt did not go up as the pandemic swept the country.

Serious delinquencies remain low

A recent TransUnion report found that consumers are performing well more than a year after the pandemic began, as serious delinquency rates remain lower. At the same time, new credit card accounts have risen from their COVID-19 lows.

As unemployment rose to double-digit levels last year, most lenders tightened their standards when issuing personal loans and credit cards. That caused consumers to reduce their spending. 

“Consumers and lenders alike took more prudent measures with their credit use,” Matt Komos, vice president of research and consulting at TransUnion, said last month. “Buoyed by government stimulus programs, many consumers used their benefits to remain current on accounts.”

Other reports have shown credit card holders are not only paying on time but paying down balances at a record pace. Capital One reported that half of the credit card balances on its books at the beginning of March were paid off completely by the end of the month.

Credit card lenders have reversed their early pandemic reduction in credit to consumers. A report from TransUnion shows that there was a spike in new credit card accounts in the second half of 2020 that has continued into 2021.

Lenders began withdrawing credit card offers last year over concerns that the pandemic-driven economic shutdown would lead to a sudden rise in unemployment and defaults. In some cases, they unilaterally closed existing accounts. But the wave of defaults never materialized. In fact, consumers’ credit card debt did not go up as the pandemic swept the country.

The TransUnion report found that consumers are performing well one year since the pandemic began, as serious delinquency rates remain lower. At the same time, new credit card accounts have risen from their COVID-19 lows.

‘More prudent measures’

As unemployment rose to double-digit levels last year, most lenders tightened their standards when issuing personal loans and credit cards. That caused consumers to reduce their spending. The report shows that unsecured personal loan originations dropped from 3.9 million in the first quarter of 2020 to 2.6 million in the April to June quarter. Credit card originations declined at an even faster rate – from 15.5 million to 8.6 million in the same timeframe.

“Consumers and lenders alike took more prudent measures with their credit use,” said Matt Komos, vice president of research and consulting at TransUnion. “Buoyed by government stimulus programs, many consumers used their benefits to remain current on accounts.”

Consumers maintained their improved habits into the first quarter of 2021. Credit card balances have continued to decline, with total balances dropping to $688 billion from $814 billion in the first quarter of last year. Average consumer credit card debt per borrower dropped to $4,791, the lowest level since at least 2009 when TransUnion first began measuring this variable. 

New credit card accounts fell nearly 18% year-over-year across all credit risk tiers, with average lines on new accounts declining 28% in the same period. Earlier this month, the Wall Street Journal reported that the percentage of Discover Card balances paid off at the end of the first quarter was the largest in two decades. 

On-time payments

Even more startling, Capital One reported that half of the credit card balances on its books at the beginning of March were paid off completely by the end of the month. In addition to paying off debt, consumers also paid their bills on time, a key factor in improving credit scores.

“Delinquencies can’t get much lower than where they are now, but if your loans keep shrinking, your revenues come down [and] margins will get worse,” Discover CEO Roger Hochschild told the newspaper.

The result of all this is that lenders have resumed their aggressive marketing of credit card offers. Consumers should consider the offers carefully before acting, considering fees and perks.

To help with the decision, check out ConsumerAffairs’ credit card guide, which includes thousands of verified reviews.

Credit card balances haven’t gotten any larger during the pandemic; in fact, data released by various card issuers shows that they’ve actually fallen.

One reason may be the generous stimulus money handed out by Washington. It seems clear that many consumers used much of it to pay down their credit card debt. Diving into the data, the Wall Street Journal reports that the percentage of Discover Card balances paid off at the end of the first quarter was the largest in two decades. 

Even more startling, Capital One reported that half of the credit card balances on its books at the beginning of March were paid off completely by the end of the month. In addition to paying off debt, consumers also paid their bills on time, a key factor in improving credit scores.

“Delinquencies can’t get much lower than where they are now, but if your loans keep shrinking, your revenues come down [and] margins will get worse,” Discover CEO Roger Hochschild told the newspaper.

Delinquencies are down

If you note a hint of concern in Hochschild’s voice, that’s because this is a very real concern for lenders. These companies tend to reap larger profits when consumers go on a spending spree and only pay the minimum. The pandemic-related shift to reducing debt is squeezing banks and may present consumers with better credit card terms. 

In recent weeks, some card issuers have marketed more aggressively and made underwriting stands more lenient in a bid to attract new customers. Check out ConsumerAffairs’ credit card reviews of the best companies and check to see if they have updated their terms.

In a bid to increase credit card revenue, the Journal also reports that major banks plan to begin issuing credit cards to consumers who lack credit scores, sharing bill payment data in order to determine creditworthiness.

“Cash wasn’t king”

TransUnion, one of three credit reporting agencies, has also tracked improved consumer debt payment behavior during the pandemic. It notes that the improvement did not come from a lack of use but from better payment discipline.

“Cash was definitely not king during the early parts of the pandemic,” said Matt Komos, TransUnion’s head of research and consulting in the U.S. “Millions of people opted to use their credit cards to make digital transactions from the safety of their homes for groceries, clothes, and other everyday items.”

Even though consumers have made strides recently to pay down credit card debt, the total consumers owe is still quite high. A recent report by Value Penguin found that the average American’s credit card debt is more than $6,000 and that 45% of U.S. families carry some credit card debt.

On the heels of Petco Health and Wellness launching a new co-branded credit card that supports pet welfare, there’s another new payment card for animal lovers.

Credit One Bank is partnering with national animal welfare nonprofit Best Friends Animal Society in a co-branded credit card that the bank says offers rewards for both humans and animals. It says the money goes to help support the nonprofit's animal welfare mission and programs anytime a cardholder makes a purchase.

"We want to make it easy for our customers to support causes they care deeply about," said John Coombe, senior vice president of marketing at Credit One Bank. "That's why Credit One Bank will make donations to Best Friends Animal Society equal to 1% of all net spend made with the Best Friends Credit Card to help support their goal of reaching no-kill in shelters across the country by 2025.”

Of course, there’s also something in it for the human cardholder; they will receive 5% cash-back rewards on the first $5,000 in eligible pet shop and pet food/supply store purchases within the first calendar year. In subsequent years, the rewards drop to 1%. 

Other perks

There are also special offers from merchant partners that are specifically designed for pet lovers. Some of those include:

• Discount codes for up to 10% off Best Friends-branded merchandise at Best Friends Lifesaving Centers, the Best Friends Mercantile, and online at the Best Friends Store;

• Discount codes for up to 5% off lodging offered by Best Friends Animal Society, including the Best Friends Roadhouse and Mercantile, Cottages, Cabins, and RV Sites; and

• Automatic enrollment in Credit One Bank's More Rewards program that provides up to 10% cash-back rewards from participating merchants.

There are no authorized user fees, and the Best Friends Animal Society gets 1% of every purchase.

Cause-supporting rewards cards could be a developing trend. A week ago, Petco announced two new payment cards that will not only reward the consumer but will support its animal welfare charity. With every purchase made using Petco Pay credit cards, Petco says it will make a donation to Petco Love, an independent nonprofit organization that supports pet health and welfare.

Petco has pledged to donate up to $1 million a year to the initiatives carried out by Petco Love, including a program that helps find lost pets. 

Petco, which rebranded itself as Petco Health and Wellness Company last October, has launched a new credit card that it says will support animal welfare.

Petco Pay, provided in partnership with Alliance Data Systems Corporation, includes the Petco Pay Mastercard, a co-branded credit card, and the Petco Pay Credit Card, a private label credit card. 

The cards feature many of the standard perks and rewards most cards offer, but they also include one benefit designed to appeal to animal lovers. With every purchase made using Petco Pay credit cards, Petco says it will make a donation to Petco Love, an independent nonprofit organization that supports pet health and welfare.

Petco has pledged to donate up to $1 million a year to the initiatives carried out by Petco Love, including a program that helps find lost pets. 

"Petco's mission is to improve the lives of pets and pet parents, and we're leading the way in the credit card space with Petco Pay," said Tariq Hassan, Petco’s chief marketing officer. "This groundbreaking credit card program not only provides great benefits to cardmembers but also gives them the gratification of having a portion of every dollar they spend go toward helping animals in need."

Eight percent cash back on Petco purchases

The cards are being offered through Petco Pals Rewards, the retailer’s membership rewards program. The credit cards’ perks include 20% off the first Petco Pay purchase and 8% back at Petco. 

The company said the Petco Pay Mastercard offers additional earning opportunities like 2% back on grocery store purchases, 1% back wherever Mastercard is accepted, and a $25 Pals Reward for spending $500 outside of Petco within the first 90 days of approval. 

The Petco Pay Mastercard also features a contactless payment option. And to make the card stand out in your wallet, Petco said it will customize the cards with photos of the cardholder’s favorite pet.

Parents will start getting a little monthly financial help starting in July. Internal Revenue Service (IRS) Commissioner Charles Rettig has confirmed the tax agency will be able to begin the payments at that time.

Before the latest pandemic aid bill signed into law in March, parents received a tax credit for each child when they filed their federal tax returns. The credit was paid as part of their tax refund. 

The $1.9 trillion measure increased the amount of the credit and allowed for its monthly distribution to help families with their budgeting, especially families driven into debt by the pandemic.

But with the tax filing deadline pushed back to May 17, the IRS had warned that it was doubtful that the payments to millions of American families would begin on schedule. At a Senate hearing Tuesday, Rettig said his agency could meet the original date.

“If we end up not being on track for some unforeseen situation, we will advise you and the committee,” Rettig told Sen. Sherrod Brown (D-Ohio).

Eligibility requirements

The monthly payment parents receive will depend on how many children they have and their household income. Individuals earning less than $75,000, or married couples earning $150,000 or less, will get the full benefit, which has been raised from $2,000 to between $3,000 and $3,600. 

The new law increased the tax credit to $3,000 per child aged 6 to 17 and $3,600 per child under the age of six for the 2021 tax year.

Parents making more than the income thresholds will still receive the original credit -- $2,000 per child under age 17 for families making less than $200,000 annually, or $400,000 for married couples.

Monthly payments from July to December

The new, increased tax credit will come in the form of a monthly check from the IRS from July through December. The amount each family gets will range from $250 for older children and $300 for children under the age of six. The other half of the tax credit will come in the form of a tax refund in 2022.

To receive the tax credit, parents must have filed a 2020 tax return. Rettig said the tax agency won’t have the information required to distribute the payments if it doesn’t have a return on file.

Aside from filing a federal return, there are no requirements. There is also no limit on the number of children in a family getting the payments if they meet the eligibility requirements.

Many successful businesses take the step of co-branding their own credit cards by partnering with a credit card lender. Two delivery firms that thrived during the pandemic -- DoorDash and Instacart -- are apparently ready to take that step.

The Wall Street Journal reports that Instacart, which delivers groceries, is linking up with JPMorgan Chase to issue a co-branded credit card packed with rewards and incentives. DoorDash, one of the leaders in restaurant order delivery, is also said to be poised to launch its own credit card and is in negotiations with major banks and fintech companies.

With the pandemic potentially drawing to a close, both companies are hoping consumers continue the ordering habits they formed during the last year. According to The Journal, the companies believe that having a rewards credit card will keep their newly won customers engaged once restrictions are lifted.

Banks always like it when successful merchants brand a credit card, seeing it as a way to make inroads with consumers who like and support a particular brand. The more credit cards get used for purchases, the more profitable it is for banks.

No comment

Neither company has commented on the report, but The Journal says it has spoken to people with knowledge of the deals who have provided some of the details. For example, the Instacart card is expected to offer 5 percent cash back on Instacart purchases.

DoorDash is reportedly reviewing bids and plans to make a selection in the coming weeks. JPMorgan Chase is also said to be pursuing a deal with DoorDash.

Is there room for more co-branded credit cards? The average consumer has about four credit cards in their wallet, so the field could expand. JPMorgan is already a partner in Amazon’s co-branded credit card, but major banks tend to link up with hotel and airline cards since those purchases tend to be larger. 

Some of the most widely used co-branded credit cards include the Southwest Rapid Rewards  Priority Credit Card, the Hilton Honors Aspire Card from American Express, and the Costco Anywhere Visa Card issued by Citi.

Is a co-branded credit card right for you? Check out ConsumerAffairs’ verified reviews of the top credit cards here. 

With the end of the coronavirus (COVID-19) pandemic in sight, a new survey suggests that about a third of consumers will resume running up big credit card bills. However, even more consumers won’t.

For 42 percent of the consumers in the Debt.com survey, the curbs they put on credit card purchases during the pandemic may be lasting. At least, that’s their stated intention.

The survey seems to suggest that many consumers learned valuable money lessons during 2020. In 2019, when Debt.com asked consumers how often they hit their credit card credit limit, 49 percent replied “never” or “rarely.” In the latest survey, conducted at the height of the pandemic, 57 percent gave that answer.

In fact, credit card usage is down despite the fact that so much retail activity has moved online. There was a 10 percent decrease in the number of people who said they used credit cards for shopping. 

Credit card balances declined

The number of people carrying more than $20,000 in credit card debt increased, but only by 1 percent in the first quarter of this year. Overall, the money consumers owed on credit card balances fell last year, according to Experian.

It was the first time in seven years that any major consumer debt category went down. Experian called it “a surprising turn of events” given the broader economic environment brought on by the pandemic.

Before last year, consumer credit card debt had grown for eight straight years, hitting a record high of $829 billion in 2019. In 2020, balances plunged by 9 percent, bringing total U.S. outstanding credit card debt to $756 billion, the lowest point since 2017.

Warning sign

The Experian data dovetails with the Debt.com survey, showing that consumers have reduced their credit utilization and improved when it comes to on-time payments. The Debt.com survey shows the number of people opening new credit card accounts dropped by 1.5 percent last year.

"Opening new credit cards can drag down your credit score and it's a warning sign," said Debt.com President Don Silvestri. "In my experience, it's likely that a person has maxed out their other cards and is seeking more breathing room. Unfortunately, they rarely catch up. Instead, they get trapped with more debt."

Rod Griffin, senior director of consumer education and advocacy for Experian, says consumers tend to make better financial decisions when they understand the factors that influence credit standing.

He says that by reducing credit utilization and delinquencies, consumers have done the two most important things they can to improve their credit scores, which “should position them better to emerge strong from the pandemic."

With pandemic-related financial stresses still burdening many consumers, three national credit reporting agencies -- Equifax, Experian, and Transunion -- have announced that they are extending free weekly credit report monitoring until April 2022. 

The companies said they will continue to offer free weekly credit reports until after next year’s Tax Day so that Americans can continue keeping tabs on their financial data during the COVID-19 pandemic. 

“Access to financial information and records on a more frequent basis helps people plan for their future while also taking care of the present," said Equifax CEO Mark W. Begor, Experian CEO Brian Cassin and Transunion CEO Chris Cartwright in a joint statement this month. "We strive to make credit more accessible and available to people every day and we hope continuing to make free credit reports available each week is helpful to consumers."

Check your credit report regularly

Credit reports have information about your credit history and payment history that lenders look at before approving loans and determining what interest rate to offer. Before the COVID-19 pandemic, U.S. consumers were entitled to one free credit report from each agency per year.

By checking your credit report regularly, you can ensure that the report is correct. If the report contains an error in any section, you can notify the credit reporting agency to initiate a dispute of that information.

“For consumers, ensuring that one’s credit remains in good standing during this time goes beyond paying mortgages, auto loans, credit card bills and other financial obligations each month," said Francis Creighton, President and CEO of the Consumer Data Industry Association.

Consumers can obtain free credit reports by visiting AnnualCreditReport.com.

More consumers are calling their credit card companies and asking for better terms, and a new report from LendingTree suggests that credit card companies are cooperating.

The report suggests that the coronavirus (COVID-19) pandemic has been a major factor. The financial hardships caused by the virus have prompted more requests from cardholders, and the report says it’s also a factor in making lenders more lenient.

The report found that 83 percent of cardholders who asked to have their credit card's interest rate reduced had their request granted. The success rate when asking a lender to waive a late fee was even higher -- 88 percent.

Eighty-three percent of cardholders who asked for a higher credit limit received one, which is remarkable since credit card companies unilaterally reduced credit limits for some customers early in the pandemic. 

It never hurts to ask

Ninety-two percent of those who asked their credit card company to drop an annual fee had their request granted. Matt Schulz, LendingTree’s chief credit analyst, says the lesson is that it never hurts to ask.

"The truth is that people have way more power over their credit card issuer than they realize, and they only need to wield it to save themselves some real money," Schulz said. 

But the report makes clear that too few credit card customers are making these kinds of requests. Fewer than half of those with an annual fee card asked for that fee to be waived or reduced in the last year, but almost everyone who asked got a “yes” answer.

Women were more likely than men to speak up and ask for these breaks than in past years and, in most cases, were more likely to have them granted than in previous years. People who experienced a loss of income during the pandemic asked their lenders for help more than those whose income remained the same. 

Lenders want to be seen as accommodative

LendingTree found that, for the most part, these requests were met with approvals on the part of the credit card companies, which no doubt wanted to be viewed as helpful during a trying time for the country. But Schulz says consumers shouldn’t wait for an emergency to ask their credit card company for a break.

"It's incredibly important to know that you have options during a global, economy-wrecking pandemic, of course, but it is also a good idea even in the best of times,” he said. “The more fees you can avoid and the more interest rates you can lower, the better — and as this survey shows, often all it takes is a simple phone call to make it happen."

The Consumer Financial Protection Bureau (CFPB) is trying to moderate a recently discovered loophole that allows debt collectors to take Economic Impact Payment (EIP) funds from consumers’ bank accounts. On Wednesday, the agency said it was encouraging both creditors and financial institutions to allow the stimulus checks distributed through the American Rescue Plan to reach consumers before taking any over-the-top actions.

“The Consumer Financial Protection Bureau is squarely focused on addressing the impact of the COVID-19 pandemic on economically vulnerable consumers and is looking carefully at the stimulus payments that millions are now receiving through the American Rescue Plan,” said CFPB Acting Director Dave Uejio. 

“The Bureau is concerned that some of those desperately needed funds will not reach consumers, and will instead be intercepted by financial institutions or debt collectors to cover overdraft fees, past-due debts, or other liabilities.”

Financial institutions say they want to help consumers

Uejio said that his agency has had discussions with financial industry trade associations that want to work with consumers who are struggling during the pandemic. 

Many of those organizations went as far as saying that they have already begun -- or will soon begin -- taking proactive measures to make sure that consumers can access the full value of their stimulus payments. 

“If payments are seized, many financial institutions have pledged to promptly restore the funds to the people who should receive them, Uejio said.

Advice for consumers

The CFPB says consumers should monitor their bank accounts or use the IRS’ Get My Payment tool to confirm that EIP funds have been deposited into their accounts. The agency has also launched a new consumer advisory that offers advice on the steps consumers can take if they believe their bank or credit union has withheld their stimulus payment to cover an overdrawn account balance. 

In overdrawn account balance situations, the CFPB says banks and credit unions may employ a variety of methods to ensure that their customers have access to the full value of their EIP funds.

Frequently, financial institutions have issued temporary provisional credits in the amount of the overdrawn account balance. However, it’s important to note that provisional relief credit may only be temporary, and the credit might be taken back after a specified period of time. It’s rare, but the CFPB says that some banks and credit unions have gone as far as permanently forgiving overdrawn account balances or issuing paper checks for the full EIP amount to consumers with overdrawn accounts. 

“If you think your bank or credit union will take or has taken a portion of your EIP to cover money you owe to the bank or credit union -- call them. If you legitimately do not owe the money, you should make them aware,” advises the CFPB’s Valentin Mihalache.

“Each financial institution has its own policies, but many are willing to work with customers who have been financially impacted by COVID-19. If they offer you a temporary credit, ask them to explain how it works and when you’ll have to pay it back. You can use our guiding questions to talk to your bank or credit union about this issue.”

Mihalache says consumers should also be aware of potential scams and avoid giving personal or banking information to unsolicited callers who claim to help with relief payments. Consumers can submit complaints to the CFPB online or by calling (855) 411-2372.

If you’re waiting for the mailman to deliver your $1,400 stimulus check, it’s on its way. However, if you’re in debt, that $1,400 might be gone before you ever see it.

The Internal Revenue Service (IRS) is not allowed to offset the amount of the stimulus check to pay various past-due federal debts or back taxes, but that’s where the agency’s authority ends. Other forms of debt -- such as state taxes, credit card bills, and medical bills -- remain unprotected. 

To make matters worse, those stimulus funds can be taken out with no questions asked. All a debt collector has to prove is that they have obtained a judgment against the debtor to collect on those accounts.

Lawmakers try to remedy the situation

While the stimulus plan offers many benefits -- from a Child Tax Credit of up to $3,600 per child, $20 billion for rental assistance, and $4.5 billion for energy bills through the Low Income Home Energy Assistance Program -- the loophole that gives creditors access to in-debt consumers’ bank accounts is ominous.

Some of the stimulus checks have already landed in people’s bank accounts, and some of the larger banks are expecting a landslide of deposits this Wednesday. That means the opportunity to remedy the situation with debt collectors is closing quickly. However, lawmakers are stepping in to try to fix the issue as quickly as they can.

Sen. Ron Wyden (OR-D) said he plans to introduce legislation that would safeguard the stimulus money from being garnished so that debt collectors can’t prevent those in need from getting access to emergency funds.

Different check, but same loophole

Wyden is not alone, and this isn’t the first time that this loophole has been left open.

“The stimulus is an essential shot in the arm to help families pay for food, rent, medicine, and auto loans, and stay connected to essential utility services,” said National Consumer Law Center Associate Director Lauren Saunders. 

But Saunders noted that the new bill, unlike the December stimulus bill, fails to prohibit debt collectors from garnishing bank accounts to grab stimulus payments. “Now Congress must take immediate action to ensure that the economic stimulus payments feed families as intended rather than debt collectors,” he said.

Despite a pandemic that threw the economy into reverse a year ago, Americans managed to pay off a record $82.9 billion in credit card debt, according to the personal finance site WalletHub.

In a typical year, Americans add $54.2 billion to their credit card balances. But 2020 was anything but a typical year. Amid economic uncertainty early in the pandemic, consumers mostly kept their credit cards in their wallets. WalletHub analyst Jill Gonzalez says it’s just the second time in the past 35 years that U.S. consumers have ended the year owing less credit card debt than they started with.

“Paying off so much credit card debt indicates that consumers have been making the most of the pandemic, by using the stimulus money and COVID restrictions to make their finances more sustainable,” she said.

Average balance: $8,089

Oddly, consumers said the pandemic made it more difficult to run up debt. They didn’t go to restaurants as much, they didn’t take trips, and they didn’t shop as much. As a result., the average credit card balance dipped to $8,089 last year. It rose a little more than 3 percent in the fourth quarter of 2020, but that was the slowest increase in a decade.

With the vaccine rollout well underway Gonzelez expects that spending will increase by as much as $50 billion this year, and much of that spending will end up on credit cards.

“A short-term burst of spending is inevitable as pandemic restrictions are lifted,” Gonzalez said. “The question is which way the pendulum swings in 2022 and beyond. My hope is that consumers will internalize lessons learned during the pandemic and showcase a newfound frugality.”

Americans still owe more than $1 trillion on credit card balances, but they appeared to manage better in 2020 than in past years. The credit card “charge-off” rate -- the rate at which credit card companies give up on collecting what they are owed -- was 2.53 percent in the fourth quarter of last year, a drop of 24.3 percent.

Make a budget

Credit card debt is among the most expensive debt consumers take on, with an average interest rate of around 17 percent. Personal finance experts say consumers can avoid increasing their credit card balance by making a budget and sticking to it.

Using a balance transfer card with a least 12 months of 0 percent interest is also a good way to make progress in paying off debt since the entire monthly payment pays down the principal.

ConsumerAffairs has researched the best balance transfer credit cards here.

U.S. military personnel say their training helped them cope with the financial uncertainties of the coronavirus (COVID-19) pandemic, but a survey shows that many had difficulty getting access to credit when they needed it.

According to the National Foundation for Credit Counseling (NFCC) 2020 Military Financial Readiness survey, military households were generally prepared to deal with the crisis that began nearly a year ago. But as the situation continued, the survey showed active duty and veteran households had difficulty maintaining their income. Gig economy jobs were harder to find, and credit opportunities dried up.

As a result, this community encountered a trend toward increased reliance on borrowing. Active duty households struggled more than veterans. Rebecca Steele, President and CEO of the NFCC, said the survey uncovered some distinct challenges faced by members of the military community.

“By clearly outlining the unique financial challenges of military families and veterans, our survey presents a roadmap that helps us take action based on areas of greatest need,” she said.

Reliance on payday lenders

Among the troubling findings, the survey suggests that the COVID-19 pandemic may be a contributing factor to increased payday loan usage. Fifty-percent of households in the survey reported difficulty finding adequate loan options during the pandemic.

That burden fell heaviest on active duty service members; they were twice as likely to have taken out a cash advance or payday loan in 2020 than in 2019.

While citing their military training as preparing them to adapt to the crisis conditions brought on by the pandemic, the survey shows that many military families lacked the financial resources to meet the challenge. One in five military spouses reported being financially unprepared when the economy shut down.

Disruptions in spouses’ employment

Part of that may have been due to disruptions to employment. Complications with Permanent Change of Station (PCS) moves during the pandemic may have contributed to military spouses’ employment challenges and resulted in a loss of income at a critical time, forcing many families to seek credit anywhere they could find it.

“The pandemic has amplified the need for more affordable sources of credit for service members who may be facing gaps in income,” said Darlene Goins, head of Financial Health Philanthropy at Wells Fargo. 

Goins said the bank supports NFCC’s program of free access to financial coaching to help military households plan, create a budget, and prepare for future emergencies. 

“Ultimately, the goal is to create a safe space to work through financial challenges,” she said.

The survey found veterans faced their own financial struggles during the pandemic. Forty-nine percent said they would have liked to have more information about financial resources that were specifically tailored to veterans.

Congressional Democrats are hammering out the details of a key element of their proposed $1.9 trillion stimulus bill. The measure would significantly increase the Child Tax Credit and change the way it is distributed.

Language in the stimulus measure instructs Congress to create a $25 billion emergency fund and spend $15 billion on an existing grant program to help child care providers.

Specifically, it would expand the child care tax credit for one year so that families would get back as much as half of their spending on child care for children under age 13. Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, says the measure under consideration would give families at least $3,000 per child.

"The pandemic is driving families deeper and deeper into poverty, and it's devastating,” Neal told CNN. “We are making the Child Tax Credit more generous, more accessible, and by paying it out monthly, this money is going to be the difference in a roof over someone's head or food on their table." 

What families would get

According to CNN, which obtained a copy of the proposed bill, the measure would pay families $3,600 per child under the age of six and $3,000 per child aged 6 through 17. The current Child Tax Credit pays $2,000 per child.

The benefit would last for a year and be limited to single parents earning up to $75,000 a year and for couples earning up to $150,000. 

The payments could be made on a monthly basis so that families could make it part of their household budgets. Typically, tax credits are distributed as part of income tax refunds. If passed by Congress, Neal said payments would begin in July.

Congress has yet to pass the $1.9 trillion aid package, but Democrats say they have the votes to do so. In the Senate, where no Republicans have signaled support, Democrats plan to use budget reconciliation to pass the measure with a simple majority.

At the start of the coronavirus (COVID-19) pandemic, many credit card companies lowered some customers’ credit limits. They even unilaterally closed some customers’ accounts to limit their risk as millions of cardholders suddenly became unemployed.

But at the start of 2021, with two vaccines rolling out and a third on the way, credit card companies want your business again. Some are offering incentives to encourage you to apply. Some of these perks are more attractive than others.

Our friends at CardRatings.com have sifted through the offers and highlighted the ones that should catch consumers’ attention. Here’s a sampling:

• Chase Freedom Unlimited. Once you sign up you can earn $200 after spending $500 in the first three months of card membership. It’s normal perk is 1.5 percent cashback on all purchases. That’s still in place, but it has added 5 percent on travel spending and 3 percent cashback on purchases at restaurants and drugstores.

• Blue Cash Everyday. Earn up to $300 by hitting a few goals after signing up. Earn $100 by spending $1,000 within six months of opening an account. You earn 20 percent back on Amazon purchases made during the same timeframe, up to $200 back. Instead of having to earn the bonus in three months new cardholders now have six months.

• Gold Card from American Express. Open a new account and earn 60,000 rewards points by spending $4,000 within the first six months. That’s a nearly 100 percent increase over what it was a year ago. It also provides a longer time to earn it.

Business credit cards

Small business credit cards have also gotten more generous in 2021. With many businesses struggling, not only is expanded access to credit helpful, the rewards can also come in handy.

• Ink Business Cash. After opening an account cardholders can earn $750 after spending $7,500 in the first three months of card membership. While the requirement is an increase over last year the reward is greater, and an average spend of $2,500 a month for a business over three months may not be a stretch.

• Amex Business Platinum. New cardholders have the chance to earn 85,000 rewards points after spending $15,000 on qualifying purchases during the first three months of card membership. It doesn’t stop there -- you get 5X points in five select business categories during the same timeframe.

"These types of bonus offers could help cardholders offset some of their expenses, or assist small businesses struggling to make ends meet," says Jennifer Doss, an editor for CardRatings. "Terms and welcome offers often change, so it's important to read the fine print and pay close attention to a card's details when opening a new account."

You can check out these and other major credit cards and read thousands of verified reviews in the ConsumerAffairs credit cards buyers guide.

It’s commonplace for retailers to have their own vanity cards, but Walgreens’ latest foray goes a little further. In an effort to boost both loyalty and revenue, the drugstore chain says it will partner with Synchrony and Mastercard to launch credit cards and a prepaid debit card, and it is exploring other financial services.

The company’s short-term plan for the credit cards is to connect them with its new customer loyalty program, myWalgreens, allowing cardholders to receive cash rewards and other offers. 

A wide range of benefits

Walgreens is keeping its cards close to its chest, only going as far as saying that the co-branded credit card will offer an undefined “wider range of benefits” when used at other retailers and service providers. The offering will reportedly be the first in another “range of new financial products and services” that the company has up its sleeve. While it didn’t give specifics, it said in a release that it plans to explore a number of add-ons that Mastercard offers such as point-of-sale financing and installments.

That last part -- point-of-sale financing and installment plans -- comes directly from the financial crunch that the pandemic put the consumer world in. According to a report by Salesforce and coverage by CNBC, the use of “buy now, pay later” for online orders grew 109 percent during the 2020 holiday shopping season.

The company is also taking a health-first cue from the pandemic, allowing customers to have access to contactless shopping experiences.

“Walgreens is committed to providing our customers and patients with unparalleled loyalty and rewards experiences for managing their health and well-being, and we are excited to partner with Synchrony and Mastercard, who share our commitment to support healthy communities,” said John Standley, Walgreens president. 

“As we continue to focus on creating new revenue streams, we look forward to exploring and introducing even more health and well-being payment initiatives in the near future.”

The new Walgreens credit cards are slated to be available in the second half of 2021, and eligible customers will be able to use the Walgreens credit card for purchases at more than 9,000 Walgreens stores, via the Walgreens mobile app, and at Walgreens.com.

The incoming Biden administration is supporting a proposal for a government-run credit reporting agency that it says would make lending fairer and go a long way toward eliminating racial and wealth disparities in the financial industry.

Under the proposal, developed by the think tank Dēmos, the credit agency would be part of the Consumer Financial Protection Bureau (CFPB) and would replace the for-profit credit agencies over a seven-year period.

“A public credit registry would develop algorithms that diminish the impact of past discrimination, deliver transparent credit scoring, provide greater data security, and offer a publicly accountable way to resolve disputes,” writes Amy Traub, associate director, Policy & Research at Dēmos, who developed the proposal. “The use of credit information for non-lending purposes, such as employment, housing, and insurance will be curtailed.”

The plan to create a government credit reporting agency is contained in Biden’s housing program, which is aimed at ending discriminatory housing practices.

Tools to raise your credit score

In the meantime, consumers seeking to boost their credit score in the new year have a number of tools to help them. XTM, a Canadian Fintech company, has rolled out what it calls “micro-credit” to its Today credit cardholders.

The company says its new product delivers overdraft protection on a subscription model and reports a good repayment history to the credit bureaus, increasing subscribers' credit score. 

There are other simple steps consumers can take to add points to their credit score. Among the most important is paying all bills on time every month; late payments are one of the largest factors weighing down credit scores.

Pay your credit card bill early

Consumers who pay off their credit card balances in full each month can get the maximum benefit from that by simply moving up their payment date. According to Credit Karma, credit card companies report balances to the credit agencies on the day the account closes for the month.

The cardholder has 30 days in which to make the payment, but as far as the credit agencies are concerned, the consumer is carrying a credit card balance. The credit agencies are never informed that the balance has been paid off before the due date.

By checking your balance three or four days before the closing date and paying the complete balance immediately, the credit agencies see a $0 balance when the account closes for the month. Credit Karma says that’s worth several points on your credit score.

Here’s why: According to Experian credit balances, credit utilization, or the percentage of your available credit that you're using, makes up 30 percent of your FICO score. Paying the balance before the month is over keeps your balance well under 30 percent of your available credit.

Consumers who have a travel rewards card may find that it hasn’t been all that useful during the pandemic since travel has been limited. But a number of card issuers have found other ways to offer their customers perks, even when they don’t leave home.

MyFICO recently reported on how some card issuers are rewarding their home-bound cardholders. They’re expanding their higher-earning rewards categories to appeal to the shift away from travel spending. 

For example, the Chase Sapphire Preferred Card is now offering more points for grocery purchases. Cardholders can earn two points per dollar on up to $1,000 in grocery store purchases from November 1, 2020 to April 30, 2021. 

At the same time, cardholders can also accumulate two points per dollar spent on dining, which includes eligible delivery services and takeout.

The Chase Sapphire Reserve Card is also offering more rewards on groceries and gasoline purchases. From June 30, 2020 through June 30, 2021, cardholders are getting an automatic statement credit on gas and grocery store purchases of up to $300.

Grocery store purchases made between November 1, 2020 to April 30, 2021 will earn three points per dollar.

Restaurants, supermarkets, and gas stations

Citi Premier, another popular travel card, has beefed up its points offered on restaurants, supermarkets, and gas purchases. Cardholders get three points per dollar when they use the card at restaurants, supermarkets, and gas stations -- and it still rewards travel. Travelers get three points per dollar on travel expenses.

Ordering out has become a household routine during the pandemic, and Capital One travel cards reward customers when they use UberEats. From now through January 31, 2021, the Capital One Venture and VentureOne are offering five points per dollar on UberEats food delivery purchases.

If you’ve already racked up a lot of miles and points on your travel card, remember that they don’t always have to be redeemed for travel. If you check into your card’s rewards options, you may find that you can cash in your miles for statement credits, gift cards, and even merchandise.

If you carry a travel rewards card in your wallet, it’s important to make it rewarding in some way. Many of these cards carry a hefty annual fee. If you aren’t getting rewards to at least cover the fee, there are many more efficient options.

While closing an account can negatively affect your credit score, you may be able to stay with your same provider but switch from a card with an annual fee to one without one.

While holiday spending showed a modest increase this year, the people doing the spending were racking up a serious amount of debt. 

According to a December 2020 MagnifyMoney survey, fewer Americans piled up holiday debt than in pandemic-free 2019, but those who used a credit card or took out a loan did it to the tune of $1,381 on average. That’s an increase of nearly $400, or 40 percent, since MagnifyMoney first started conducting its survey in 2015.

Pushing credit as far as possible

The consumer market was seemingly undeterred by COVID-19 or mounting unemployment rates. While it wasn’t exactly spend-at-all-costs, shoppers inched closer in that direction. Here are some of MagnifyMoney’s findings that show just how far consumers went into debt over the 2020 holiday:

The credit card bill can wait. As might be expected, credit cards were the most popular way to pay for holiday purchases among those who took the debt route. Fifty-six percent of the borrowers surveyed said they flexed the plastic this holiday season, but almost all of those who took on holiday debt (89 percent) said they’re not likely to pay the total completely off on their first month’s bill, putting them into the precarious position of taking on hefty interest charges.

“Still, most consumers will likely not take advantage of debt payoff strategies like debt consolidation or balance transfers,” commented Erika Giovanetti, the debt and personal loans writer for LendingTree. “Less than two in five (38 percent) consumers with holiday debt will try to consolidate their debt or shop around for a good balance transfer rate. For those who will not, the most common reason was not wanting to deal with another bank (20 percent).”

Personal loans continue their rise. The number of Americans with personal loans has increased steadily in recent years from 15 million to 20+ million, according to TransUnion, but the number of people turning to personal loans to finance holiday purchases is also on the rise. More than one in four of those who took on holiday debt this year (27 percent) said that debt came from a personal loan, up from one in five (20 percent) a year ago. 

Younger consumers dancing on the edge

The researchers conducting the survey said their findings also point to a troubling trend of buying now and paying later among younger consumers. 

“Point-of-sale financing companies like Affirm and Quadpay are popular among consumers. Nearly four in 10 (37 percent) of all Americans surveyed used ‘buy now, pay later’ financing for at least one holiday purchase this year,” Giovanetti said, pegging millennials and parents of young children as the demographics most likely to utilize this type of financing.

Gionvaetti’s cohort, Matt Schulz, chief credit analyst at LendingTree, says that point-of-sale found its groove in 2020 and is likely here to stay. “People like it because the payments are typically predictable and easier to understand than credit card payments, and there’s no risk of running up more debt after the loan is paid off,” he said.

While it’s probably not something they’d teach in Economics 101, the survey laid bare that half of those laid off or furloughed due to the pandemic in the millennials/young parents group also took on holiday debt -- most likely to try and bring something positive to 2020.

“The pandemic has wrecked so many things for so many people, canceling birthday parties, vacations, family get-togethers and more,” said Schulz. “Now, many people are likely trying to overdo it a bit for Christmas to make up for a crummy year. It’s easy to understand, but that spending can really clobber your budget.”

When the coronavirus (COVID-19) pandemic struck in March, credit card companies reacted almost immediately, unilaterally closing some accounts and approving fewer new ones.

Now that vaccines against the virus are rolling out and an end to the pandemic is in sight, what credit card trends are in store for 2021? CardRatings.com has issued a new report listing some of the changes consumers can expect in the coming year.

Among the trends, the company’s analysts believe it will continue to be a bit harder to open a new credit card account. When accounts are approved, they may also have smaller credit limits. That’s because credit cards are unsecured debt, meaning the lender has no collateral in the event that the consumer can’t pay. With unemployment still high and the economy still uncertain, lenders can be expected to show some caution.

"Thankfully, with the recent vaccine rollout, there's reason to be hopeful the economy – and credit card approvals – bounce back sooner rather than later," said Brooklyn Lowery, senior managing editor for CardRatings

Shifting rewards

In the meantime, there could be less available credit in the consumer economy. Small businesses may find they’re making fewer sales. On the other hand, the just-signed stimulus bill may help by putting money in consumers’ pockets.

Travel rewards cards are getting much less use during the pandemic, so lenders are finding alternative ways to reward cardholders for using them. One example is the Chase Pay Yourself Back program that allows consumers with the Chase Ultimate Rewards card to redeem points for several categories of everyday purchases. 

That perk was announced as a "limited time" feature earlier this year, but it has already been expanded to additional cards and extended into 2021. CardRatings analysts say the program could even become a permanent feature as banks try to retain cardholders while attracting new ones.

Rising rates

A third trend to watch for in the coming year is rising credit card interest rates. Rates have been stable and even declined some during the pandemic because the Federal Reserve has essentially cut a key interest rate to 0 percent.

CardRatings analysts don’t expect that trend to continue. Bond yields are already beginning to show some signs of life, and credit card rates could soon rise as well, especially as the pandemic begins to end.

"Historically, interest rates tend to go up as the economy improves," Lowery said.

That’s why consumers should start now paying down credit card balances. In the future, more of the monthly payment may go toward just paying interest.

Capital One reportedly will no longer allow its customers to use its credit cards to pay off debt accrued through “buy now, pay later” (BNPL) transactions, which have grown in popularity during the pandemic.

A growing number of apps offer BNPL services in which a consumer purchases an item and charges it through the app. The consumer makes four payments, usually every two weeks, to clear the debt.

Consumers don’t pay interest. The app company charges the merchant a small commission. But the transactions are considered risky because the consumer is not required to submit to a credit check.

Reuters reports that Capital One has confirmed that it will not allow its customers using its credit cards to clear BNPL debt because of “unacceptable risk.” It’s the first credit card company to take that step.

‘Risky business’

Reuters quotes a Capital One spokeswoman as saying the company is ending the practice of consumers putting “point-of-sale” loans on its credit cards. 

“These kinds of transactions can be risky for customers and the banks that serve them,” the spokeswoman told the news agency.

Credit card companies also view BNPL as a growing source of competition. Consumers who switch from paying with a credit card don’t pay interest, which averages about 17 percent on balances. 

How it works

One BNPL app company, Klarna, explains how it works in the terms and conditions on its website:

• Use your own valid debit or credit card, or other accepted payment method, to pay (no prepaid cards).

• The initial payment is charged when the merchant completes your order (this is usually the shipping date for online orders).

• The next 3 payments are automatically charged every 2 weeks after your first payment.

• There are no interest charges with Pay later in 4 installments, and no fees when you follow your automatic payment schedule.

BNPL services are largely unregulated, even though they involve what are in effect interest-free loans. A search for “buy now pay later” on the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) websites returned no results.

Some personal finance experts have warned that BNPL could pose trouble for impulsive consumers. They say consumers could look past the high cost of an item if they only see the payment they will be required to make every two weeks.

With so many consumer purchases shifting to online channels this year, it should come as no surprise that credit card usage is much higher than in past years. For that reason, using the right card for your particular needs and protecting the card from data thieves are two important considerations.

A new survey from Generali Global Assistance (GGA) found that 86 percent of consumers plan to do most of their holiday shopping online this year and 62 percent of shoppers plan on using just one card to make purchases.

Not only does using a single card make it easier to keep track of spending, security experts say it’s also safer.

"The pandemic has created the perfect environment for scammers, who are exploiting uncertainty and our more digitally focused reality, said Paige Schaffer, CEO, Global Identity and Cyber Protection Services at GGA. “Thirty-six percent of shoppers we surveyed this year indicated that their credit card provider experiencing a data breach was a top concern this holiday season.”

Best cards for security

If you’re using a single card, having one with robust fraud protection, as well as other consumer-friendly features, will work to your advantage. The personal finance site MoneyUnder30.com recently ranked credit cards for their security features.

It rated Wells Fargo Cash Wise Visa Card as best for fraud protection. It singled out the Discover It Cash Back card as best for security and cashback.

While security is very important, consumers also consider perks and benefits when choosing a credit card. But consumers should consider their needs. Do they need to transfer a balance or do they need cashback? In the era of COVID-19, travel rewards may be less important than they used to be.

Rating the cards

In its recent analysis of the best credit cards for 2021, CardRatings.com offered choices in 11 different categories. Some of the picks for next year include:

• Best Flat-Rate Cash-Back Rewards – Citi Double Cash Card

• Best for Families – Blue Cash Preferred Card from American Express

• Best General Travel Rewards – Chase Sapphire Preferred

• Best Balance Transfer Offer – Citi Diamond Preferred

• Best Student Credit Card – Discover it Student Cash Back

• Best for Small Business – Ink Business Preferred

The editors say they consulted consumers as well as experts, scoring cards on customer service, rewards, usability, and other factors.

ConsumerAffairs has also dug deep into various credit card offers, looking for the best fit for a wide range of needs. You’ll find our results here.

If you’re wondering why Congress and the Trump administration haven’t been able to enact another round of stimulus to help struggling Americans, you aren’t alone. Federal Reserve Chairman Jerome Powell is on the same page.

In prepared remarks made to a Senate committee on Tuesday, Powell said the economy needs more help, and it needs it soon. Focusing primarily on the money Congress appropriated for the Fed’s lending programs, Powell credited that move with keeping the economy afloat during the coronavirus (COVID-19) pandemic.

“These programs serve as a backstop to key credit markets and have helped restore the flow of credit from private lenders through normal channels,” Powell told the Senate Finance Committee. “We have deployed these lending powers to an unprecedented extent.”

There’s $455 billion of CARES Act funds that have not been spent. Powell has asked that it be released for the Fed’s lending efforts, but Treasury Secretary Steven Mnuchin says the Trump administration thinks it would be better spent in providing aid directly to Americans and small businesses.

Partisan deadlock

Republicans and Democrats in Congress have not been able to agree on another round of stimulus help, even though both sides agree on several basic principles -- direct payments to Americans and help for small businesses.

The issue has taken on greater urgency with the arrival of December since several key provisions of the CARES Act expire at the end of this month. They include:

• A moratorium on evictions for renters;

• Suspended payments on student loans;

• A tax credit for companies that retain their workforce;

• $150 billion in aid to state and local government cannot be rolled into 2021;

• A 13-week extension of unemployment benefits; and

• Unemployment benefits for freelancers and contract workers.

‘Everything gets worse’

When these provisions expire at the end of the month, renters who are behind on their payments can be evicted, student loan borrowers must resume payments, businesses rewarded by the government for not laying off employees will no longer have that benefit, and millions of Americans could lose their unemployment benefits.

“Everything gets much worse on Dec. 31, with a lot of money running out and a lot of people in desperate straits,” Rep. David Price (D-N.C.), a senior member of the House Appropriations Committee, told the Wall Street Journal.

A vaccine may be in sight, but it could be months before a significant portion of the population is inoculated. In the meantime, Powell says the outlook for the economy is “extraordinarily uncertain.” He says a full economic recovery is unlikely until Americans are confident that it is safe to reengage in a broad range of activities.

Many households are facing staggering credit card debt, but fintech firm SoFi says its newly issued credit card could help with that.

The company says its first credit card promotes healthy financial habits and delivers on its mission to “help people get their money right.” The card, on Mastercard’s network, has no annual fee and provides up to 2 percent unlimited cashback when redeemed into SoFi Money or SoFi Invest accounts.

The two percent rate also applies when the rewards are used to pay down SoFi Student Loans or SoFi Personal Loans. The card launched last week with a small number of SoFi members. Consumers interested in the card can get on a waitlist for when the card membership is fully open.

‘Holistic, healthy money habits’

Company executives say the card is aimed at helping consumers chip away at the $14.3 trillion in consumer debt with rewards that are most valuable when used to pay off debt. Other options include investing the rewards or saving for a rainy day.

"Based on feedback from our members, we designed a credit card that helps our members pay down debt or invest in the future with every purchase while building holistic, healthy money habits," said SoFi CEO Anthony Noto. "Through simply using the SoFi Credit Card and following the same daily spending patterns that our members do today, we are making 'getting your money right' the most intuitive and convenient choice."

Cardholders who carry a balance on the card will also be rewarded if they use the card responsibly, the company says. The interest rate on balances will go down by 1 percent after 12 straight on-time credit card payments and will remain at that level as long as on-time payments continue. 

According to the Federal Reserve, U.S. consumers were carrying $1.08 trillion in credit card debt in the third quarter of 2019. That made up a little over 26 percent of consumers’ total debt at the time.

The growth of fintech

SoFi is one of the growing number of fintech firms that are providing financial services directly to consumers by using technology to provide many of the services traditionally associated with banks. The companies tend to be favored by younger consumers.

SoFi was founded in 2011 by four students at the Stanford Graduate School of business. One of the principal aims was to provide a more affordable student loan product.

"SoFi continues to create thoughtful and innovative products to empower its members to pay down debt and improve their financial lives," said Linda Kirkpatrick, president, U.S. Issuers at Mastercard. "We are proud to build upon our relationship with SoFi and work closely to arm their members with benefits and features that are directly relevant and meaningful to their lives."

With the pandemic’s first Halloween less than a week away, a new WalletHub study finds that consumers are still spending billions on the holiday, but overall, they’re feeling life is a little spookier than they’d prefer.

The survey -- WalletHub’s Halloween Spending & Financial Fears Survey -- lays out these consumer frights:

• A whopping 130 million Americans think the coronavirus is the scariest thing about Halloween this year.

• Nearly 40 percent of Americans are more afraid of credit card debt than the coronavirus.

“Almost 40 percent of Americans are more scared of credit card debt than the coronavirus in part because of political allegiances, but also due to the fact that credit card debt might seem more tangible to an indebted individual who has yet to know someone with COVID-19,” said Jill Gonzalez, a WalletHub analyst. 

“Current events aside, money was the number one stressor for Americans for many years before the coronavirus pandemic, so it shouldn’t be a surprise that credit card debt and money problems in general still scare a lot of us, maybe even more so than before.”

Money concerns are widespread this year

The survey found that the pandemic has led to an increase in the number of consumers experiencing money-related worries.

• Concerns about money problems are hitting 22 million more people this year than last year;

• Close to 90 percent of Americans think that politicians prey on peoples' financial fears;

• Roughly 13 million more Americans are scared about their kids' financial futures in 2020 than in 2019;

• Almost 33 percent of people think their finances are a personal horror show.

Gonzalez said that consumers think the “horror show” label applies for a variety of reasons, including the pandemic’s impact on the U.S. economy, as well as debt levels which continue to be high despite showing recent improvement.

“It’s tough to say your finances are looking good when you’re out of work or waiting for business to pick back up. You can’t ignore the possibility that some people are just being dramatic when saying their finances are a horror show, either,” she said.

An unusually large number of consumers have expressed interest in signing up for a store credit card this holiday shopping season. 

The survey, conducted for CompareCards, found that 44 percent of Americans say they're at least somewhat likely to apply for a store card during the holiday shopping season. That's up from 32 percent in 2019 and 24 percent in 2018.

A store credit card is a Visa or Mastercard that is co-branded with a national retailer. Consumers are often offered a special discount on a purchase if they apply for the card.

The survey authors say the findings are somewhat odd since more than half of people in the survey said they've had a store credit card in the past and have regretted getting one.

What’s changed?

What’s different now? The authors point out that the interest rate on these store-branded credit cards has come down from recent highs, but they’re still higher than the rate on regular credit cards.

Another possible reason for the shift in sentiment could be that more consumers need a credit card. At the beginning of the coronavirus (COVID-19) pandemic, credit card issuers unilaterally closed many credit card accounts or lowered credit limits.

A previous CompareCards survey found that about 70 million people – more than one-third of credit cardholders –  involuntarily had a credit limit reduced or a credit card account closed in a 60-day period from mid-May to mid-July.

Lenders moved swiftly to reduce their risk, fearing widespread unemployment would lead to a wave of defaults. It was impossible for them to determine which of their customers had lost their income -- and were thus more likely to default -- and which were still gainfully employed.

Easy to get

Since store-branded credit cards are easier to get -- clerks often try to sign you up in the checkout line -- more consumers may be giving them another look. But their interest rates tend to be on the high side and the rewards are usually less-generous than traditional rewards cards.

Store cards may also look more attractive to consumers than in the past. In addition to slightly lower interest rates, the rewards are getting better.

More retailers are trying to drive spending by creating tiered-rewards programs that let consumers earn rewards faster the more they spend. That’s fine, but remember those higher interest rates. Carrying a balance can wipe out those rewards very quickly.

The survey found that nearly half the people who currently have a store-branded credit card are carrying a high-interest balance. Fifty-nine percent of consumers with a store credit card say it’s the card they use the most.

Venmo has introduced its first credit card, issued by Synchrony and powered by Visa. Members can manage their card in the Venmo app and earn cashback on each purchase.

Just like the app, the card allows users to transfer money or split purchases with friends. A nice feature of the card is that the top reward category changes based on the customer’s biggest spending category.

Instead of having to choose a category or have one assigned by the credit card issuer each quarter, the new Venmo card will pay 3 percent cash back on the customer’s largest purchase category during a billing cycle. One month it might be airlines, another month it might be groceries.

The card pays 2 percent cash back on items in the second-largest category and up to 1 percent on all other purchases. There is no annual fee.

Spending categories include groceries, bills and utilities, health and beauty, gasoline, entertainment, dining and nightlights, transportation, and travel.

Cash goes into the Venmo account

When a customer earns cash, it’s automatically placed in their Venmo account, allowing them to easily use the money. They can use it to make statement payments, make purchases, or send it to family or friends using the app.

The card has many of the same features of the app. Users can manage their card and spending using the mobile app and track spending activity in real time, organized by spending categories, and split and share purchases.

They can also monitor how much cashback they’ve received, make payments, and otherwise manage the credit card – all in the app. Customers can also choose to receive real-time alerts to help them see when and where purchases are made, and when cashback is applied to their account.

Minimal contact during purchases

Venmo says its credit card is also easier to use. It has an RFID-enabled chip so customers can tap to pay at the point-of-sale, allowing for minimal contact, instead of inserting the chip or swiping their card at the point-of-sale.

Venmo’s card also takes advantage of parent company PayPal’s QR code-scanning for credit-card purchases at some brick and mortar and online retailers. To start, the Venmo card’s QR code will only work for card activation and for other Venmo users to send card customers a payment.

Venmo is doing a soft rollout, making the new card available only to a small percentage of current Venmo users this year. The card will be fully available in the first quarter of next year.

LendingTree, an online loan marketplace, has introduced a new app designed to connect all of a users’ financial accounts in one place. The goal is to help consumers better manage their financial lives.

Most people with bank accounts have online access to their accounts. The same is true if they have a mortgage, credit cards, or investment accounts. The new app, My LendingTree, connects with consumers' checking and savings accounts, in addition to credit cards and loans, providing a comprehensive financial overview in a single program.   

The app connects to bank accounts at over 11,000 institutions. By integrating checking and savings account information, the app can show budgets, spending habits, transaction history, and cash flow analysis while also letting users check credit scores, savings recommendations, and identity monitoring updates. 

By consolidating all of this information in one place, a user doesn’t need to log into multiple accounts and can go to one place to keep up with how they’re doing financially. The app is available with a free download.

"Fintech is helping to make money easier, which often begins with understanding your financial situation and the options available to you," said Eric Sager, COO of Plaid, the platform that powers the app. "MyLendingTree now makes it easy to securely link your financial accounts through Plaid, including loans and other debts, and get a comprehensive view of your finances to help you improve your money management."

Monitoring finances and making smarter decisions

In addition to showing information from bank accounts, the app provides a cash flow analysis, using data from past transactions to predict future spending needs.

It has a budget tracker feature, informing users how their monthly spending lines up with their recommended budget. It allows users to set their own budgets and alter them when conditions call for it. The budgeting feature also shows users a snapshot of the categories where they are spending the most money and where they may be off-track. It provides the ability to drill-down to see transaction-level information.

The monthly spending feature looks at the current month and compares those expenses to previous months. The transaction history feature provides expense and income records across all connected accounts instead of being limited to a single account or bank. The accounts summary gives users the ability to see all of their financial accounts -- checking, savings, loans, and credit cards -- all in one place.

Sushil Sharma, chief product officer at LendingTree, says the app will empower consumers with a better understanding of their financial lives so that they can make smarter financial decisions in the future.

It’s becoming increasingly clear that one effect of the coronavirus (COVID-19) pandemic has been a change in consumers’ financial habits. A new study of consumers’ credit card debt shows the biggest reduction on record as the pandemic shut down the economy.

In its latest credit card debt study, WalletHub reports that Americans began the year owing more than $1 trillion in credit card debt after a $76.7 billion spending spree during 2019. But when the pandemic arrived with full force in March, consumers’ first impulse was to pay off debt. Credit card balances dropped by a record $60 billion.

The frugality continued in the second quarter. Not only did consumers put less on plastic in April through June, they paid off another $58 billion -- a record paydown for the second quarter.

‘Generous unemployment benefits’ helped

When 2020 draws to a close, WalletHub researchers predict that consumers will end the year with less credit card debt than when they began, the first time that’s happened since the end of the Great Recession in 2009.

“The fact that U.S. consumers paid off $58.1 billion in credit card debt during the second quarter of 2020 is largely attributable to the generous unemployment benefits that laid-off workers were still receiving at the time by Congressional decree, as well as the overall efforts people have made to cut back on spending and generally de-risk their finances in the face of historic uncertainty,” said Jill Gonzalez, WalletHub analyst. 

“It might seem counterintuitive that debt levels would decline when so many people are out of work, but that’s also when people become most frugal and when credit card issuers get stingier with approval decisions and credit limits.”

A Gallup study released this week tends to back up the conclusion that consumers have become more careful with their spending during the pandemic. The survey -- taken after the personal benefits from the CARES Act expired -- shows that 54 percent of Americans are currently saving at least some of their money and plan to continue saving versus spending what they have in the near future.

In another encouraging sign, 76 percent of the people with the ability to save money plan to keep socking it away over the next six months. Another 28 percent say they’ll spend their money on basic goods and services; only 13 percent will splurge a bit on vacation or travel; and 10 percent will use their savings to pay off debts, such as credit cards.

And while day trading in the stock market has become more popular since the pandemic, it apparently involves only a small subset of investors. Seventy-nine percent of the respondents in the Gallup study said they prefer to tuck money away in a savings account, keeping it in cash.

At one point during the coronavirus (COVID-19) pandemic, air travel was down 96 percent. Hotel bookings have cratered. Cruise ships remain tied up at the pier.

So maybe it’s no surprise that consumers would begin asking themselves why they’re paying an annual fee to carry a travel rewards card. Many millennials have apparently decided it’s no longer worth it.

A new ValuePenguin survey shows that 41 percent of millennial travel cardholders closed a travel rewards card since the beginning of the pandemic. Another 34 percent say they’ve thought about doing it.

More than half of those who were laid off or furloughed have cashed out some or all of their points or miles due to the pandemic's impact on their ability to travel. Again, a significant group -- 23 percent -- is considering it.

Not that surprising

In a way, the numbers are not surprising since many travel rewards cards carry hefty annual fees. While the points and miles can be very rewarding, some cards charge more than $100 a year to cardholders.

With the pandemic discouraging consumers from traveling, there’s little opportunity to rack up miles and points. But cardholders still have to pay the annual fee.

The survey also found that 28 percent of Americans who booked a trip using their travel rewards lost their miles and points when they had to cancel the trip due to the pandemic. 

"It doesn't surprise me at all that many people are closing travel cards right now," said Matt Schulz, chief credit analyst at LendingTree, ValuePenguin's parent company. "Many Americans are simply trying to keep food on the table, and hoarding travel miles and points just doesn't make any sense for a lot of people at this time."

Credit score impact

Canceling a credit card will have a negative impact on your credit score. Your access to credit is one part of the score’s formula, so your score will dip when the amount of credit is lowered. However, in most cases, the decrease is small and temporary.

Amid all the account-closing, some consumers are actually applying for new travel rewards credit cards. Forty-five percent of millennials have applied for a new card since March. Schulz says it could be a sign of optimism.

“Americans love travel, and many cannot wait for the day when they can get back on a plane,” he said. 

Even if that’s the case, Schulz and other personal finance experts say there may be better choices when it comes to a credit card. A simple cashback card may be more rewarding and rarely carries an annual fee.

If you’re considering applying for a new credit card, ConsumerAffairs’ guide to the “Best Credit Cards” may help you pick the one that’s best for you.

As soon as the pandemic threw millions of Americans out of work, credit card lenders began canceling cardholder accounts and reducing credit lines. New data suggests that this trend has only accelerated.

A survey by credit card site CompareCards reveals that about 70 million people – more than one-third of credit cardholders –  involuntarily had a credit limit reduced or a credit card account closed in a 60-day period from mid-May to mid-July.

Lenders moved swiftly to reduce their risk. It was impossible for them to determine which of their customers had lost their income -- and were thus more likely to default -- and which were gainfully employed.

But the survey shows lenders haven’t tightened credit for everyone. Millennial customers were the cardholders most likely to have a credit limit reduced or account closed involuntarily. 

High-income cardholders not immune

Customers with the highest incomes -- who are often among the biggest spenders and have the highest credit limits -- were the most likely to say their credit availability had only been reduced in the wake of the pandemic.

When credit limits were reduced, the survey shows it wasn’t by a lot. The most common credit limit reduction was between $501 and $1,000. But 22 percent of customers in the survey said they saw their credit availability shrink by $5,000 or more.

About 89 percent of those whose credit availability declined were notified by their lender of the change, but not all were given a reason. Of those who were told why there was a change in their account, about half said it was because of a decrease in their credit score or late payment.

Credit score impact

Losing access to credit will almost always send a credit score even lower. A score will go down if a credit card company reduces the cardholder’s credit limit. It could go down even more if there is a balance on the card. The credit limit reduction means the cardholder is using a higher percentage of available credit, usually a drag on credit scores.

“We're several months into the pandemic and one of the few things we know for certain is that no one knows exactly when this is going to end. Because of that, it's likely that we will see banks continue to be cautious when lending,” the authors write. 

There are some things consumers can do to make sure they aren’t the next to lose access to credit. Consider using any dormant cards more. Put a small, recurring subscription – such as Spotify or Netflix – on that little-used card to ensure that it is used each month. Then, set up automatic payments so you never pay late. 

If you have a travel rewards credit card in your wallet, you may be asking yourself just how useful that will be in the midst of a pandemic

Air travel has plunged since the coronavirus (COVID-19) swept the world, and cruises have been canceled. Many countries are temporarily closing their borders to travelers from other countries, another inducement to stay home. In the U.S., some states where coronavirus cases are low are discouraging travelers from states where cases have spiked.

For travel rewards cardholders, that may mean a lot less travel in the months ahead. Not only are they missing out on racking up rewards points, but they are also likely paying a hefty annual fee for the privilege of having the card.

The Wall Street Journal reports that major banks are taking steps to discourage customers from canceling these highly profitable cards, noting that JPMorgan Chase is delaying a $100 increase to its $450 annual fee on its flagship Sapphire Reserve Card.

Chase has joined Citibank and other major card issuers in adding other non-travel rewards to their cards to keep them in consumers’ wallets. However, consumers should carefully measure the value of those potential rewards against the annual fee.

Cash may be king

Having a rewards card that provides points or cashback on routine purchases like gasoline and groceries may make more sense in these times, and these types of cards rarely carry an annual fee.

In a new report, PayPal offers research showing that a significant number of consumers are using their credit card rewards to stretch their budgets. Nearly a third of consumers have used rewards to purchase the things they need most, such as groceries. 

"More and more people across the country are turning to their credit card rewards as a helpful and easy way to make their dollars go farther, and in the current environment, two-thirds of Americans now view these rewards balances as a way to buy the things they need such as groceries and other essentials," said Jill Cress, vice president of consumer marketing at PayPal.

Unaware of their rewards

At the same time, the research found that 39 percent of people with rewards credit cards were completely unaware of their rewards balance. Cress says it’s not only important to incorporate those rewards into the household budgets, but consumers should also think carefully about the credit cards they have and the kinds of spending they reward.

"With travel and luxury items still less of a priority for many right now, our research shows that people are instead tapping into their rewards balances to support small businesses in their community and to give back to causes," Cress said.

Replacing a travel rewards card that carries an annual fee with a no-fee card providing cashback on everyday purchases may be a prudent step in this new environment, and there are many of these cards to choose from.

ConsumerAffairs has researched the best cashback credit cards here.

Credit card companies slammed on the brakes in March as millions of consumers lost their jobs. The number of new credit card accounts plunged 73 percent between March 15th and April 15th, according to a survey by CompareCards.

While it’s not surprising that lenders would try to reduce their risk in the face of rising unemployment, the speed in which they acted is unprecedented. Then again, the economic disaster from the coronavirus (COVID-19) shutdown happened virtually overnight. 

Prior to the pandemic, credit card companies aggressively sought to open new accounts because of a robust economy. In the new environment, consumers may find it will be much harder to get all types of credit.

Economic uncertainty

Compared to the March-to-April periods from 2017 to 2019, the number of new cards slowed to a trickle this year. When lenders did issue cards, the credit limits were on average $700 lower.

“When the economy is uncertain, as we are currently witnessing, plans change and lenders get nervous,” CompareCards wrote in a blog post. “When lenders become wary, they resort to reducing credit limits on existing accounts, or even close those accounts altogether, because all that available credit just looks like unnecessary risk to the bank.”

Even if you already have a credit card, it doesn’t mean you’re going to keep it. As unemployment surged in late March, credit card companies moved quickly to close some customers’ accounts. 

At the end of April, about 25 percent of consumers reported that their credit card company had closed an account or lowered their credit limit.

‘High risk of failure to pay’

ConsumerAffairs has received scores of complaints from consumers like Robert, of Houston, who told us he had several credit cards with Synchrony, which he said had continued to increase his credit limits over the years.

“Then, in one single day, Synchrony closed every single account without notice,” Robert wrote in his ConsumerAffairs post. ”Received a letter stating ‘Activity on accounts indicative of high risk of failure to pay.’ How is that possible when there was less than $3k total on just 2 of the several accounts I had with them?”

Robert also said his credit score dropped by more than 100 points because of the loss of credit, which he says significantly increased his debt ratio.

Credit card companies are often quick to react to perceived risk because credit card debt is not secured by any kind of collateral. If an account holder doesn’t pay, there is no means to secure payment without going to court.

But in the wake of the coronavirus, some lenders are even worried about secured debt. Earlier this month, Wells Fargo announced it was temporarily suspending new home equity lines of credit (HELOC), joining other major banks moving to reduce their credit exposure.

Consumers whose credit card accounts have been closed by their lender may be able to restore access by applying for a secured credit card. ConsumerAffairs has researched the best secured credit card companies here.

Navy Federal Credit Union is ramping up the competition in the rewards credit card space by introducing four new credit card promotions this week. The cards, designed for different uses and different consumers, all offer rewards of some kind.

The Navy Federal Visa Signature Flagship Rewards card provides 50,000 bonus points -- which translates to a $500 value -- to new cardholders who spend at least $4,000 within 90 days of opening the account.

It could be a good choice for consumers preparing to make a major purchase that would get them over the $4,000 threshold. It’s also good for frequent travelers because it offers three times the points on travel expenses and two times the points on all other purchases. 

While that can be attractive for frequent travelers, there is a $49 annual fee. But cardholders can receive a statement credit of up to $100 for Global Entry or TSA Pre-check. 

The interest rate on balances ranges from 11.49 percent to 18 percent, and the offer is good through the end of April.

For groceries, gasoline, and restaurants

The Navy Federal More Rewards American Express Card has a lower spending threshold. Spend just $3,000 within 90 days of opening the account and you’ll get 25,000 bonus points worth $250.

The card pays three times the points for purchases at supermarkets, for gasoline and transit, and at restaurants. It pays one times the points on all other purchases.

There’s no annual fee, and the interest rate on balances ranges from 11.15 percent to 18 percent. The credit card offer is good through the end of August.

$150 cashback

Navy Federal’s Cash Rewards card pays cardholders $150 cashback if they spend at least $3,000 within the first 90 days of account activity. 

They’ll also get an interest rate of 1.99 percent on purchases for the first six months, making it an attractive tool for consumers who need to finance a major purchase for a short period of time.

After the introductory period, the rate ranges from 11.15 percent to 18 percent. There is no annual fee, and the offer is good through June.

Balance transfer at 0 percent

The Navy Federal Platinum card isn’t technically a rewards card; it’s a balance transfer card. However, these kinds of cards can sometimes be the most rewarding.

New cardholders are eligible for a 0 percent introductory rate on balance transfers for 12 months after opening the account with no balance transfer fee. After that, the rate ranges from 7.49 percent to 18 percent.

There is no annual fee and the offer is good through the end of December.

Millennials and Generation Z tend to be fitness and health enthusiasts, and they also seem to have a lot of credit card debt. Could those two facts be related?

They could, according to a new survey by CompareCards. The survey found 38 percent of millennials and 41 percent of Generation Z have had or are currently dealing with credit card debt due to fitness-related expenses.

Young people, who tend to be more active and in better shape than their older peers, are more likely to go into debt to stay that way. About 28 percent of all other age groups go into debt paying for gym memberships, exercise equipment, and expensive food they believe to be more healthy.

When it comes to going into debt on fitness, millennials and Generation Z spend an average of $124 per month, the survey shows. The most common expense is a gym membership, purchased by 76 percent of young people.

But 32 percent of this age group also pulls out the plastic to purchase workout attire, 22 percent purchase exercise equipment, and 22 percent subscribe to a mobile fitness app. 

Subscriptions

Subscriptions can be small expenses that add up when there are a lot of them, and the CompareCards survey suggests younger consumers not only have fitness subscriptions, but diet subscriptions too.

Forty-three percent of younger consumers say they spend extra money each month on diet and nutrition, either for services of different kinds of food. Sixteen percent of millennials and 14 percent of Generation Z pay for a nutritionist. Eighteen percent of millennials and 13 percent of Generation Z pay for cleanses, while 14 percent of both generations purchase personalized meal plans.

“What's more, of the 28 percent of survey respondents who said they're currently dieting, 45 percent said their grocery spending has increased, too,” the authors write.

Social media pressure

What’s behind this hyper-focus on health and fitness? The survey suggests it could be a new way young consumers seek status.

More than 25 percent of Generation Z and 17 percent of millennials admit they are driven by social media influencers to spend money on fitness and nutrition. Across all ages, that number is 13 percent.

While preserving your health will pay dividends in the long-run, the experts at CompareCards suggest going into debt to do so can be detrimental to your financial health.

One in four Americans has at least one subscription-based fitness or diet expense. That number jumps to two in five among Generation Z and slightly over one in three for millennials.

A whopping 46 million American consumers say they’re likely to miss at least one credit card due date in 2020.

A new WalletHub credit cards survey shows that the cocktail of overzealous spending and credit card dependence may be getting the best of consumers and putting them in the difficult position of determining which bills they can pay based on their monthly income. 

WalletHub’s survey took a look at how consumers handle late payments and what their feelings are when it comes to leaning on plastic money going forward.

Here are the highlights of the study:

• Credit card issuers are forgiving…if you ask nicely. Almost 90 percent of the consumers who asked forgiveness for missing a due date were given a pass on the late fee. Women aren’t shy about asking to get a late fee waived -- with that demographic asking about 18 percent more than men. However, women are also 2 percent less likely to get their waiver request approved. 

• Payment priorities change with age. The 18-44 demographic has the most worrywarts when it comes to missing credit card payments. The 45-59 demographic does most of its hand-wringing about their mortgage, and those over the age of 59 say tax payments are what makes them the illest at ease.

• Luxury can lead to lapses. The more people make, the more they apparently forget. The survey shows that high-income consumers are nearly twice as likely to miss a payment due to absentmindedness as people with lower incomes. 

• Men and women react differently to fees. Do you feel “punished” when you’re confronted with a late fee? Of the women surveyed, 39 percent said they were more likely to feel that way than men; however, men are twice as likely to feel “indifferent.”

Stretched out?

“The reason that roughly 46 million people expect to miss at least one credit card due date in 2020, according to WalletHub’s latest credit card survey, is that we’re stretched too thin -- in terms of both time and money,” said WalletHub CEO Odysseas Papadimitriou. 

“U.S. credit card users started 2020 with more than $1 trillion in credit card debt. Up until this point, we’ve managed to keep our accounts in good standing at historical rates. However, expecting to miss due dates is a sign of cracks in the foundation. And not only do 18 percent of people expect to miss at least one credit card due date in 2020, but 30 percent say that not having enough money is the reason we’re most likely to be late.”

Taking the stress out of late payments

If you fall into the oh-no-not-again category when it comes to paying your credit card bill on time, there are some steps you can take to stop that slide.

“The easiest way to avoid late payments, and the fees and credit score damage that can accompany them, is to set up automatic monthly bill payments from a checking account for at least the minimum amount due each month. This will at least remove forgetfulness as a potential cause,” said WalletHub CEO Odysseas Papadimitriou. 

“Automated payments won’t do much good if you don’t have enough money in your bank account, however. So careful budgeting and saving are key, too.”

Consider asking for help

Besides Papadimitriou’s suggestion, there’s also the credit counseling route. 

Unbeknownst to most consumers, credit counseling agencies certified by the National Foundation for Credit Counseling (NFCC) offer free debt counseling. Whether it’s a last resort or you just feel like you need to get a grip on your credit card use, those agencies can be a good -- and understanding -- resource. 

ConsumerAffairs has put together a free guide on the best credit counselors. If you ever find yourself needing some help, it might be a good place to start. You can find the guide to credit counselors here, and the guide to debt relief programs is available here.

On the heels of a LendingTree study that found a majority of Americans entered the year feeling financial stress, another survey points to consumers’ growing financial angst.

In an analysis of Federal Reserve Data, OnlineLoans reports that 10 percent of respondents think they are losing ground financially. Nearly half of consumers who say it’s difficult to get by say they’re doing worse than their parents were at that age.

The flip side of that, however, is that an overwhelming majority -- 75 percent -- say they’re living comfortably or doing okay. That flies in the face of the LendingTree study, issued last week, which found that 60 percent of people are carrying a debt load that causes them stress.

The credit card squeeze

But the latest study doesn’t focus on income; it notes that some high-income households struggle due to spending. And there’s a single factor that plays an outsized role in both studies -- credit card debt.

“Even though the current U.S. economic climate is quite strong, Americans still struggle to afford their standard of living, and many are not prepared for an unforeseen emergency,” the authors write. “Seventeen percent of Americans said they couldn't pay some bills this month. And the biggest culprit was the credit card bill, which 7 percent of the survey pool – including 4 percent of those living comfortably – pointed to as a major concern.”

Outstanding credit card debt passed the $1 trillion mark a year ago and is beginning to catch up with student loan debt. While most consumer interest rates have fallen since then, credit card interest rates have not.

Balance transfers

An often-overlooked tool in reducing this debt is applying for a balance transfer card with an introductory low-to-no interest rate. Until the end of February, Navy Federal Credit Union is offering its nine million members an introductory rate of 1.99 percent on new purchases and transferred balances.

Justin Zeidman, manager of credit card products for Navy Federal, says what makes the firm’s offer attractive to debt-strapped consumers is the fact there is no balance transfer fee that is charged by most balance transfer cards.

“A lot of people look at a 0 percent APR on a balance transfer and assume that it’s free,” Zeidman told ConsumerAffairs. “In reality, if you’re transferring a $5,000 balance to a card with a 4 percent balance transfer fee it’s costing you $200 just to move the money.”

Zeidman says it’s also important to read the fine print and see what the rate adjusts to once the introductory period is over. Chances are good that there will be a balance remaining on the card once the introductory period expires, so the rate you pay after that is important. But paying off as much of your balance as possible at a rock bottom rate can have a profound psychological effect.

“Seeing your interest charges rack up at a much smaller pace creates a greater sense in the consumer’s mind of being able to get out of debt, to see that light at the end of the tunnel,” Zeidman said.

ConsumerAffairs has checked out some other balance transfer credit card offers here.

Reviews of products and services are essential for savvy consumers who want to do their homework and make the best financial decision. But one such site that offered these reviews has caught the ire of the Federal Trade Commission (FTC). 

The agency says that LendEDU -- which offers comparisons on financial products like student loans, personal loans, and credit cards -- misled consumers by not remaining objective and unbiased when ranking various services. Regulators also charge the company of using fake reviews to make certain products appear more desirable. 

“LendEDU told consumers that its financial product rankings were based on objective and unbiased information about the quality of the product being offered, but in fact LendEDU sold its rankings to the highest bidder,” said Andrew Smith, the director of the FTC’s Bureau of Consumer Protection. 

“These misrepresentations undermine consumer trust, and we will hold lead generators like LendEDU accountable for their false promises of objectivity.”

Misleading reviews

The FTC’s complaint states that LendEDU misrepresented that the rankings on its site were not affected by payments from advertisers, even though that wasn’t the case. But officials say the deception didn’t stop there.

Although LendEDU claimed that reviews on its site were based on actual experiences from impartial consumers, officials say that many of them were written by company employees, their family or friends, or other people who had a professional relationship with the company. Many of these reviews were also used on other third-party sites.

Under a proposed settlement, LendEDU has agreed to pay $350,000 to settle the FTC’s charges. It is also barred from making these kinds of misrepresentations in the future. 

As Valentine’s Day draws near, that new dress or time spent working out in the gym might not be nearly as helpful for getting a date as getting a handle on your finances.

The 2020 Valentine’s Day Spending Survey by personal finance site WalletHub shows that having a high credit score might give you an edge in establishing a romantic relationship. In fact, the survey found 51 percent of people would not marry someone with bad credit.

Credit scores are more important for women than men. Sixty percent of women say a subprime credit score would be a deal-breaker; around 41 percent of men say they feel the same way.

The survey suggests women tend to be a lot more practical about financial matters than men. Men are three times as likely as women to go into debt to purchase a Valentine’s Day gift.

Worst than bad breath

Other nuggets from the survey reveal that four out of ten people -- both men and women -- say irresponsible spending is a bigger turnoff than bad breath. Forty-six percent of people would break up over irresponsible spending, the second biggest reason behind cheating.

WalletHub analyst Jill Gonzalez says the Great Recession put a greater emphasis on financial values as men and women consider mates.

“The fact that 51 percent of people say they would not marry someone with bad credit should be the biggest wake-up call for daters,” Gonzalez said. “It makes sense when you consider that bad credit can cost people hundreds of thousands of dollars over the course of a lifetime.”

Be honest

The good news is that a bad credit score can be improved. All it takes is a little time, along with paying all your bills on time and reducing your debt. But should the subject of your credit score come up on that first or second date, honesty is the best policy.

A recent survey by TD Bank found that 31 percent of millennials would consider breaking off a relationship with a partner who was hiding debt or a bad credit score. The pollsters talked to consumers who are married, in a committed relationship, or divorced.

Unfortunately, financial secrecy in a relationship is not uncommon. That same survey found that 27 percent of millennials are currently keeping a financial secret from their partner, more than any other generation. Nearly half of that 27 percent is hiding credit card debt.

Older generations are also keeping secrets. Among the silent generation and baby boomers, a financial secret is most likely to involve a bank account the partner doesn’t know about.

"It's important that couples are honest and open about their money challenges,” said Rachel DeAlto, relationship expert, coach, and television personality. “Oftentimes a partner will hide a credit card bill or low score due to guilt or embarrassment, yet when the debt comes to light it's often not the debt that creates the conflict - it's the secrecy." 

The number of U.S. consumers using credit cards has increased 7 percent over the last five years, according to a new report from Packaged Facts.

The report’s authors say credit card use usually goes up during good economic times. Steady economic growth and an increasingly healthy job market in recent years have helped to provide a widening pool of credit-worthy credit card customers, and good times have encouraged them to spend.

Another factor driving increased credit card us is e-commerce, which is taking an increasingly bigger market share of retail and which is made much easier with payment cards.

The report found that consumers increasingly favor general-purpose credit cards over so-called private-label credit cards. This suggests that, after several years of growth, private label cards may now be less popular with consumers.

A private label credit card is a store-branded card that is meant to be used at a specific store. These cards are managed by a bank or commercial finance company for retailers like department and specialty stores and for some airlines.

The trend of going cashless

The growth in credit card use may also suggest the continuation of the trend of consumers paying for virtually everything using plastic. A 2018 Pew Research Center study found that 29 percent of U.S. adults said they make no purchases using physical currency during a typical week, up from 24 percent in 2015.

“Most notably, adults with an annual household income of $75,000 or more are more than twice as likely as those earning less than $30,000 a year to say they do not make any purchases using cash in a typical week (41% vs. 18%),” Pew said in a release.

“Conversely, lower-income Americans are about four times as likely as higher-income Americans to say they make all or almost all of their purchases using cash (29% vs. 7%),” the Center said.

More consumers can qualify

The higher income group is also more likely to have a bank account and to be able to qualify for a credit card. Packaged Facts’ report showing credit card use is rising could also mean that consumers who previously couldn’t qualify now can.

But a 2019 report from Origin, Hill Holliday’s independent research arm, suggests most consumers aren’t ready to give up cash completely. The survey found that 76 percent of consumers still carry some cash, even if they mostly use other methods to pay for things. Fifty-five percent said they “hated” the idea of completely abandoning cash.

Most merchants -- particularly small businesses -- also prefer that their customers pay with cash because payment cards always carry some type of fee.

Many consumers are waking up today with the realization that they have overloaded their credit card during the holidays with a balance that will take months to pay off.

It happens. But transferring the balance to a new card with a 0 percent interest rate for the first year or so can help you pay down the balance faster and spare you the double-digit interest charges you would pay otherwise.

In its annual balance transfer card report, CompareCards.com reviewed the terms and conditions of 167 credit cards that allow balance transfers. Once again this year, the researchers found that interest-free introductory periods are still easy to find.

In searching for a card, consider one that doesn’t carry a one-time balance transfer fee. Most balance transfer cards charge a fee of at least 3 percent. On a $5,000 balance, that comes to $150.

The Chase Slate card now offers a 0 percent rate on transferred balances for 15 months. If you transfer the balance during the first 60 days the account is open, you won’t pay a balance transfer fee. If you wait until later than that you’ll pay a hefty 5 percent fee.

Common misconceptions

The researchers found that 75 percent of the consumers surveyed mistakenly believed that they would be assessed interest on the full balance if they didn’t pay it off completely during the transfer card’s introductory period. That’s not the case, although that’s exactly what happens with a merchant’s “deferred interest” plan.

With a balance transfer card, 100 percent of your payments are used to pay down the balance during the introductory period. At the end of the introductory period, the card’s prevailing rate kicks in. The rate can be as high as 25 percent for many balance transfer cards, so it’s important to pay as much of the balance as possible during the interest-free introductory period.

According to the survey, nearly 20 percent of consumers with credit cards plan to apply for a new card that will allow them to transfer a balance. Another 32 percent said they’re thinking about it.

This is a fairly common practice. About half of all credit card customers say they have opened a new credit card account just to transfer a balance and take advantage of a 0 percent interest rate. Of that number, 18 percent have done it more than once.

The experts at ConsumerAffairs have researched balance transfer credit cards with an attractive introductory promotion. You can check out their findings here. 

New reports are circulating that credit card companies, hotels, and airlines are going after the jugular of consumers who knowingly violate program rules in an effort to pump up reward points and miles. In the minds of the loyalty rewards providers, this is pure and simple abuse.

The games people play

Smarty-pants consumers have evidently been trying to work all sorts of angles to get more rewards. Here are some of the plays that ConsumerAffairs has found consumers trying to make:

5/24

One gaming technique is to sign up for five credit cards in 24 months, the typical threshold for how often a consumer can apply for a credit card and how many they can have with one company, e.g. Chase. While that possibility apparently still exists, it’s probably a safe bet that the cat’s out of the proverbial bag and the credit card companies are going to be watching 5/24 like a hawk.

Grey areas

ThePointsGuy’s (TPG) reports that American Airlines is shutting down some account holders who were trying to leverage a “grey area” in the terms and conditions by opening credit card accounts using offers that were sent electronically to another member. 

“Standard Citi credit card offers restrict cardholders from earning a sign-up bonus if the potential cardholder has opened or closed an American Airlines miles-earning credit card within the past 48 months,” writes TPG’s JT Genter. 

“However, these targeted mailers didn’t have this sign-up restriction. So, travelers were using these mailers to apply for numerous credit card accounts and earn credit card sign-up bonuses without being limited by the 48-month restrictions.”

Leaked link theory

There’s also the “leaked link” theory in which sneaky consumers tweak links associated with offers originally sent to someone else, get targeted for the same offer, and open up another rewards card in their own name, their real business, or a business they crafted just for the scam.

“Some folks figured out a pattern and have thus discovered links to set-APR offers on many Chase cards,” wrote Nick Reyes at FrequentMiler. “It is important to note that these links were likely not intended to be public. There is therefore certainly some risk in applying and we recommend caution and considering the risk for yourself before applying.”

Black star offer

Another trick consumers have tried to pull that credit card companies like Chase have gotten wise to is the “black star offer.” In the “just for you” section of a consumer’s Chase account online, some may see a “black star,” business-related offer.

However, greed gets the better of some consumers in their quest for black star offers, and therein lies the rub. “Best idea is to still apply for the card you want the most first and then maybe you get lucky and can get a second card as well,” writes the DoctorOfCredit.

Playing with fire

Gaming any system can seem like fun, but it can become addictive. One enterprising consumer with the handle of Amex_Fangirl learned their lesson when Chase shut their account down, and with it, their five personal and one business cards. The user was very candid about how their luck with black star offers gave “a false sense of security, so I jumped in this time.”

One residual effect of getting your accounts shuttered for trying to beat the system can be a little hand-wringing and sweating about what the airlines or credit card companies will do in retaliation. 

“There are lawyers and someone with legal knowledge in this sub,” Amex_Fangirl wrote on Reddit. “In your opinion, how likely will AA be after us monetarily? Their T&C [terms and conditions] mentions ‘Fraud, misrepresentation, abuse or violation of applicable rules is subject to administrative and/or legal action.’ and ‘American Airlines reserves the right to take appropriate legal action to recover damages, including its attorneys’ fees incurred in prosecuting any lawsuit.’"

Words from the wise

The PointsPundit at TravelUpdate has a mantra for any consumer who would like a little extra rewards juice from their credit cards. 

“More often than not, loyalty ideally cuts both ways,” they note. “If you’re a customer who plays the long game and is in the bank’s good books, you’ll enjoy the rich rewards in the long run. However, a few handy tips might help you if you’re looking to play safe and avoid attracting the attention of fraud prevention teams.”

Here’s how PointsPundit lays out their best laid plans:

• Move ahead at a casual pace. “Miles and points are very profitable for banks and travel companies. They aren’t going anywhere. Don’t take a crash and burn approach.”

• Don’t mess with links that weren’t sent to you directly. “If you get a targeted offer, then by all means go for it.”

• Be smart and look for rewards that are a good match for your travel goals. “Apply for cards that align with your travel goals. If you apply for 25 credit cards in a year or 40 in two years, will you really use all of them? Will your pace of travel keep up with the amount of miles you’re racking up? More often than not, people keep hoarding miles until a devaluation hits them eventually.

• Stay away from “manufactured spending.” According to StudentDebtRelief, manufactured spending is “the process of buying items on credit that can be converted to cash e.g. a gift card. The cardholder then uses the cash to pay the bill on the card, which means he earns rewards without spending any money.” PointPundit says the banks are hip to this and that manufactured spending, especially in bonus categories, is aggressively monitored. “It’s your call how much (if at all any) manufactured spending you want to really generate if it entails risking a shutdown.”

“While I don’t think that the sky is falling, the miles and points game is definitely changing,” is Pundit’s warning. “Just like Amex, Chase seems to be getting more vigilant…It always helps to tread carefully and not poke the bear.

With Black Friday -- one of the most successful, spending-wise, in recent history -- in the rearview mirror, and the holiday season well underway, many consumers are occupied with what they’re going to gift their friends and family. 

While holiday spending can leave many consumers with higher than normal credit card bills, a new study conducted by researchers from Boston College found that shopping is one of the biggest sources of secrecy in relationships, and such trends can ultimately have an effect on retailers and romance. 

“Understanding financial infidelity is important because financial matters are one of the major sources of conflict within romantic couples and prior research has shown that keeping money-related secrets in relationships is a ‘dealbreaker,’” said researcher Hristina Nikolova. 

The effect of secret purchases

To understand how secret purchases affect couples and retailers, the researchers utilized several different components -- including bank statements, records from a couples’ money-sharing app, and data from field studies -- to create the Financial Infidelity (FI) Scale. 

Financial infidelity is any such financial behavior that one partner hides from the other, as they fear the response from their partner if he/she knew the truth. The study revealed that the effects of consumers hiding purchases from their partners is twofold -- it could put a strain on the relationship and it also affects retailers’ bottom lines. 

The researchers explained that FI scores were higher when one partner opted against joint credit cards, made the majority of their purchases in cash, or quickly got rid of receipts, among other secretive behaviors. 

These actions can ultimately affect the way consumers shop, which is why the researchers are warning retailers to adopt new marketing tactics if they want to ensure their profits don’t plummet. 

“We are entering the biggest holiday shopping season and there are very simple things that retailers can do to boost their sales, such as offering inconspicuous packaging without a brand name or the ability to pay cash,” said researcher Hristina Nikolova. “Our research suggests that these options should appeal to consumers who are prone to engage in financial infidelity. Retailers should recognize that such shoppers do exist and they will probably sneak an expensive coat or a massage amidst the gift shopping they will do.” 

Keep an open dialogue

It’s also important for consumers to know that keeping an open dialogue in their relationships is key, particularly where finances are concerned. Recent studies have shown that keeping secrets around money could be a dealbreaker in many relationships. 

“A few things that couples can do to prevent financial infidelity is to talk more, get on the same page regarding both joint and individual goals they might have, and also budget for some occasional indulgences along the way of achieving their long-term financial goals,” said Nikolova. 

Sony is rebranding its two credit cards, one specifically designed for video game players. The cards will be co-branded with Comenity Bank after previously being associated with Capital One.

The two credit cards are competing in the field of rewards credit cards and are aimed at solidifying Sony customer loyalty. The Sony Card provides rewards to cardmembers when they purchase Sony products, along with rewards linked to restaurant and entertainment spending.

The PlayStation Card offers rewards for PlayStation Store purchases and Sony products, along with PlayStation digital services and mobile phone payments. Both cards are locked into the Sony Rewards loyalty program, giving customers a chance to speed up the accumulation of Sony Rewards points.

The cards are being issued through Alliance Data Systems Corporation (ADS), which specializes in data-driven marketing and loyalty solutions. ADS says the cards will feature several digital features that streamline the process of accessing and interacting with credit accounts using mobile devices.

‘Tech-forward, data-driven approach’

ADS says it will also assist Sony with its data and analytics capabilities to help grow the brand and drive sales.

"Alliance Data has proven expertise in digital customer engagement and the ability to drive loyalty and sales through a multi-channel strategy," said Steven Fuld, senior vice president of marketing at Sony. "Its tech-forward, data-driven approach aligns with our goals of reaching more customers and creating memorable experiences."

Comenity Bank says the transition from Capital One should be seamless for current cardholders.

“Your account balance will be automatically transferred to your new account,” the bank says on its website. “We will send you a billing statement that shows you how much you owe. You remain responsible for any existing balance and must pay all amounts due on your account, according to the terms of your Customer Agreement.”

The Sony Card pays 5,000 bonus points when you open and use the card within 60 days. It earns five times points on purchases of Sony products at authorized retailers as well as five times points on entertainment purchases. It pays two times points at restaurants and one point everywhere else.

The Sony PlayStation Card earns five times points at the PlayStation Store and on purchases of Sony and PlayStation products at authorized retailers. It earns three times points on mobile phone bill payments and one point on all other purchases.

KeyBank reports that nearly one-third of the consumers who signed up for its secured credit card were eligible for an unsecured card after just one year.

A secured credit card is often used by consumers with poor or no credit. They make a deposit with the lender which secures their credit line. For example, if they deposit $500, they have a $500 credit limit on the card.

KeyBank promotes it as an effective tool to not only build up a credit score but also establish good money-management habits. The lender reports that 30 percent of its secured credit card customers became eligible this month for an unsecured card. Of that number, KeyBank says 65 percent are millennials.

“Millennials, many of whom came of age during the 2008 recession, are saddled with debt and looking for ways out of it," said Mitch Kime, head of Consumer Payments in KeyBank's Enterprise Payments group. "Our Secured Credit Card helps them overcome the barriers they face to establishing a strong credit history that makes financial achievements, like renting their own apartment, a reality."

Consumer support

KeyBank says it offers support to its secured credit card customers by reviewing accounts twice a year. Customers are then offered advice on how they can better manage their credit and improve spending habits. According to the lender, young adults and recent college graduates between the ages of 21 and 25 make up the largest segment of Secured Credit Card customers. 

Selecting a secured credit card is a lot like deciding on any other type of card. It’s best to find one with no annual fee. Some secured cards even offer rewards, such as cashback on purchases. 

While the credit limits tend to be low -- after all, they’re determined by how much money you deposit as security -- that tends to be beneficial since it prevents consumers from running up large balances. In most instances, consumers using a secured card need to pay the balance in full each month to have any available credit the following month. That’s a good habit to establish.

ConsumerAffairs has researched secured credit cards and come up with this list of the best ones. 

Consumer credit defaults, as measured by S&P Dow Jones and Experian, rose again in September for a third straight month.

The index shows consumers seemed to have the most difficulty paying their car loans and mortgages. However, the default rate on credit cards actually fell 41 basis points to 3.32 percent.

Even though the default rate on car loans and mortgages went up, the increase was slight and the total remains very low. The default rate on auto loans is only 1.05 percent, and on mortgages it’s even less -- 0.73 percent.

Credit card defaults went down even though consumers increased their debt in the second quarter of the year. Consumers began the year owing more than $1 trillion on their credit card accounts, but they managed to repay $38.2 billion collectively in the first three months of the year.

Consumer financial health

The numbers are somewhat reassuring about the financial health of the consumer. While business leaders have recently expressed concern about a slowing economy, unemployment remains low and consumers appear to be paying their bills.

Of course, economists point out that the consumer is often a lagging indicator when things turn south. In other words, consumers are often the last to feel the pain. Bloomberg economists said this week there is a 25 percent chance the economy slips into a recession next month, the highest those odds have been since April. 

JPMorgan Chase CEO Jamie Dimon is more emphatic. In a conference call with reporters following the bank’s third-quarter earnings release, Dimon said there is little doubt a recession is in the future, largely due to the ongoing trade dispute with China.

But the banker said he sees no indication that consumers are under any strain, saying “the consumer is doing fine.”

Geographic disparity

The S&P Dow Jones/Experian index also pinpoints default activity geographically. In September, it found three of the five major metropolitan statistical areas ("MSAs") showed higher default rates compared to the previous month. 

Chicago led the increase in defaults, rising 14 basis points to 1.19 percent. The default rates for New York and Miami each rose two basis points to 0.96 percent and 1.30 percent, respectively. The rate for Dallas was unchanged, while Los Angeles actually recorded a decline in default rates.

The crowded rewards credit card field got even more crowded this week with two new entries -- one affiliated with Visa and the other with American Express.

Credit card issuer Credit One Bank is teaming with American Express to offer a new cash back rewards credit card. The Credit One Bank American Express Card provides unlimited 1 percent cash back rewards on every purchase, regardless of the category. It also offers return protection, travel accident insurance, and extended warranty coverages. 

"The new Credit One Bank American Express Card offers our card members more choice and value while broadening our credit card offerings overall," said Robert DeJong, CEO at Credit One Bank. "And, at the same time, we're offering customers the chance to earn more cash back rewards, on every purchase, wherever they use the card.”

The new card is Credit One Bank’s first affiliation with American Express.

Sportsman’s Warehouse Visa

Sportsman's Warehouse has launched its Explorewards Visa card in partnership with Alliance Data, which operates co-branded and private label credit programs. Cardholders can earn five points for every $1 spent in Sportsman Warehouse stores and on its website. The card awards two points per dollar spent on gasoline, home improvement, and campground purchases and one point on all other purchases.

The company says cardholders may redeem points with no minimum by using the Sportsman’s Warehouse loyalty account eGift Card process. Cardholders can earn a $50.00 Rewards Card with $500.00 in purchases outside of Sportsman's Warehouse within the first 120 days of opening their account.

"Now, customers can easily apply for our new credit card via text, online or at a local Sportsman's store, earn points fast and redeem them at any time for gift cards, to use for all of their favorite outdoor gear, apparel, accessories, and more," said Jon Barker, Sportsman's Warehouse CEO.

Choose a rewards card carefully

Personal finance advisors generally suggest consumers use a rewards credit card since it provides cash back or other benefits. However, it’s important to choose a card that rewards the kinds of purchases you make the most.

It’s also important to choose a card that has no annual fee, which could easily wipe out any rewards you might receive. An annual fee might be justified in some cases if your use of the card will generate rewards that far exceed the fee.

To help determine what credit card might be your best choice, check out ConsumerAffairs’ credit card guide.

On the eve of the Federal Reserve’s Open Market Committee (OMC) meeting, the central bank has been forced to make unusual injections of capital into the credit markets to meet funding needs.

The New York Federal Reserve Bank announced its intention to put another $75 billion into the financial system Wednesday, its second such move in as many days. The bank acted after interest rates on overnight repurchasing agreements, known as “repos,” surged by as much as 10 percent on Tuesday.

What it means is fairly simple: all of a sudden demand for loans has outstripped available capital in banks to make loans. Oddly, it occurred against a backdrop of low interest rates when the concern until recently had been that rates on long-term bonds were lower than those on short-term notes.

“This repo operation will be conducted with Primary Dealers for up to an aggregate amount of $75 billion,” the New York Fed said in a statement. “Securities eligible as collateral in the repo include Treasury, agency debt, and agency mortgage-backed securities.”

Keeping a key interest rate in check

Ironically, the New York Fed acted in an effort to keep the Fed’s key interest rate -- the federal funds rate -- from going higher. It’s currently floating in a range of 2 percent to 2.25 percent and the New York Fed said its action is designed to keep the rate stable.

But when the OMC meets today, Fed policymakers are fully expected to announce a quarter-point cut in the federal funds rate, perhaps making the New York Fed’s job even harder. The OMC is under intense pressure from the financial markets -- and the White House -- to lower interest rates.

The Financial Times reports that the New York Fed appears to have been successful in calming the financial markets, noting that the repo rate had settled back into its middle range by late Tuesday. A bigger question, however, is whether the sudden spike is a one-off event or a sign of bigger trouble down the road.

Mark Cabana, a rates strategist at Bank of America, told Fox Business that continued pressure on the Fed’s main interest rate would likely raise questions about the Fed’s control of the money markets. Fox reports the spike was an unusual event caused by corporations withdrawing funds to pay their third-quarter taxes on Monday.

Consumers aren’t affected - yet

It doesn’t appear that consumers are in the line of fire from this event, at least not yet. The repo purchase was designed to help major banks meet their capital needs. But left unchecked, consumers as well as businesses could have faced higher interest rates. 

Assuming it does not dissuade the Fed from its expected rate cut Wednesday then consumers should suffer no immediate negative effects.

If the Fed cuts the federal funds rate as expected, then consumers with credit card balances will see some relief. Credit card interest rates are closely tied to the Fed’s key interest rate and a reduction will likely be reflected on credit card bills.

Banks’ prime lending rates are also influenced by the federal funds rate so a reduction would make car loans and home equity lines of credit less expensive. 

Picking a credit card is done too often in an off-hand manner without a whole lot of thought. Maybe a merchant offers you a discount at checkout if you apply for their credit card.

But if you are seeking your first credit card, it pays to think first about your needs. If you rarely travel, then choosing an airline rewards card with an annual fee is definitely not a good fit.

If you have little credit history, there will be many cards that simply decline your application. In that case, how do you find a lender who will not only take you on as a customer but who also offers a product that fits your needs? For answers, we turned to some credit card experts.

CreditCards.com likes the Discover It Student Cash Back card. As the name implies, it is for students who, in many cases, have never had a credit card in their name. It offers 5 percent cash back on rotating categories that change quarterly. All other categories earn 1 percent cash back on every purchase.

Unusual rewards for a student card

The card has no annual fee and wins points for its cashback rewards, which CreditCards.com says is unusual for a student card.

WalletHub has several suggestions for consumers new to credit, including the Capital One QuicksilverOne Cash Rewards card. The card makes the list because it pays 1.5 percent cash back on all purchases.

The only downside, however, is the $39 annual fee. For some, that might not make sense. But the experts at WalletHub point out that the cash rewards will pay for the annual fee if you think you’ll spend $2,600 a year on the card. The interest rate is also on the high side for consumers with spotty credit, so it’s advisable to pay the balance in full each month if you get the card.

"While there has been a lot written about credit cards that offer the best perks and bonuses, there's not as much information available for people who just want a good starter card," said Eleri Miller, Marketing Coordinator for RAVE Reviews. 

RAVE has published a list of what it sees are good starter credit cards that include the two mentioned above. It also suggests Citi Rewards Student Card pays double points at supermarkets and gas stations on the first $6,000 spent per year. It provides one point on all other purchases after that.

There is no annual fee, and it offers a 0 percent introductory interest rate for the first seven months after opening an account. But beware -- if the balance isn’t paid off at the end of seven months, the interest rate will go from 16.49 percent to 26.49 percent, depending on your creditworthiness.

For consumers with ample credit experience, check out ConsumerAffairs’ best credit card section, where you can find recommendations for cards that best suit specific needs.

The Apple Card began open enrollment this week, with the tech giant urging its iPhone customers to begin applying for the new credit card.

But while the Apple Card works like a regular credit card, you can’t treat it like a regular credit card. 

A support note, first reported by Apple Insider, warns users not to store the card in a leather wallet. Leather, it turns out, will permanently discolor the card’s bright, white, metal finish. Don’t put it in your jeans pocket either, since coming in contact with denim will do the same thing.

In fact, it seems almost as though the Apple Card should be kept in a totally separate environment since contact with other credit cards, keys, and loose change can also damage the card.

Cleaning instructions

It’s unlikely that many consumers spend much time cleaning their other credit cards, but Apple has provided instructions for doing that to its new card.

“Gently wipe with a soft, slightly damp, lint-free microfiber cloth,” the company advises. “Moisten a soft, microfiber cloth with isopropyl alcohol and gently wipe the card. Don't use window or household cleaners, compressed air, aerosol sprays, solvents, ammonia, or abrasives to clean your titanium Apple Card.”

With this much pressure to keep the Apple Card in pristine condition, some consumers might think twice before shoving it into the slot of a nasty gas pump. And in truth, the card might not have been designed for that.

The card may actually have been designed to be linked with Apple Pay. Consumers using Apple’s payment system can simply replace the card the system currently uses with the new Apple Card. Consumers who aren’t using Apple Pay may start using it once they get the Apple Card. Carrying the card might not even be necessary.

All of this prompted tech site CCN to declare this week that the Apple Card really isn’t a credit card as much as it is a “huge marketing ploy for iPhone sales.”

The Apple Card, the company’s entry into the credit card market, is now open for all iPhone users. Over the last 10 days, it has only been available to select customers.

Apple says its customers can quickly apply for the new credit card through the Wallet app on iPhone and start using it right away. Apple announced the card earlier this year, partnering with Goldman Sachs, saying it wanted to help consumers better manage their money.

“We’re thrilled with the overwhelming interest in Apple Card and its positive reception,” said Jennifer Bailey, Apple’s vice president of Apple Pay. “Customers have told us they love Apple Card’s simplicity and how it gives them a better view of their spending.”

The Apple Card is like many regular credit cards. It doesn’t have an annual fee and it offers 3 percent cash back on Apple purchases and 1 percent on all other purchases. 

The card has gotten a rather lukewarm reception from personal finance experts who note that most cards now don’t charge an annual fee and offer rewards as generous or more than what the Apple Card pays.

Other cards may have better benefits

“The only people who should consider applying for the Apple Card are those who pay their bills in full every month and spend a lot via Apple Pay,” WalletHub CEO Odysseas Papadimitriou told us earlier this month. “Everyone else is better off with one of the best rewards credit cards or one of the best 0% APR credit cards.”

The Apple Card, after all, is still a credit card that charges credit card interest. When the company announced the product in the spring, it said its rates would be lower than most credit cards. They are, but not that much lower -- topping out at around 24 percent APR. The average credit card rate is around 15 percent.

Papadimitrious points out that the Apple Card doesn’t offer 0 percent introductory rates, and its lowest interest rate -- the one offered to customers with the best credit -- is 12.99 percent.

Added utility

That said, loyal Apple customers may find added utility with the card. It’s extending 3 percent Daily Cash to more merchants and apps. And from now on customers will receive 3 percent Daily Cash when they use Apple Card with Apple Pay for Uber and Uber Eats.

There could be an additional advantage. If you own an iPhone and have been turned down by other credit card companies, the Apple Card might be your best bet. CNBC reported last week that consumers with subprime credit scores are being approved for the Apple Card. 

Apple reportedly sought a banking partner willing to approve as many of its U.S.-based iPhone users as possible, within the bounds of responsible lending. One iPhone user approved for the Apple Card told the network he was “shocked” that he was approved because his credit score is 620.

The rewards credit card landscape continues to get more competitive, with lenders not only introducing new cards with lucrative benefits but updating current cards to stay ahead of rivals.

Navy Federal Credit Union has revamped its More Rewards Card from American Express, increasing existing rewards and adding new ones. The card already offers three times the points at supermarkets and gas stations. Under the refresh, restaurant purchases will go from two times the points to three times.

A point is worth one cent when you redeem for cash, travel, merchandise, or gift cards. Earning 30,000 points will translate into $300 in cash or rewards.

Under the new structure, which goes into effect in September, the card will offer a new rewards category, paying three times the points on transit expenses. That includes riding sharing, bridges, tolls and ferries, parking lots and garages, limos and taxis, bus lines, charters, tour buses, and railroads.

30,000 point sign-up bonus

New cardholders will get a 30,000 point sign-up bonus and can finance purchases at 0 percent interest for the first 12 months. There are no annual fees, foreign transaction fees, balance transfer fees, or cash advance fees.

The interest rate range also compares favorably to the recently introduced Apple Card, which will charge between 12.99 and 23.99 percent interest on balances. The Navy Federal More Rewards Card has an interest rate range of  11.90 to 18.00 percent. 

For the industry as a whole, the average credit card interest rate is around 15 percent.

Additional perks

Under the makeover, the card will carry a few additional perks. Cardholders will be able to get early access to sought-after tickets for shows, sporting events, and concerts.

Personal finance experts increasingly suggest that consumers shop carefully for a rewards credit card and use it to maximize the return, even using it to pay bills in come cases. However, it only makes sense if you pay the balance in full each month.

No matter how many points you get for the purchase, it probably won’t cover the double-digit interest charges you will incur if you add the purchase to a balance.

The Apple Card, Apple’s branded credit card announced earlier this year, began to roll out this week. 

Some iPhone owners were able to apply for the card this week, and it will be open to everyone else by the end of the month. This week, consumers and financial services experts got their first look at the card’s details.

“The only people who should consider applying for the Apple Card are those who pay their bills in full every month and spend a lot via Apple Pay,” said WalletHub CEO Odysseas Papadimitriou. “Everyone else is better off with one of the best rewards credit cards or one of the best 0% APR credit cards.”

That’s because the Apple Card is still a credit card. When the company announced the product in the spring, it said its rates would be lower than most credit cards. They are, but not that much lower -- topping out at around 24 percent APR. The average credit card rate is around 15 percent.

Papadimitrious points out that the Apple Card doesn’t offer 0 percent introductory rates, and its lowest interest rate -- the one offered to customers with the best credit -- is 12.99 percent.

CNBC reports that many consumers with subprime credit scores are currently qualifying for the Apple Card. The network reports that Goldman Sachs, Apple’s partner, is bowing to pressure from Apple to approve as many of its customers as possible -- even those with less-than-stellar credit.

‘Didn’t reinvent the wheel’

"As with all Apple products, the team behind the Apple Card has created an attractive-looking product, but they didn’t reinvent the wheel when it comes to credit cards,” said Sara Rathner, credit card expert at NerdWallet. “Consumers owe it to themselves to shop around when choosing a new credit card and select one that rewards them the most where they spend most often.”

As an alternative, Rathner suggests taking a look at the Citi Double Cash rewards card, which pays 2 percent back on all purchases. Its interest rate range is not much higher than the Apple Card’s -- 16.24 percent to 26.24 percent.

Of course, as CNBC’s reporting shows, some people can qualify for the Apple Card who can’t get a card designed for people with good to excellent credit.

Apple’s rewards

Apple saves its most generous rewards for the purchase of Apple products. It will pay 3 percent cash back on any Apple transaction, including iCloud storage. It pays 2 percent on any Apple Pay transaction and 1 percent on purchases made with the physical card or virtual card number.

“Unless the bulk of your budget goes toward buying new Apple products, there are a variety of cards on the market that may be a better fit," said Rathner.

Apple says its new card has some advantages that other cards don’t have. It doesn’t charge late fees and there is no annual fee. It also waives foreign transaction fees.

Democratic presidential hopeful Sen. Bernie Sanders (I-Vt.) has gotten a lot of attention for his proposal to wipe out all student loan debt. His proposal to cap credit card interest rates is less known but just as popular.

Sanders has proposed capping the interest rate consumers pay on credit card balances at 15 percent. The average rate on credit cards is slightly higher than that, and many cardholders pay an even higher rate, making it difficult to pay off large balances.

While consumers like the idea of a cap, a new survey from CompareCards, a division of LendingTree, finds that support goes down when consumers are told how such a cap would affect credit.

Eighty-three percent of respondents support the concept of capping credit card rates at 15 percent. But the support falls to 51 percent when they learn that the cap would make it harder to qualify for a credit card.

Unsecured loans

Lenders say credit card rates are so much higher than other types of loans because credit card debt is unsecured. If a consumer defaults on the debt, the credit card company can sue, but it has little other recourse. There is no collateral securing the loan, so lenders charge everyone a higher rate to compensate for their expected losses from consumers who don’t pay.

"Americans love the idea of a credit card rate cap,” said Matt Schulz, chief industry analyst at CompareCards. “It's one of the few things that both Republicans and Democrats agree on these days, but that love isn't unconditional." 

Schulz says the survey showed a large number of cardholders would have second thoughts about an interest rate cap if it made it harder for them to get access to credit. Even cardholders with good credit are less supportive of a cap when they learn credit card companies would likely reduce rewards and incentives if a cap is imposed.

No limits on interest

Currently, there are few limits on what interest rate credit card companies can charge. The rate for cards offered to consumers with subprime credit can be more than 30 percent. 

One credit card company recently set the rate on its card at 79.9 percent. That jaw-dropping rate was found to be legal as long as the bank disclosed the terms in accordance with the Truth in Lending Act.

Even with the knowledge that it might reduce some consumers’ access to credit, an overwhelming majority -- 77 percent -- agreed there should be stronger regulations in place to protect credit card customers.

With dust-ups like Carnival Cruise Lines being threatened with a ban from U.S. ports and the Boeing 737 MAX grounding, consumers are starting to take a look at credit cards that come with built-in travel insurance benefits.

That sounds like a good idea in theory, “but depending on each traveler and their trip specifics, this limited coverage may be exactly what they need, or it may not provide the right benefits or coverage amounts,” Jenna Hummer, a spokesperson for Squaremouth, a travel insurance comparison site, told ConsumerAffairs.

Hummer recommends that the consumer do a little more investigating before they sign up for a new credit card for the sole purpose of a travel insurance perk. “One big concern is when travelers assume their credit card offers the trip protection they need but they do not check the coverage details in advance of their trip.”

A broken foot diving in Aruba?

Squaremouth found three situations where third-party travel insurance policies can cover costs that credit cards won’t necessarily guarantee.

At the top of Squaremouth’s warning list is the fact that most credit cards don't include medical coverage if a traveler has a medical emergency while traveling. Keyword there being “most.” If the credit card you sign up for promises that it does indeed cover travel medical benefits, check the amount. Often, the amount is limited, ranging from $2,500 to $5,000.

If medical coverage is something you want to have just in case, it might be smarter to take a look at third-party medical insurance. Those policies usually offer more comprehensive medical coverage, with benefits starting around $10,000 for Emergency Medical and $100,000 for Medical Evacuation. Third-party policies can also offer some added pluses like coverage for pre-existing conditions, dental, including chronic conditions and recent diagnoses, illnesses, or injuries.

Squaremouth’s guidance? At least $50,000 in Emergency Medical coverage and $100,000 in Medical Evacuation coverage for international travel, plus higher amounts for cruises or remote travel.

When ConsumerAffairs tested Squaremouth’s $50,000 medical coverage suggestion at travel insurer Allianz, the rate we received was $152 (for a 50-year old Alabama resident visiting Aruba over the Fourth of July) which also included trip interruption, trip cancellation, baggage loss/delay, etc.

When travel plans get off the tracks

“Many credit cards offer Trip Cancellation coverage to customers who pay for trips through their card, reimbursing travelers who are unable to take their trip as planned,” Hummer said, but with a slight “but” -- those cards usually cap coverage at a certain amount.

And, just like emergency medical, travelers who want to make sure their plane or boat gets them where they’re going, checking out third-party insurers would be smart. Typically, they cover much higher trip costs and offer reimbursements up to 100% of prepaid and non-refundable travel expenses, like airfare, hotels, and tours.

Squaremouth raises one important point about Trip Cancellation coverage: While you’d rather not have to ask the credit card company or travel insurance company for approval, unfortunately, the standard Trip Cancellation benefit typically only reimburses travelers who cancel for specific reasons, such as illness, death, severe weather, or terrorism.

The all-in-one option

Want a catch-all? While Cancel for Any Reason policies can run as much as 40 percent more, the coverage is broad and will -- at least partially -- reimburse the consumer to cancel for reasons that are not covered by the standard Trip Cancellation benefit.

Consumers owe more than $1 trillion in credit card debt, but how that debt is managed can make the difference between getting ahead or living paycheck-to-paycheck.

Carrying a balance of $1,000 or less? Those payments can be manageable even with a modest income and the balance can be paid off with some sustained effort. What about $5,000? That gets a little harder.

When a credit card balance goes over $10,000, that’s when you can find yourself behind the 8 ball, depending on your income and other expenses. Assuming a 17 percent interest rate -- and the rate on many cards is higher -- the interest payments alone would be $141.66 a month, assuming you never paid anything on the principle.

Unfortunately, a growing number of consumers find themselves trying to juggle payments around a five-figure credit card balance. About one in six consumers with credit cards in the nation’s largest metro areas carry a balance of $10,000 or more, according to a new report from CompareCards.

Big spenders in Bridgeport, Conn.

According to the study Bridgeport, Conn., has the highest percentage of consumers with a $10,000 credit card balance. Researchers say most of the cities with the highest percentages of people with five-figure credit card debt are along the East Coast and West Coast. And it’s not low income households that have gotten in over their heads in plastic debt -- it's often the wealthiest cities that carry the biggest card balances.

About 23 percent of credit card holders in the Bridgeport metro area carry balances in excess of  $10,000. Nearly 2 percent of Bridgeport consumers owe more than $50,000 on their cards.

Virginia Beach is second on the list, with 20 percent of cardholders owing at least $10,000 on their cards. Washington, D.C. is third with just under 20 percent in the five-figure club. New York is fourth and Los Angeles rounds out the top five.

Less debt in the South

While the biggest borrowers tend to be on the coasts, the South has fewer credit card customers who owe $10,000 or more. In fact, five of the seven cities with the lowest percentage of cardholders with five-figure card debt were in the South.

Winston-Salem, N.C.; Greensboro, N.C.; Chattanooga; Knoxville, Tenn.; and Jackson, Miss., have high percentages of five-figure credit card debt, but none higher than 12.4 percent.

"When your credit card debt hits five figures, it's crushing, and it can consume your life. I know. I've been there," said Matt Schulz, chief industry analyst at CompareCards. "But if you're struggling with credit card debt, the worst thing you can do is nothing.”

Sometimes seeking advice from a non-profit credit counselor can be the first step toward getting out of debt. The National Foundation for Credit Counseling (NFCC) can put you in touch with a non-profit counselor in your area.

After student loan debt, credit card debt is one of the main financial anchors holding consumers back, preventing them from getting ahead.

But a new survey conducted for U.S. News and World Report shows a lot of consumers are not only unaware of how much credit card debt they owe, they don’t even know if that debt exists.

A recent report from the Federal Reserve shows credit card debt in the U.S. surpassed the $1 trillion mark for the first time in 2018. Student loan debt is only slightly larger, at $1.4 trillion.

The disturbing results of the U.S. News survey show 21 percent of consumers don’t know if they are carrying a credit card balance and 30 percent said they don’t know how much interest they pay each month.

Nearly a quarter owe more than $10,000

The survey also found that of consumers who have credit card debt, 24 percent owe more than $10,001. While 37 percent have a balance on just one credit card; 12 percent are running tabs on five or more credit cards.

If you recognize yourself among those statistics, Beverly Harzog, best-selling author, credit card expert and consumer finance analyst at U.S. News, says it’s no cause for shame. Most of us have been there at one time or another.

"When I was young, I fell into a sea of credit card debt because I was uneducated about personal finance and unaware of the high interest rates associated with credit cards," she said.

Paying down a balance might not be as daunting as it might seem. Harzog recommends tricks like transferring high interest credit card balances to a card giving you a year or more without paying interest.

Get a balance transfer card

"If you qualify, a balance transfer credit card can save you money and help you get back on track financially," she said.

As ConsumerAffairs has previously reported, a balance transfer card with a 0 percent interest rate allows you to quickly pay off a balance because the entire payment goes to pay down what’s owed. With a high-interest credit card, very little of the payment actually goes toward the debt.

The U.S. News survey uncovered some good news as well as bad news. It found that a majority of consumers -- 60 percent -- do not have any credit card debt. They pay off their balance in full each month.

But of consumers who are carrying a credit card balance, 13 percent said they have to struggle to make ends meet. Fifteen percent said their credit card debt limits their spending on other things.

If you get a robocall promising a reduction in your credit card’s interest rate, the Federal Trade Commission (FTC) has a piece of advice: hang up.

The agency says it has begun distributing refunds to consumers who fell for such a pitch. The FTC joined with the Florida Attorney General’s Office in 2015 to sue Payless Solutions, accusing it of making illegal robocalls to thousands of people nationwide offering a “worthless” program to reduce credit card interest rates.

According to the complaint, the defendants told consumers they could shave at least $2,500 from their credit card bills and pay them off must faster because they would be paying a lower interest rate.

The average credit card interest rate is over 17 percent, with many cardholders paying a much higher rate. The program may have sounded very attractive to some heavily leveraged consumers, even though the company charged an upfront fee that the FTC said ranged from a low of $300 to a high of $4,999. The suit also charged the defendants with illegally charging some consumers without their consent.

Full refunds

The FTC said it is now providing full refunds to consumers charged a fee by Payless Solutions, with the average refund at about $1,000. Eligibility will be determined by the company’s records or through consumer complaints to the FTC’s Consumer Sentinel Network. Consumers who receive a refund should deposit or cash checks within 60 days, which is specified on the check.

It should be noted that the FTC never requires consumers to pay money or provide account information to cash a refund check.

While paying an upfront fee will not get you a lower interest rate there are legitimate ways to pay less each month and pay off the balance faster. The first is by transferring the balance to a card offering several months of 0 percent interest.

Considerations

There are several considerations when selecting a balance transfer card, including whether to apply for one that charges a fee to transfer the balance. Most cards charge between 3 percent and 5 percent of the balance, but a few don’t. Here is a good place to start your research.

Consumers with impaired credit might not qualify for a balance transfer card. If so, the experts at ConsumerAffairs suggest taking steps to raise your credit score. The best way to do that is to pay every bill on time, no matter what.

If one of your credit cards is nearly maxed out, work on paying down that balance first. That, too, will improve your credit score.

You’ll find other helpful advice for reducing your credit card debt here.

Now that consumers have gotten accustomed to inserting their embedded-chip cards into a credit card terminal instead of swiping, the next trend may be just simply tapping the card on the terminal to record a purchase.

KeyBank is launching Mastercard contactless credit and debit cards, in partnership with Mastercard and FIS. The new cards, which are now being issued to account holders, will allow consumers to make in-store purchases by just tapping the terminal screen. The transaction is encrypted to provide security.

"We know that consumers value convenience and speed, and our new contactless cards make everyday purchases quick and simple, with the confidence that transactions are secure,” said Ken Gavrity, head of KeyBank Enterprise Payments. “We're thrilled to offer our customers this easy-to-use and safe way to pay."

Built-in antenna

Contactless cards come with a different kind of chip and a near field communication (NFC) antenna, which transmits data between the card and the terminal, usually in about half the time it takes to make a purchase using cards with the EMV chips.

Sara Rathner, NerdWallet’s credit card expert, says the contactless cards are popular in Europe, but U.S. consumers and businesses have been slow to adopt them.

“KeyBank is following other major credit and debit card issuers in offering this feature,” Rathner told ConsumerAffairs. “Wells Fargo, Chase, Capital One, and American Express have all started to roll out contactless payment capabilities on their products in the past few years. As more U.S. merchants update their point-of-sale hardware to accept contactless payments, consumers will adopt this faster way to pay in greater numbers.”

While consumers may worry about the security of contactless payments, a transaction is secured by using a one-time code rather than your personal information.

“While there’s always a risk of your credit or debit card being compromised, you have recourse if you report fraudulent charges to the issuer as soon as possible,” Rathner said.

According to CreditCards.com, the U.S. adoption of the EMV chip card as standard may pave the way to wider use of contactless cards. That’s because many of the new terminals that accept chip cards also work for contactless cards.

Digital wallets also use similar technology. Once you load your payment information into a digital wallet app, you can pay for purchases by holding your smartphone next to the credit card terminal. An estimated 30 million retailers are equipped to accept digital wallet payments.

Consumers have a growing number of options to cash when it comes to spending money.

In addition to countless credit cards, there are mobile wallets that can allow you to pay via your phone. A debit card lets you spend money from your bank account with just a swipe. And of course, there’s the old fashioned credit card.

So is the greenback an endangered species? The latest research from Origin, Hill Holliday’s independent research arm, suggests most consumers aren’t ready to give up cash completely. The study tried to measure consumers’ attitudes about cash and other forms of payment and examined the attitudes that both consumers and businesses have about cash versus plastic and digital.

The younger consumers are, the more likely they are to be using a mobile wallet and app-based payments such as Apple Pay or Venmo; however, they aren’t ready to go all in. Businesses appear to prefer cash to accepting mobile payments due to costs, tech adoption, and perceived lack of interest among consumers.

Most still carry cash

The survey found that 76 percent of consumers still carry some cash, even if they mostly use other methods to pay for things. Fifty-five percent said they “hated” the idea of completely abandoning cash.

So far, mobile wallets are pretty much a millennial thing. Forty-five percent of consumers over 40 have never made a mobile payment, while 22 percent of those under 40 use it daily. But 58 percent of those using mobile payments only started in the last year.

Last week The Wall Street Journal reported Venmo, an app originally designed as a way to transfer money between family and friends, is rolling out a branded credit card in a bid to attract users who are not quite ready to try a digital wallet.

Sara Rathner, a credit card analyst at NerdWallet, says the card appears to be targeting a young group of consumers that already relies heavily on the Venmo app.

“One benefit I see the card providing is waiving the 3 percent fee to use it to transfer money, but that would be a small perk compared to what other cards offer,” Rathner said in an email to ConsumerAffairs. “There are so many rewards cards on the market with massive sign-up bonuses and generous cashback rates at places where younger consumers spend the most, like restaurants.”

Tough business

Rathner said Venmo may have the same experience as Apple when it announced its credit card. She said the announcement was mostly met with yawns.

“A strong brand is good to have, but consumers are going to vote with their wallets for the card that earns them the most rewards," she said.

In a 2018 survey conducted for the Pew Research Center roughly three-in-ten adults in the U.S. said they made no purchases using physical currency during a typical week -- that’s up from 24 percent in 2015.

As part of its research, Hill Holliday conducted a deprivation study with 10 adults, who agreed to “go cashless” for a week and record their experiences. According to the researchers, every participant cheated.

As competition in the credit card industry increases, so do the benefits for consumers. The Chase Freedom Card is the latest to ratchet up rewards for cardholders.

The card is doubling its cash back rewards for new account holders from 1.5 percent to 3 percent on up to $20,000 in purchases during the first year. That potentially adds up to an extra $300 in cash back.

After the first year, the cash back rewards rate returns to 1.5 percent on all purchases.

“Freedom Unlimited’s 3 percent cash back offer provides new cardmembers with the opportunity to make the most of their everyday spending and keep them 'always earning,'” said BJ Mahoney, general manager of Chase Freedom. “We are excited to reward new customers even more for their purchases.”

Flexibility

With the Chase Freedom Card, users can get cash back or redeem their points for travel, gift cards, Apple products, and even products bought on Amazon.

The Chase Freedom Card carries no annual fee and offers 0 percent financing for 15 months when you transfer an existing balance from another card. After that, the rate can vary between 17.24 percent and 25.99 percent. There is a 3 percent balance transfer fee, so moving a large balance can be pricey.

The Freedom Card offers other perks, such as a $150 cash bonus if you spend $500 on purchases in the first three months the account is open. The card pays 5 percent cash back on up to $1,500 in combined purchases in bonus categories that you choose.

Try to avoid annual fees

Lenders continue to add benefits as consumers flock to rewards credit cards and the competition to sign new accounts heats up. But it is important to keep in mind that many of these premium cards carry annual fees -- some of them $400 or more.

Paying an annual fee will wipe out much of your cash rewards, depending on how you use the card. There are plenty of rewards cards, like the Chase Freedom Card, that do not charge an annual fee.

As we have pointed out in the past, sometimes the best rewards credit card is a balance transfer card. That’s especially true if you have a large balance of $5,000 or more. The money you save in interest charges will probably far exceed what you will earn in cash back rewards.

When selecting a balance transfer, look for one that does not charge a balance transfer fee. It may be a better choice, even if the interest-free period is shorter.

ConsumerAffairs offers other tips for selecting the right credit card here.

As part of a settlement approved this week by the court, some consumers will be eligible for two years of free credit monitoring from Experian.

The settlement covers three lawsuits filed in federal court claiming that some consumers’ credit reports contained inaccurate tax liens or civil judgments. The suits claimed affected consumers suffered lower credit scores and may have been denied credit, or paid higher costs as a result.

As part of the settlement, Experian has set up mediation and arbitration programs for affected consumers. Those who meet certain requirements may be eligible to mediate claims for money through these programs, though payment is not guaranteed. These benefits are available until August 22, 2020.

Consumers are eligible to take part in the settlement if they requested their credit report from Experian between January 15, 2011 and September 21, 2018 and it included an incorrect public record such as a bankruptcy, judgment, or tax lien.

Consumers are also eligible if Experian sent their credit report to a third party between January 15, 2014 and September 21, 2018 and the report contained inaccurate information.

Experian has established this website to guide consumers who may be eligible for the benefits.

Not one to be left out of the all-things-for-all-people game, Apple threw a giant welcoming party on Monday for its new video streaming service -- “TV+” -- and its new credit card, “Apple Card.”

Apple’s foray into fintech is a giant step for the company, but not a new one. Its “Apple Pay” is in its fourth year as a mobile payment and digital wallet service, and according to Apple CEO Tim Cook, Apple Pay transactions soared to more than 1 billion in 2018. If you’re doing the math, that’s about 11 million per day -- thought to be more than both Square and PayPal’s mobile transactions.

The big questions

Just looking at its history, let alone the numbers, it’s tough to call Apple’s move into the credit card world a bad one. However, within hours after the company’s announcement, tech and financial sages came out of the woodwork to weigh in with their own take.

Here’s what ConsumerAffairs found:

Apple’s pitch

As far as the upsides to Apple Card, the company has three points it wants the consumer to take away:

1. “The card lives on your iPhone, in the Wallet app. And that makes all kinds of new things possible.

2. When you buy something using Apple Card, you get a percentage of your purchase back in Daily Cash. Not a month from now, but every day. There’s no limit to how much you can get. And it goes right onto your Apple Cash card, so you can use it just like cash.

3. Apple Card doesn’t have any fees. No annual, cash‑advance, over-the-limit, or late fees.”

Security

For one, TechCrunch’s security editor, Zach Whittaker, gave the card a nice fistbump.

“Chief among the benefits is a range of security and privacy features, which Apple says — unlike traditional credit card providers — the company doesn’t know where a customer shopped, what they bought or how much they paid. But its one feature — a one-time unique dynamic security code — will make it nearly impossible for anyone to use the credit card to make fraudulent purchases,” Whittaker said.

Charting new waters

Apple isn’t alone in this venture; it has Mastercard on its side to help guide it through processes that it may be new to.

In an interview with Mastercard’s Jorn Lambert, EVP of digital solutions, PYMTS learned that “the embrace of the Apple Card may span both the virtual and physical offerings, and...will likely prove useful in restaurants or bars where Apple Pay is not currently a payment option. The move from plastic to ‘digital first’ to ‘digital only’ may take several years.”

But Apple Card’s joint physical and digital card offerings may be what marks a “turning point.”

Need or want?

Credit card companies -- short of MasterCard, which is Apple’s partner in this deal -- won’t be taking this move lying down. It’s a safe bet that credit card companies around the world are getting geared up with similar products that will offer consumers more choices.

“They [Apple] are really lengthening this gap that other competitors can come into,” said credit card vlogger Brian Jung. “I believe from a business standpoint, credit cards are an excellent move, but as a credit card channel, I can't recommend this credit card to a lot of my people unless you guys are in it for the flex value. The only reason I would say to get this card now, in my opinion, it really is kind of a gimmick card because it is just for the name brand.”

It’s still a credit card

Dovetailing Jung’s point-of-view, iMore’s Rene Ritchie weighed in with this slant:

“It’s still a credit card, and that means the interest is still real, and the business model is still awful. The entire credit card industry is still absolutely and unabashedly evil. Apple's doing some good stuff to mitigate it. They're keeping [interest rates] low. They're suggesting ways to pay debt off faster, including bi-weekly and weekly payments. They're showing you how much interest you'll be paying if you choose different payment options. They're offering payment plan options to help you get debt free.”

“But the entire credit card system is still absolutely and unabashedly evil. If Apple has to get into bed with it, I'd much rather see something like American Express, the classic version, where you can't carry a balance and so there's no usurious interest rates and no debt-built business. Which, frankly, should be absolutely illegal anyway.”

The verdict?

It’s really too early to tell. The features are inviting, but like we said -- other credit card companies are likely to follow suit.

On the fintech end, it’ll be no stroll in the park for Apple, either. It has Google’s Google Pay service to contend with. Facebook’s WhatsApp is said to be rolling out a payment feature, too. And while Apple has its iPhone to carry some of Apple Card’s load via Apple Pay, Android Pay and Samsung Pay have a larger footprint around the world.

There’s a disconnect when it comes to millennials and credit. They’re the generation least likely to carry cash, but a new survey by TD Bank shows they are also the most likely to fall short when it comes to building healthy credit habits.

For example, millennials are big believers in plastic, but 23 percent don’t have a credit card. And while they tend not to like cash, 26 percent actually prefer to spend cash when they travel.

Other statistics stick out. Personal finance experts say consumers should use 30 percent or less of their credit limit. Half of millennials have tapped between 31 percent and 90 percent of their available credit.

Perhaps more disturbing, 32 percent of millennials routinely carry a credit card balance. They rarely pay off their balance in full, potentially damaging their credit health and increasing their monthly costs in a rising rate environment, as the one consumers found themselves in last year.

What’s my score?

About a quarter of millennials are unaware of their credit score, a real disadvantage when applying for everything from credit cards to car loans. Consumers with high credit scores deserve -- and should demand -- lower interest rates.

"The data is a bit concerning,” said Mike Kinane, who is head of US Bankcard at TD Bank. “It shows that a significant knowledge gap exists for millennials when it comes to credit, especially compared to prior generations."   

Kinane says even millennials who use cash should develop their financial knowledge and habits since it will no doubt prove useful in the future.

Advice from Suze

Money management guru Suze Orman consistently counsels consumers to get rid of their credit card debt, even to the point of tapping into savings to do so. After all, she points out, you’re earning 1 percent on your savings but probably paying 17 percent or more on your credit card balance.

If you lack savings but have an excellent credit score, Orman also suggests a balance transfer card with at least a year of zero percent interest. ConsumerAffairs rates the best balance transfer cards here.

The TD Bank survey also suggests millennials aren’t quite as savvy as older generations when it comes to playing the credit card rewards game. They do a good job of earning rewards with their purchases, but 30 percent have put off using those rewards to the point where they have expired.

According to the survey, millennials spend $2,447 a year on dining, more than Gen-X ‘s $1,923  and Baby Boomers’ $1,486. Using a credit card with 2 percent cash back on dining could net nearly $50 in rewards each year. That could pay for over two weeks of coffee or almost four months of a Netflix subscription.

We’ve reached another milestone. Americans owe over $4 trillion worth of consumer debt, a record number, according to new data released by the Federal Reserve.

At least we have credit cards. The Federal Reserve found that credit card debt alone surpassed $1 trillion for the first time.

Data released by consumer financing sites confirm that it’s past time to start paying off our credit cards. The firm Experian reports that the average American has a credit card balance of $4,293. A recent WalletHub survey found that more than 1 in 3 people are afraid of maxing out their credit cards when making a purchase over $100.

The findings come at a time when credit card interest is rising, now averaging 17.41 percent.

Another major source of consumer debt is higher education. Student loan debt tripled in the last decade alone and is now worth $1.5 trillion.

Still, financial experts don’t seem particularly worried about American consumer debt, or debt that doesn’t include mortgages. The amount remains “pretty manageable overall," one financial expert told CNBC.

A new credit card provided by Goldman Sachs and Apple is reportedly in the planning stages. A report in The Wall Street Journal cites people involved in the project who say it will be a Mastercard product and use elements of Apple’s digital wallet, Apple Pay.

The sources say the new card is expected to launch later in 2019 around the time Apple upgrades the iPhone. While industry analysts say the card should be a winner for both companies, Arielle O’Shea, NerdWallet personal finance expert, says it could also be good for consumers.

“If reports are true and the card ends up offering 2 percent back on all purchases, it could directly compete with other top cash back cards on the market,” she told ConsumerAffairs.com.

O’Shea says Goldman Sachs would like to engage with millennials, and she sees an Apple credit card as an effective way to bond with this next generation of bank customers.

“The bank is likely hoping to piggyback on Apple's loyal following to convert users of the credit card to long-term Marcus banking customers that turn to the bank for other financial products,” O’Shea said.

Slow to adopt Apple pay

Apple Pay is widely used around the world, but the adoption rate among retailers lags far behind credit cards. The new Apple card is expected to go head-to-head with Chase’s Sapphire Preferred and Sapphire Reserve travel cards, which are already popular with millennial consumers

“Given that millennials tend to most value experiences and travel, they may continue to be attracted to travel rewards cards despite Apple's powerful brand,” O’Shea said. “Even the biggest Apple fans shouldn't blindly turn to this card: It's important to compare annual fees and features when shopping for a new card, and make sure it fits your spending habits.”

The Journal Report makes clear that consumers who are already using Apple Pay may stand to benefit the most. Cardholders may get some special features in Apple Pay such as setting a budget and managing payments.

In the intense competition for credit card customers, Navy Federal Credit Union has revamped its member rewards program by significantly increasing the rewards it offers members.

The credit union has changed the name of its Member Mall to Navy Federal Member Deals. Members who go to the new online portal will be able to shop online at over 900 major retailers using a Navy Federal card. By doing so, they can earn up to 15 times the points or choose to receive 15 percent cash back on their purchases.

Members using the portal for Valentine’s gifts can get increased rewards through the program from FTD and Godiva, experiential gifts with offers from outlets like LivingSocial, or even book a  winter vacation getaway through Expedia or Hotels.com. The move ups the ante in the credit card sweepstakes.

"At Navy Federal, we want our cardholders to take full advantage of the opportunities to earn even more rewards - and our recently revamped Member Deals is a perfect example,” Justin Zeidman, head of credit card products at Navy Federal, told ConsumerAffairs. “Credit card points and cash back can translate into hundreds of dollars back in our members' pockets.”

The retailers in the program include Walmart, Best Buy, Staples, Macy’s, and the Home Depot. If you went to one of these stores or accessed it online without going through the members portal, you’d still save money, just not as much.

More cash back

For example, spending $400 using the Navy Federal cashRewards card by going directly to a  participating retailer would yield $6 cash back, nothing to sneeze at. However, spending that same $400 at one of these retailers by accessing it through the Member Deals portal would get you $26 cash back.

If you have a Navy Federal card that rewards you with points, the difference is just as striking. The Visa Signature Flagship Rewards card would give you 800 points on a normal $400 purchase. But spending that same money through the Member Deals portal lets you rack up 2,800 points.

Participating retailers offer attractive deals since Navy Federal is funneling customers their way. Some even offer extra rewards, such as Verizon--  which has increased the points for adding a new line -- and Barneys New York, which has tripled its points per dollar.

Choosing a rewards card

Rewards credit cards have become increasingly popular in recent years as lenders have become more generous with the rewards they offer. Before applying, however, consider how you will use the card and what kind of rewards best suit your lifestyle.

Travel cards with the most generous rewards usually charge an annual fee. Carefully consider whether the rewards you stand to earn will more than pay for the fee. There are plenty of rewards cards that don’t charge an annual fee.

Despite significant losses over the last 12 months, cryptocurrencies remain popular with some consumers. But how do you spend them? It just got a little easier.

Ternio, a technology firm specializing in blockchain, has introduced BlockCard, a debit card that enables the account holder to spend their cryptocurrency as though it were dollars. The company says it can be used online or at point-of-sale locations in brick and mortar retail locations, as long as the business accepts credit cards.

To start, the BlockCard will allow you to spend Bitcoin, Ethereum, Stellar Lumens, and Ternio. Consumers who own any of those currencies may deposit them to their BlockCard account. The company says it plans to add additional currencies later in the year.

“Ternio’s goal is to accelerate the use of blockchain and cryptocurrency into everyday life,” said Ian Kane, chief operating officer and founder of Ternio. “BlockCard enables the card holder to gain real utility from their cryptocurrency and removes the notion that crypto is only a speculative asset.”

First to support multiple currencies

BlockCard isn’t the only plastic to support a cryptocurrency, but the company said it is the first to support multiple currencies. It says it is the only card that allows real-time cryptocurrency spending by processing transactions using a crypto exchange.

“We want to give consumers the option on which digital asset they use to fund their BlockCard account,” said Daniel Gouldman, CEO and co-founder of the company. “Card holders decide if they want to buy a bagel with their Bitcoin or a latte with their Stellar Lumens. Most importantly, these transactions occur on digital asset exchanges, which helps to propel the crypto community.”

Ternio said it registered more than 1,000 people during the card’s soft launch. People interested in applying for a card can do so here.

What’s ahead?

Consumers who purchased Bitcoin and other digital currencies early in 2017 saw the value of their holdings surge, but 2018 was a different story, with Bitcoin down about 75 percent from its highs.

What does 2019 hold in store? Bitcoin and other currencies have begun the year with sharp  gains, but they still have a long way to go to make up for their losses. According to NewsBTC.com, a publication covering the crypto markets, Bitcoin remains in a bearish trend, unable to break above the $4,000 level.

Its value at the end of 2017 was more than $14,000.

Consumers struggling to pay off credit card debt would be wise to consider a balance transfer credit card in 2019, but picking the right one and using it effectively is key to making it pay off.

CompareCards, a division of LendingTree, has studied the terms and conditions of more than 160 balance transfer cards and found that there are still plenty of zero percent introductory rate options. But it’s important to read the fine print and use the cards to your full advantage.

The study found that 41 percent of consumers have applied for a balance transfer card in the past, but 40 percent of them have failed to pay off the entire balance during the zero percent introductory period. After the introductory period, the interest rate often adjusts to one that is higher than the national average.

The advantage of zero percent, of course, is the entire payment goes to pay down the balance. If you have been paying $200 a month on your old card, chances are most of that amount goes to pay interest. Paying $200 for 15 months with no interest charges will reduce a balance by $3,000.

Length of introductory period vs. balance transfer fee

The study points out the need to carefully choose a balance transfer card. The length of the zero percent introductory period is an important factor, but so is the balance transfer fee most cards assess. It is a fee based on the amount of money being transferred, and it can be hefty -- especially on large balances.

Most cards charge at least 3 percent of the transferred balance, but some charge as much as 5 percent. Even at 3 percent, transferring $10,000 results in an upfront fee of $300. The study shows that only one in six consumers who transferred a balance in the past were able to avoid the balance transfer fee.

Matt Schulz, chief industry analyst at CompareCards, says consumers can achieve some real savings with a balance transfer card as long as they understand the fees, deadlines, and other quirks that can come with this tool.

“Don’t wait, though. Credit card interest rates continue to rise and as they do it is likely these offers will get less and less attractive,” Schulz said.

Here are three options

The Chase Slate balance transfer card remains an attractive option for its combination of no transfer fee and fairly long introductory period. Consumers get 15 months of zero percent interest.

The Amex Everyday Credit Card from American Express also offers 15 months of interest-free payments with no balance transfer fee.

The Citi Simplicity Card offers 21 months at zero percent interest, but that extra six months of interest-free payments come at a hefty price. There is a balance transfer fee of either $5 or 5 percent of the transferred balance, whichever is greater.

Experian has launched an initiative that it says will help many consumers instantly raise their credit score. It’s called “Experian Boost,” and the credit bureau says it will significantly influence how consumers get access to credit.

There are several ways consumers can raise their credit scores. First and foremost, they should pay all of their bills on time, but some bills count more than others.

For example, if you own a home and pay a mortgage, the mortgage lender reports your payment history to the credit bureaus. But if you rent your home, it’s likely you don’t get a similar credit from paying your rent on time.

Experian says consumers who sign up for Experian Boost will be asked to grant the platform access to their online bank accounts used to pay their bills. Specifically, Boost will look for timely payments on utility and telephone bills, which are currently not included in most credit score formulas.

Recalculated FICO score

The consumer is then asked to verify the data and confirm they want it included in their Experian credit file. After that, Experian delivers a recalculated FICO score.

"Globally, we are constantly innovating and leveraging technology to find new ways to help consumers gain access to quality credit while promoting fair and responsible lending," said Experian Global CEO Brian Cassin. "We are committed to financial inclusion, and Experian Boost is the latest example of our efforts to increase consumer awareness of credit's impact and value while giving them greater control."

Experian said there is no charge to use the Experian Boost platform. Admittedly, it will help some consumers more than others.

The company says consumers with lower scores -- 580 to 669 -- will see the most potential improvement. Based on an early analysis, the company says two out of three credit scores improved when utility and phone bills were included.

Helps those with little credit history

Furthermore, 10 percent of consumers with “thin” credit files -- meaning they haven’t had much access to credit -- became “scorable” for the first time. Seventy-five percent of consumers with a score below 680 experienced an improvement in their credit score.

The improvement for consumers in this score range could be valuable since the rise in score could potentially give them credit options other than expensive subprime loans. The Credit Builders Alliance estimates that a subprime credit score will cost a consumer an additional $200,000 over their lifetime.

For example, having a 720 FICO score instead of 500 will save you $4,020 on a $10,000, 5-year auto loan – lowering the payment by $67 a month.

Experian has provided this link for consumers who want to sign up for Experian Boost or to get more information.

Hand-wringing is the exercise du jour at Bank of America (BOA) and JPMorgan Chase thanks to a group of bank customers filing a class action lawsuit which claims the two banking giants sold the personal information customers gave as a part of acquiring a credit card.

And, as most consumers know, when you jump through the hoops of a credit card application, there’s virtually no personal data that’s kept out of the loop. Names, addresses, Social Security numbers, addresses, credit history, and bank accounts all come into play.

The capper on the banks’ personal data practice in this situation is that the credit card holders have to continue to provide this information to the financial institutions as long as they use their credit cards, according to the lawsuit.

“Plaintiffs’ [personal financial information] is valuable to Defendants,” contends the plaintiffs.

“They regularly enter into agreements with third parties to provide this [PFI: personal financial information] in exchange for money and other financial benefit. Under these agreements, Defendants have profited greatly from the sale of Plaintiffs’ PFI to third parties.”

The plaintiffs feel that their personal profile is of value to the banks and that the banks have profited off that data without the user’s permission without sharing part of that profit with the credit card holder.

“Plaintiffs have a property interest in their own PFI regardless of what Defendants may do to or with it once Defendants have it in their possession, however it may be de-identified and/or aggregated for sale,” alleges the suit.

Haven’t the banks learned their lesson yet?

JPMorgan Chase & Co. paid credit card customers $100 million as part of a class action lawsuit settlement, which resolved allegations that it improperly increased minimum payments as a means to generate higher fees, according to TopClassActions.

And, in an ironic twist of misuse of consumer data, JPMorgan Chase was fined $4.6 million in 2017 for not guaranteeing accuracy of consumer information.

Bank of America has also experienced its fair share of trips to the courthouse. Just last year, the bank paid $1.9 million to settle a consumer protection lawsuit alleging that it did not disclose that phone calls with consumers were being recorded.

BOA was also part of the largest civil fine in American history when it agreed to pay a $16 billion fine for mortgage fraud.

Children are getting their own credit cards at an earlier age, which if properly supervised and monitored, can be a good way to teach them proper money-management skills.

But far more parents are allowing their children to use their credit cards, which may not be such a wise decision.

A survey by CompareCards, a subsidiary of LendingTree, found 52 percent of parents have allowed their children under 18 to use their credit cards to make online purchases. Not surprisingly, 48 percent of the parents who did that now say they regret doing it.

"The survey found that Americans have been burned by the volatile mixture of kids and credit cards," said Matt Schulz, CompareCards' chief industry analyst. "While most Americans feel that you should wait until you're in your 20s to get your first credit card, they also think that it's OK to let your child use your credit or debit card to make online purchases, even though it often doesn't go well."

Blurred boundaries

One problem with the practice is that boundaries can sometimes blur in the mind of the child. Of the parents who allowed their children to access their credit card, 29 percent said the child had made at least one unauthorized purchase.

Another problem is the fact the child never sees the bill – the consequences of the purchase. All they know is they typed in some credit card information and got what they wanted. Maybe they reimbursed Mom and Dad later, but the connection between the credit card purchase and the payment isn't quite as strong.

The survey found that parents think the best age for a child to get a credit card is 21, but some personal finance advisors think that's a little late.

Authorized user on parents’ account

Legally you must be at least 18 to open a credit card account in your name, but a growing number of parents are making their children authorized users on one of their accounts. T. Rowe Price's Parents, Kids, and Money Survey found that 18 percent of children age eight to 14 carry a credit card on one of their parents' accounts.

Before taking that step, however, there are some things to consider. The child should have a source of income to pay for the purchases, either an after-school job or an allowance.

Secondly, children should be held accountable for their spending. While they will not receive separate bills, the parents' credit card bill will break down spending. Children need to be held accountable every time the bill arrives. If they charge things for which they can't pay, parents need to hold onto the card until they can pay it back.

If a child is practically an adult when they get their first credit card, often when going off to college, it is often too late to develop good money-management habits.

The lightning-fast pace of technology has dug deeper into consumers’ billfolds. Mastercard announced on Friday that signatures will soon be optional for all cardholders, not only on the card but on receipts, as well. Mastercard issuers will start distributing the signature panel-less cards in April, 2019.

Having the luxury of get-it-and-go without having to sign anything offers consumers the ability to save time and deal with a little less hassle at the tail end of a transaction for those who “tap-and-pay.”

Mastercard didn’t come to this change quickly. In a study of 1,200+ credit card users, only 40 percent said they had put their John Hancock on the back of their cards, and one-third of those who haven’t signed said they didn’t really see any value in doing it anyway.

“With modern, advanced forms of authentication now available, removing the requirement for signature capture at the point of sale and now signature panels on Mastercard cards is an important step in support of our digital evolution,” said Linda Kirkpatrick, executive vice president, U.S. Merchants and Acceptance, Mastercard. “Issuers, merchants and cardholders will benefit from this change as faster, safer options improve satisfaction and increase sales.”

Mastercard said the move to signature-less was also delayed until cards embedded with chips became common.

Any security risk?

In Mastercard’s research, most of the survey takers didn’t believe that leaving their signature off posed a risk, and two-thirds of the respondents said they preferred biometrics over the standard signatures, PIN numbers, and passwords when paying with their card.

“We see this as a win for all. The investments we’ve made in technology like artificial intelligence and biometrics are what’s powering this next step,” said Ajay Bhalla, president of Mastercard’s cyber and intelligence solutions.

“We believe our merchant and issuing partners everywhere will embrace the ability to deliver a simpler checkout experience while maintaining the highest levels of security.”

To give consumers an extra ounce of confidence in Mastercard’s technology move, the company says that users will remain protected against fraud via Mastercard Zero Liability coverage. However, knowing the caveats of the policy will be important to ensure that there are no gaps.

If a consumer’s card ever gets compromised, the company’s Zero Liability policy states that the card user will not be held responsible for unauthorized transactions only if:

• The user has used reasonable care in protecting their card from loss or theft; and

• The user promptly reports loss or theft to their financial institution.

Verifi, an ecommerce solution provider, tells ConsumerAffairs that adding three-factor authentication through biometrics will help ensure that consumers’ identities are protected. However, there are drawbacks to consider.

“The plus for biometrics is that they cannot easily be counterfeited as they are unique to the customer and they are easily accessible for the user,” a company representative said. “On the flip side, this type of authentication is less convenient for consumers and usually requires a longer time commitment for the checkout process as the merchant is requiring an additional factor of authentication.”

American Express (Amex) is saying goodbye to its “Premier Rewards Gold Card” and hello to the latest darling in the metal card design, the “American Express Gold Card.”

The new card was conceived primarily for consumers who love -- and spend money on -- travel and food.

“We designed the new Gold Card to reward our Card Members’ growing appetites for dining out, eating in and traveling near and far,” said Rachel Stocks, American Express’ executive vice president of Global Premium Products & Benefits.

“Our Card Members increasingly want to experience new cuisines and explore new places, so when creating this new product, we focused on adding value in these areas, like the new dining credit and 4X points accelerators at U.S. restaurants and supermarkets. This is just another way that we strive to have our customers’ backs during the moments they value most.”

The biggest casualty in the card’s rehab is the rewards that were previously given for gasoline purchases. The updated Gold Card is saying “so long” to those points effective October 4, 2019.

All-you-can-eat rewards points

Effective immediately, Gold Card Members will get twice the rewards points they do now, whether they’re eating out at a restaurant or buying foodstuffs at their local grocer. The new Gold Card now offers 4X (four times) the points at U.S. Restaurants, as well as U.S. supermarkets (on the first $25,000 in annual purchases). The buying habits of the growing millennial market might have played a hand in American Express’ refocus.

“While it’s becoming common for higher-end travel cards to come with some form of statement credit for travel purchases, this is the first time we’ve seen a dining credit,” said John Ganotis, Founder of CreditCardInsider.com, in comments to ConsumerAffairs.

The new Gold Card also throws in a new $120 annual dining credit which gifts its members up to $10 per month in statement credits when they use their card at participating Shake Shack locations, The Cheesecake Factory, Ruth’s Chris Steak House, and Grubhub/Seamless.

Like to travel?

In addition to Amex’s new dining and food bonuses, the Gold Card is upping the ante for travel lovers. Those fringe benefits include:

• 3X Membership Rewards points on flights booked directly with airlines and amextravel.com;

• $100 airline fee credit: up to $100 in statement credits per year for incidental expenses like baggage fees at one selected airline;

• The Hotel Collection: Gold Card Members get a $75 hotel credit on qualifying charges, plus a room upgrade upon check-in, when available, when they book a stay of at least two consecutive nights at hotels in the collection;

• Personalized Travel Service: provides access to a team of Travel Professionals who can help with travel bookings and vacation packages across air, hotels, transportation, cruise and tour; and

• Gratis membership to The Travel Collection by Travel Leaders Group where cardholders can pick up additional discounts and amenities when booking their travel.

The perks are nice, but they’ll cost you

The old Premier Reward Gold Card’s annual fee was $195 and, if that was a little too much to swing, hang on to your hat.

The refreshed Gold Card will cost you an annual fee of $250. The new fee will go into effect for current Premier Rewards Gold Card Members starting April 1, 2019, the card’s annual account renewal date.

Like most retailers, Target offers holders of their Red credit card special deals from time to time, such as the retailer’s current promotion of 5 percent off when the card is used. However, unlike many retailers, Target also offers a Target Red debit card.

Applying the adage of “if it walks like a duck and talks like a duck,” the debit version of Target Red is raising some potential concerns among its users.

According to the assertions in a class action litigation in federal court, the Target Debit Card is not really a "debit card." The litigation contends that consumers may have been fooled into thinking the card worked exactly like every other debit card -- specifically, that if there’s money in a connected account, then it will be used to cover a transaction. For standard debit cards, a transaction will generally be cancelled or declined if there’s not enough money in the account.

However, this may not be the case for Target’s debit card. According to reports, it’s possible that even though the connected account has insufficient fees, a purchase using the Target Red debit card can still be be approved. The catch at that point is that such an non-sufficient funds (NSF) purchase can trigger a Return Payment Fee from Target on top of an NSF fee from a consumer’s bank. In some situations, those penalties can total more than $60.

But the fee snowball going down the hill doesn’t stop there. According to TopClassActions, Target can further attempt to submit the transaction through the consumer’s bank up to two more times. Of course, each of those tries can add even more fees from both Target and the bank -- as much as $100 -- if those attempts turn up as NSFs.

The fine print vs. what’s reasonable

In the class action suit of James Walters v. Target Corp., Target makes it clear that to become one of their debit cardholders, a customer must sign an agreement with Target that spells out various terms and conditions.

Walters, on the other hand, alleges that an "inherent feature of a debit card is immediate processing of a transaction by either seizing deposit account funds or declining a transaction."

Because a debit card can be immediately processed, Walters alleges it is impossible for a true debit card transaction to directly trigger overdraft or NSF fees by spending more than available funds.

Adding more fuel to Walters’ fire, he argues that that Target's practice of misstating the card as a debit card is intentional, focused on producing returned payment fees (RPF) fees and saving on automated clearinghouse (ACH) transaction fees by combining transactions together over a period of days and, then, processing them as a group.

At the core of this suit is the term "reasonable." In the judge’s order that both granted and denied parts of Target’s motion for reconsideration, the judge used "reasonable" eight times in explaining his decisions.

For example, in siding with the plaintiff, the judge wrote that "reasonable consumers are not required to look past misleading labels to clarifying fine print."

In partial favor to Target, the judge wrote that "a reasonable jury could conclude that Target exercised its discretion in bad faith by always delaying electronic funds transfers (EFT) and charging maximum RPF when [the Agreement] said only that [Target] may engage in such practices. Target contends that this ruling was clear error because the Agreement expressly permits such practices. Target's argument is partially correct."

Is Target the only one to blame?

Reports are that both Shell and Nordstrom debit card customers had the same experience as Target’s.

If you have a Target Red debit card and found that you were charged a return payment or insufficient funds fee from your bank, it’s possible you qualify to participate in a Target Red debit card class action lawsuit investigation which could recover reimbursement for fees, financial damages, and more.

Credit card issuers have stepped up their game in recent months, introducing cards with more perks and upgrading current cards to make them more attractive to consumers.

Earlier this month Chase teamed up with Expedia to provide extra travel booking options on its Chase Ultimate Travel Rewards card. Also this month American Express added fraud protections, allowing cardholders to place temporary freezes on their cards' use.

Now, Navy Federal Credit Union is relaunching its Visa Signature Flagship Rewards credit card, currently in the wallets of about 98,000 consumers. The new card, which launches September 5, provides an increase in rewards and other perks. The credit union says the makeover transforms the card from a traditional rewards card to one "fit for travelers, adventure seekers and everyday commuters."

More points

Cardholders will get three times the points on all travel related spending, including ride sharing and trains. All other non-travel purchases will get two times the points. One point is worth 1 cent when redeemed for cash, travel or gift cards.

Other perks include:

• Up to $100 statement credit for Global Entry or TSA Pre-Check®

• One point is now equal to $0.01 when you redeem for cash, travel or gift cards

• No foreign transaction fees

• No balance transfer fees

• No limit on rewards earned and rewards never expire

The annual fee is waived for the first year but the card carries a $49 a year fee after that.