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Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

After moderating somewhat in June, mortgage rates have spiked back up this month. Average 30-year mortgage rates are now the highest they’ve been since November 2022, when they topped 7% for the first time since 2002, according to Freddie Mac data. Currently, this rate is hovering in the 6.9% to 7% range.

Rates are up across the board, with some ARM rates and 30-year refinance rates spiking above 7%. However, FHA rates are currently still well below 6%, offering a bit more affordability for FHA borrowers.

“Surprisingly resilient” has been the phrase most commonly used to describe both the labor market and the larger economy, and this resilience is what’s keeping mortgage rates up. On Friday, the US Bureau of Labor Statistics released June’s jobs report. The report showed that while the labor market is cooling, it’s still running relatively hot, adding 209,000 jobs in June. 

While a strong labor market is generally a good thing, there’s currently more jobs available than there are workers to fill them. This mismatch can be good for wage growth but bad for inflation, which is why the Federal Reserve has been watching this area of the economy so closely. Until the labor market becomes more balanced, the Fed is likely to keep hiking the federal funds rate. This will keep mortgage rates elevated.

The good news is that the economy is cooling, albeit slowly. Most major forecasts expect rates to recede at some point in the second half of 2023, which means we should start to see rates fall very soon.

Current Mortgage Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Current Refinance Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

30-year Fixed Mortgage Rates

The current average 30-year fixed mortgage rate is 6.81%, according to Freddie Mac. This is an increase from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year Fixed Mortgage Rates

The average 15-year fixed mortgage rate is 6.24%, up from the prior week, according to Freddie Mac data.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

When Will Mortgage Rates Go Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Though rates had initially been trending down this year, they’ve since ticked back up. 

As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it’s still above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

Apache is functioning normally

Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

After moderating somewhat in June, mortgage rates have spiked back up this month. Average 30-year mortgage rates are now the highest they’ve been since November 2022, when they topped 7% for the first time since 2002, according to Freddie Mac data. Currently, this rate is hovering in the 6.9% to 7% range.

Rates are up across the board, with some ARM rates and 30-year refinance rates spiking above 7%. However, FHA rates are currently still well below 6%, offering a bit more affordability for FHA borrowers.

“Surprisingly resilient” has been the phrase most commonly used to describe both the labor market and the larger economy, and this resilience is what’s keeping mortgage rates up. On Friday, the US Bureau of Labor Statistics released June’s jobs report. The report showed that while the labor market is cooling, it’s still running relatively hot, adding 209,000 jobs in June. 

While a strong labor market is generally a good thing, there’s currently more jobs available than there are workers to fill them. This mismatch can be good for wage growth but bad for inflation, which is why the Federal Reserve has been watching this area of the economy so closely. Until the labor market becomes more balanced, the Fed is likely to keep hiking the federal funds rate. This will keep mortgage rates elevated.

The good news is that the economy is cooling, albeit slowly. Most major forecasts expect rates to recede at some point in the second half of 2023, which means we should start to see rates fall very soon.

Current Mortgage Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Current Refinance Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

30-year Fixed Mortgage Rates

The current average 30-year fixed mortgage rate is 6.81%, according to Freddie Mac. This is an increase from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year Fixed Mortgage Rates

The average 15-year fixed mortgage rate is 6.24%, up from the prior week, according to Freddie Mac data.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

When Will Mortgage Rates Go Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Though rates had initially been trending down this year, they’ve since ticked back up. 

As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it’s still above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

Apache is functioning normally


New York
CNN
 — 

When the Federal Reserve kicked off its rate-hiking campaign in March last year, the housing market responded predictably — mortgage rates climbed, leading to eventual declines in home prices.

But after 10 rate hikes, the housing market — traditionally one of the most interest-rate-sensitive areas of the economy — is anything but predictable.

“It’s creating a lot of confusion,” said Orphe Divounguy, a senior economist at Zillow.

Mortgage rates have likely peaked — but home prices keep increasing

The Fed has raised its benchmark interest rate by five percentage points since last March to help lower inflation, which was at a 40-year high.

When the Fed raises interest rates, that increases the rates that banks charge each other for overnight loans. Banks and other financial institutions pass on the higher cost of borrowing to consumers by charging them higher rates on mortgages, credit cards, auto loans and other loans. In theory, consumers respond to this by cutting back on spending, which means businesses can’t raise prices as much as they had.

Before the Fed announced its first rate hike on March 16, 2022, average 30-year fixed mortgage rates hadn’t gone above 4% since May 2019, according to data from Freddie Mac. Rates began to increase in anticipation of the Fed’s decision to raise rates and climbed even higher to 4.42% immediately after the first hike. Mortgage rates then continued to climb in tandem with the Fed’s hikes until November, when mortgage rates peaked at 7.08%, despite four subsequent rate hikes since then.

Mortgage rates have been moving higher recently, after weeks of declines. For the week ending July 6, mortgage rates hit 6.81%, the highest level for the year so far, Freddie Mac reported on Thursday.

But the median price of an existing home in May was $396,100, down from 3.1% compared to a year prior, according to data from the National Association of Realtors. However, median prices were up 2.6% for the month, marking the fourth-straight monthly increase. The median price of a new home was $416,300 in May. That’s a 7.6% decline from last May, but a 3.5% increase on a monthly basis, according to US Census Bureau data.

Why did mortgage rates stop responding to Fed hikes?

The Fed’s monetary policy is one of many factors that influences mortgage rates, said Charles Dougherty, senior economist at Wells Fargo.

Another big factor is yields on 10-year Treasury notes, which tend to serve as a bellwether for mortgage rates. But in recent months, the spread between the 10-year Treasury and 30-year fixed mortgage rates has widened.

That’s a product of the uncertain economic outlook, Dougherty said. Inflation remains above the Fed’s 2% target, which means the central bank is likely to implement more rate hikes. But without fully knowing the full effect that more hikes could have on the economy, the Fed may inadvertently invite a recession, he said.

“Long-term interest rates are anticipating not just the Fed’s next move, but the potential path for rates over the next decade,” said Len Kiefer, deputy chief economist at Freddie Mac. “Mortgage rates may respond to the next Fed rate move, but it could seem counterfactual.”

“For example, if the market comes to the conclusion that future rate hikes are less likely, that could put downward pressure on mortgage rates. In that case, mortgage rates could fall, even if the policy rate goes up,” Kiefer told CNN.

Higher mortgage rates have reduced home inventory

In theory, when mortgage rates go up, home prices should fall since it raises the cost of homeownership, thereby reducing demand. But that’s not happening.

That’s partly because the higher mortgage rates that came after the Fed hiked rates created a major lock-in effect, said Kiefer.

At the start of the pandemic, the Fed slashed rates to near-zero levels in hopes of stimulating the US economy as businesses closed and workers stayed home to avoid catching or spreading Covid. With such low rates, homeowners and homebuyers were then able to refinance or buy with rates as low as 2%.

With mortgages now approaching 7%, all that has changed. Selling could mean forfeiting a low mortgage rate for one that’s potentially double.

“Many existing homeowners find it difficult to give up a mortgage under 4% to trade for one over 6%,” Kiefer said. That has contributed to a decline in housing inventory.

And since many homes are still listed above where they were before the pandemic, homeowners have little incentive to sell.

“It seems to be that supply will be stuck for the foreseeable future,” said Dougherty.

Housing inventory, or the number of active home listings, is down by a third from before the pandemic. As of June, there were nearly 614,000 existing homes listed compared to almost 928,000 in February 2020, according to data from Realtor.com.

In many ways, the housing market is still playing catch-up from the Great Recession, which induced nearly a decade of sluggish new home construction, Divounguy said. When mortgages fell below 3% in 2020, home builders started to pick up — but not fast enough to meet the pandemic surge in demand.

Home inventory is likely to drop even lower due to the “low flow of listings paired with the demand for homebuying in the spring,” Zillow’s Divounguy told CNN. On top of that, housing demands remain high because the labor market is still so strong and workers continue to earn more than they had before the pandemic, he added.

“That tells the crux of the story for why the housing market seems a bit odd right now,” Divounguy said.

Source: cnn.com

Apache is functioning normally

You may not think it’s a big deal, but a bad credit score can turn your life upside down in ways you don’t realize. Think about your daily life — where you live, what you drive, where you work — these can all be affected by a low credit score. 

The good news is a bad credit score is something you can fix, although it takes time and careful planning. Maybe you don’t know your credit score or whether it’s good or bad. That’s okay — this guide will walk you through what a bad credit score is, the ways it can affect your everyday life, and what you can do to fix it. 

What’s Ahead:

What is a bad credit score?

A credit score is a number used by lenders and other companies to determine your creditworthiness or how likely you are to repay a loan or pay your bills on time. Lending or renting to individuals is a risk. A credit score helps lenders and creditors understand your risk level before they enter into an agreement. 

FICO credit scores range from 300 to 850. A bad credit score typically is a score below 660. Credit scores are divided into ranges, with bad credit scores ranging from fair to very poor:

Excellent 781-850
Good 661 – 780
Fair 601 – 660
Poor 500 – 600
Very Poor 300 – 499

Some lenders or industries rely on different types of scores to make decisions, but for the most part, these are the ranges you should consider in relation to your credit score. 

How a bad credit score affects you

Unfortunately, having a bad credit score can affect not just your financial life, but also where you can live, work, and shop. Here are some of the ways having a bad or low credit score can affect you: 

Securing a loan is more difficult

A low credit score sends up red flags to lenders that you are a lending risk. Bad credit makes it infinitely harder to prove that you are worthy of approval for a mortgage, auto loan, or other loan products. 

Higher interest rates

If you still qualify for a loan or line of credit, chances are you will end up with much higher interest rates than someone with good credit. Higher interest rates mean that you’ll pay more interest over your loan term unless you have funds to pay it off early. Depending on the type of loan, you could end up paying thousands of dollars more than you would if you have good or excellent credit. 

Fewer options renting an apartment

If you’re on the hunt for a new house or apartment to rent, your low credit score could put a damper on your search.

Landlords and property management companies want to rent to responsible tenants. They use credit checks to determine your ability to pay rent. Poor credit could mean having your application denied or putting down a larger security deposit to secure an apartment. 

Higher insurance premiums

Insurance companies sometimes run credit checks when setting premiums. They may also use a credit-based insurance score that’s based on your information from your credit report. The report will reveal the reasons for your low credit score, and you could end up paying significantly higher premiums than you would with good credit.

Trouble purchasing a cell phone

Mobile providers use credit checks to approve new contracts. Your bad credit score makes you a high-risk customer with most providers. Poor credit could mean saying goodbye to the latest iPhone or Galaxy with unlimited data and hello to a prepaid phone plan.

A harder time landing a job

In some states, employers are allowed to run credit checks on prospective employees during the hiring process. Jobs in finance or management that require handling large sums of money are prime candidates for credit checks. You may have a hard time convincing a company to trust you with their money if your credit report reveals a history of poor financial decisions. 

You won’t qualify for most credit cards

Having a credit card might seem like a rite of passage, but there’s no guarantee that you’ll be approved if you have a bad credit score. Most rewards credit cards that earn points, miles, or cash back or come with travel and other perks require good to excellent credit. 

There are some credit cards for people with bad credit, but they are few and far between and don’t offer the same level of benefits. You could also resort to a secured credit card, which relies on a security deposit instead of a credit check to secure the card. Secured credit cards typically have lower credit limits and high interest rates. 

Related: Best Secured Credit Cards

How credit scores are calculated

In most cases, when someone talks about credit scores, they are referring to your FICO score. The FICO credit scoring model was created by the Fair Isaacs Corporation. It’s a three-digit number, ranging from 300 to 850, that gives a snapshot of your credit and your risk level as a lendee or customer. Five factors go into calculating FICO credit scores: 

  • Payment history (35%). Vendors report your payments to credit bureaus. Late payments stand out like a sore thumb on credit reports and make you more of a lending risk. 
  • Amounts owed (30%). Creditors also look at how much on your available credit you’re using at any given time. Using a higher percentage of your available credit creates a picture of someone at risk of defaulting on payments because they are overextended. 
  • Length of credit history (15%). The length of your credit history looks at factors like how long your accounts have been open, the age of your newest account, and the average age of your credit accounts. Each time you open a new account, your credit age may drop. 
  • Credit mix (10%). The type of credit accounts you have open is factored into your FICO score too. Credit types can include mortgage loans, installment loans, credit cards, retail credit accounts, and other financial accounts. 
  • New credit (10%). New credit refers to any time you open a new credit account, or someone runs a hard credit check. 

Several FICO score models exist, including models for specific industries like auto lending and mortgage lending. FICO Score 8 is the most widely used credit scoring model. 

The difference between VantageScores and FICO scores

FICO isn’t the only scoring model. VantageScore is another model used by lenders to determine creditworthiness. VantageScore was created in 2006 by the three primary credit reporting bureaus, Equifax, Experian, and TransUnion. There are currently four versions of VantageScore, with the latest model released in 2017. 

The major difference between VantageScores and FICO scores is the score range. Earlier  VantageScore models have a score range of 501 to 990. Your VantageScore can often be significantly higher than your FICO score. VantageScores can vary, too, depending on which credit bureau or model is used, just like FICO scores. 

How to improve your credit score

If your credit score isn’t where you want it to be, or it’s becoming a problem for your finances, you can improve it with some hard work and patience. Like anything else, you may have to make some sacrifices, but a good credit score can unlock so many things that it’s worth giving up some conveniences now to improve it.

Here are some things you can start doing right now to improve your credit score. 

Related: How To Improve Your Credit Score, Step By Step

Access your credit score and reports

To improve your credit, you first need to know where it stands now. You can do this by getting copies of your complete credit reports from all three bureaus — Experian, Equifax, and TransUnion. Your reports are available for free once a year at www.annualcreditreport.com or by calling (877) 322-8228. 

Errors aren’t common on credit reports, but they do occur from time to time. Check your reports for anything incorrect and if you find something, dispute it with the credit bureau. Even small errors can have an impact on your credit. 

You can buy your official FICO credit score through myFICO or use free credit score tracking apps Credit Karma or CreditWise to see your score. 

Pay your bills on time

Your payment history is a major player in determining your credit score. Your goal moving forward is to make all of your bill payments on time. Late payments are reported to the credit bureaus and will drop your score even further. A record that shows a history of on-time payments, though, will boost your score. Set alerts to remind you of upcoming bill payments or, even better, set up automatic payments for at least the minimum amount due to ensure that you don’t miss any payments. 

If you’re having a hard time paying your bills, reach out to creditors to see if they are willing to work with you. You might qualify for hardship or payment programs that will help you pay off any debts. 

Pay down your debt

To repair your credit, you also want to lower your credit utilization ratio. You do that by paying off your debt, including revolving credit accounts, like credit cards or lines of credit. Every little bit helps. Make at least minimum payments, but pay extra if you have additional funds available. This will lower the amount of outstanding debt compared to the total credit available to you. 

Apply for a secured credit card

Secured credit cards are designed for people with bad credit or no credit. You can qualify for a secured credit card through a security deposit instead of a hard credit inquiry. Your security deposit essentially becomes your credit limit. As you make small purchases on your card and pay the balance off on time and in full, those payments are reported to the credit bureaus. 

If you go this route, try to keep a low balance and never carry it over month-to-month. Secured credit cards often come with high APRs, so you could end up paying expensive interest charges if you don’t pay off the entire balance each month. Some credit card issuers will check your credit periodically and switch you to an unsecured card if your credit has improved.

Apply for a credit-builder loan

Another option to boost your score is to apply for a credit-builder loan. Similar to secured credit cards, these are personal loans for people with bad credit. Credit-builder loans work differently than traditional loans, where you receive the loan amount upfront and then pay it back over time. With a credit-builder loan, you make fixed payments each month until the end of the loan term, and then you receive the loan amount. These loan payments are reported to the credit bureaus the same as any loan. 

Will you pay interest as you do with other loans? Yes, and you may also have to pay a fee to take out this kind of loan, but that’s the price you might have to pay to avoid another credit inquiry or to qualify for a loan. 

Become an authorized user

Have a close family member with good credit add you as an authorized user on their credit card. Although this strategy isn’t likely to cause a massive jump in your score, it could have some impact, especially for individuals with a shorter credit history. Make sure the card issuer reports authorized users to the credit bureaus or this won’t help you.  

Summary

Improving a bad credit score can not only save you money but can also open up opportunities in most areas of your life. Use the tips and tools listed above as a guide to understanding your credit score and what you can do to boost it over time.

Read more:

Source: moneyunder30.com

Apache is functioning normally

My philosophy on credit cards has changed completely in the last five years. I’ve gone from anti-credit-card to pro-credit-card — but only for those who can use them responsibly. I think they’re a great convenience, and I like getting cash back when I use mine.

But not everyone thinks this cash-back feature is a good thing. In fact, my inbox is a-flutter with folks who want me to comment on the recent credit-card study from the Consumer Payments Research Center. This study (which can be downloaded as a 810kb PDF from the Federal Reserve Bank of Boston) found that credit cards transfer wealth from the poor to the rich. How? Through fees and rewards programs.

From the abstract:

Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or “cash”) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year.

Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. On average, and after accounting for rewards paid to households by banks, the lowest-income household ($20,000 or less annually) pays $23 and the highest-income household ($150,000 or more annually) receives $756 every year.

To summarize: Wealthy people are more likely to use credit cards than poor people (and more likely to receive rewards for doing so). But because prices are generally the same whether you pay with cash or credit — in most cases, credit-card companies prohibit stores from adding a fee for credit-card use — poor people usually pay more for things than wealthy people do. This is, effectively, a transfer of wealth from the poor to the rich. This isn’t just hypothetical or abstract; the paper lays out the details for just how this occurs.

Note: There are many other ways in which the poor pay more than the rich. Wealthy people are more likely to negotiate. (No evidence — my own belief.) Wealthy people usually have the ability to wait before buying something. Wealthy people tend do have more buying options (and thus find lower prices). And so on.

There’s a lot of interesting information in this study, and if you have time, you ought to read it. It’s thought-provoking. And it has created quite a stir in the media.

  • Even before this study was released, Ron Lieber at The New York Times was contemplating the damage of rewards cards. Lieber has been “fanatical” about using his mileage card for fifteen years, but recognizes that he may be part of the problem. Since the release of the study, the NYT Bucks blog has posted a follow-up about how much credit card rewards cost the poor.
  • The Wall Street Journal blog post on the study offers no opinions, but the commenters make some interesting points. (Well, those that aren’t being internet idiots, that is.) I particularly like the comment from Jay on July 27th at 10:48am (which describes the reasons low-income earners shouldn’t use credit cards).
  • GRS reader Alan forwarded this article from the Portland Oregonian, in which Brent Hunsberger does a good of explaining the complicated web of fees and payments in the current system. (And the comments on his article are surprisingly rational; OregonLive.com is not known for its intelligent discussions.)

The article from the Oregonian also includes this video, in which Hunsberger diagrams the web of credit-card fees and payments:

Out of curiosity, I pinged my pals at Index Credit Cards. Their new spokeswoman, Dr. Mary Ann Campbell, had this to say:

The problem, as I see it, is that there aren’t enough options to incentivize the poor, such as discounts for cash or no-fee cards with low limits and strict rules to help them build their credit. Increased options and incentives for the poor without taking away the reward for good behavior earned by people who are managing their money well would be a smart and healthy way to address this dilemma.

It’s all about incentives and options. The incentive of credit card companies to get people who have the money to spend more is working through reward cards. As the economy is driven through more spending, so are more jobs created, and tax revenues increased, which I see as actually helping the poor.

So, what do you think of this research? I understand the research and accept that it’s true, yet it’s unlikely to change the way I use credit cards. Yes, I could take a moral stand and refuse to use credit for most of my purchases. But doing so would cost me a lot of money — roughly the same as my dining-out budget for a few months. (And I like my clams in butter sauce!)

The main problem is that the system already exists, and it’s deeply entrenched. It’s not going away. By electing to opt out, smart consumers — wealthy or not — cost themselves money. If using a rewards credit card without carrying a balance is a way for me to save a few hundred dollars a year, that qualifies as one of those Big Wins I’m always preaching about. It seems foolish to give this up.

But maybe I’m just being selfish.

What about you? Does this study make you think twice about your own use of credit cards?

Source: getrichslowly.org

Apache is functioning normally

I recently participated in a conference call with Suze Orman, who is working to promote Best Life Week. This series runs on The Oprah Winfrey Show all this week, and is intended to help viewers “jumpstart 2009 and make it the best year ever!”

Hyperbole aside, it was great to have a chance to speak with Suze Orman, who will be sharing money tips with Oprah viewers this Thursday. I tried to ask her about maintaining motivation and sticking to goals. She answered with how to avoid credit cards. Not exactly what I was after, but the information was still good.

J.D. Roth
Having once been over $35,000 in debt myself, I know that it’s one thing to say you’re ready to get out of debt and to stop using credit cards, but it’s another thing to actually maintain the dedication for the days and the years that are needed to pay that debt off. I’m wondering if you have any favorite behavioral tips or tools for maintaining motivation with new goals for a New Year’s resolution.

Suze Orman
You know, J.D., what’s very fascinating is that the desire to want to use the drug known as credit cards is a very, very strong pull on people. It’s almost as strong — I’m very serious about this when I say this — as a narcotic, as tobacco, as well as alcohol.

And in the same way that if you happen to be a drug addict or you happen to be an alcoholic, that normally what keeps you on the road of the straight and narrow is that you don’t hang out with people who drink. You don’t go into bars. You don’t keep alcohol around your house. You make it so that it’s easy for you to not get yourself in trouble because it’s right there.

Saying “No” to Credit

The same, I have to say, is true when it comes to credit cards. You have to, even though you don’t want to close down your credit cards because that will hurt your FICO score, that doesn’t mean that you can’t rip them up. Doesn’t mean that you can’t cut them up as soon as you’re out of credit card debt where you just don’t see them.

So my advice to people who were once in credit card debt and now they’ve gotten themselves out of credit card debt is I would literally cut up all of my credit cards. I would not be carrying them, I would not even have them in the refrigerator. Some people say they put them in the freezer — oh, give me a break. Anything can come out of a freezer. I would cut them up 100%.

And if, in fact, I knew that I might seriously be tempted to call the credit card company and say, you know what, send it to me again — I would not care about my FICO score and I would literally call up the credit card company, close down the account and not give me any temptation whatsoever to get myself into credit card trouble. As soon as I got offers in the mail, they would immediately go into the trash.

Keeping Good Company

The key is keeping good company, and when it comes to your money, you usually are keeping good company with other people who aren’t in credit card debt, other people who don’t entice you to spend money, other people who don’t say, “Let’s go on this vacation. Oh, just put it on your credit card debt.” Other people that say, “Oh, please, let’s just go out to dinner.”

Good company are people that say:

  • “I understand that you have credit card debt and you don’t have the money.”
  • “Let’s go to your house and I’ll bring food.”
  • “We don’t need to go on a vacation, let’s just go for a walk on the beach.”

Again, when you leave your house, leave your house without any credit cards. You can go to the mall, you can go window-shop, you can enjoy the mall just like everybody else, but do not take your credit cards with you whenever you go out.

If you see something that you want and you don’t have the credit cards, fine — you can’t buy it. If you’re still thinking about it one month later, maybe you really wanted it. Who knew? But that keeps people in check. So:

  • Don’t leave your house with credit cards.
  • Cut up your credit cards once they’re paid off.
  • If you need to go further than that, close them down and who cares about your FICO score.
  • And keep good company.

That would be my advice.

You can read more of Orman’s responses at participating personal finance blogs. Jeremy from Gen-X Finance asked about the current economy, and Will from Wise Bread asked about the easiest things people can do to improve their financial situation.

Source: getrichslowly.org

Apache is functioning normally

The Offer

Direct link to offer

  • Capital One Venture card is offering 100,000 points after $5,000 in spend within the first 3 months

Card Details

  • $95 annual fee; fee is not waived the first year
  • Card earns 2x points everywhere (the equivalent of 2% everywhere)
  • Card earns 5x points on hotels and rental cars booked through Capital One Travel
  • Card earns 5x points per dollar on Turo car rentals through 5/16/23
  • No foreign transaction fees
  • Visa Signature benefits
  • Receive up to a $100 credit for Global Entry or TSA PreCheck

Our Verdict

Same offer as the recent deal, but doesn’t seem to be linked from a kiosk from what I can see. Previous best offer required $10,000 in spend. Because this has a lower minimum spend requirement/no kiosk requirement we will add this to the best credit card bonuses.

Source: doctorofcredit.com

Apache is functioning normally

[Editor’s note: Originally published on Vertical.]

In 2017, I had a quick day trip to San Francisco. I was visiting family just south of the Bay Area in Carmel-by-the-Sea and needed a place to stay for the night after some meetings.

I plugged into AirBnB and found a private room with Mimi and Mosh right in Presidio Heights (where I could run in the morning) for $193 per night.

I was probably impatient with them as I staggered in late that night after a day full of meetings and they walked me through all of the amenities of the place. But they were very kind with me and seemingly delighted in pointing out the little tea kettle they had bought for guests with assorted teas for the next morning.

It was a wonderful, inviting experience and I felt safe and it felt private. I left them a 5-star review and they did the same for me.

It was perfect. I was a stranger to them and they were to me. And it didn’t matter.

I had a safe, private, well-located place to sleep on a business trip and they got an extra couple hundred dollars. We were both happy.

That’s what Brian, Joe, Nate, and the AirBnB team created: a place for strangers to spend the night in the same house . . . happily. Peacefully.

Now, I’m sure you are reading all the same articles I am about AirBnB.

It’s fun to see who is going to be the big financial winner and all the ways they are taking care of employees and hosts. I’m sure plenty of people are scoffing at yet another Silicon Valley tech startup getting huge with hyper-growth metrics.

All of that coverage is warranted and usually worth the read. But I would encourage you to look a little deeper than the financials and think about something that AirBnB taught me and taught us about ourselves.

For context, if you happen to be reading this in some future year, you should know that 2020 has been pretty tough for most of us. We’ve had this crippling global pandemic that shut down the planet.

From Black Lives Matter to mask-wearing, somehow every decision or statement we made this year seemed to be about who we vote for.

Add to that the worst hurricane season on record, an escalating trade war between the US and China, and the death of James freaking Bond, and I am just done with all of this.

Suffice it to say – 2020 has been a pretty tough year and it’s easy to get bogged down in all the negativity.

And then there is AirBnB.

As a startup investor, I love a good origin story. With the tales of maxing-out credit cards, selling political cereal, and taking pictures of early listings in NY, AirBnB’s origins are legendary.

But one aspect of their story stands out to me and should give hope to all of us in this year of woe.

Any remarkable startup is a little controversial and AirBnB was no exception. Investors couldn’t deny the hustle and talent of Joe and Brian as they built it from the beginning. What they could question was human nature.

“Why would I want a stranger staying in my home?” went the common objection.

You see, most investors are so jaded about people that they assume the worst of our nature. We are inherently self-serving creatures and will revert to our most selfish and protective impulses more often than not.

So it’s highly understandable that your average venture capitalist would look at a young AirBnB, with just a few hundred listings on the platform, and assume that most of us would NEVER be comfortable letting a stranger sleep in our home.

That would be crazy. People are difficult and mean and rude and terrible towards each other.

Who would do that?

Well, it turns out more than a few of us. Mimi and Mosh weren’t the only ones willing to open their home.

To be clear, as with any endeavor that involves large numbers of human beings behaving around each other, AirBnB has had its problems with parties and illegal activity on their platform. I don’t want to make light of those and I do commend the ongoing work the team is doing there.

But that misses the bigger point – AirBnB created a place where strangers can trust each other enough to share a roof.

Doesn’t matter who you voted for. Doesn’t matter where you are from or what you believe.

We are all just people stumbling our way through our own stories looking for places to rest and feel safe.

AirBnB allows us to find strangers that want to provide that. Not hotel brands we trust. Not a college buddy’s couch. Strangers.

And that is truly remarkable.

So here in late 2020, I hope we can all take a moment to pause and reflect on that.

Try to forget about politics for a minute. Forget about how different we are from each other.

Just for a moment, think about the millions of people who have shared their homes with complete strangers. I know we can be terrible to each other, but we can also be kind, welcoming, and get special tea kettles for people we’ve never met.

Because when it comes down to it, we all just want a place to rest, feel safe, and belong. AirBnB not only created a place for us to feel that, but they made a place where we can feel that sense of belonging among total strangers in most cities and countries around the world. And in this terrible year we need that sense of belonging and connectivity more than ever.

So whenever Joe, Brian, and the team go ring the opening bell in the next few weeks to signal their company going public, stand up with me and cheer for them. Raise a glass or tweet your heart out.

Not because of the financial success and rewards, but for reminding us of something we seemingly forgot in 2020 – we are more similar than we are different and strangers can still be kind to each other.

From me and my family to the team at AirBnB, thank you! I needed that reminder.

Source: geekestateblog.com