However, with some guidance and discipline, it’s possible to overcome these challenges. This guide is designed to help you gain a better understanding of your credit card debt and develop the strategies and motivation you need to pay your debt off faster. With careful planning and discipline, you can take the first step toward your life without credit card debt today and start focusing on your other financial goals sooner.

In this article, we’ll cover:

• Knowing what you owe
• Debt repayment strategies
• Making more and spending less
• Negotiating with creditors
• Staying motivated

Understanding your credit card debt

Taking control of your credit card debt starts with an understanding of your current debt situation. Once you have the full picture, including the amount you owe and your monthly expenses, you can build a budget conducive to getting out of debt. 

Evaluate your current debt situation

Knowing what you owe is the first step to eliminating debt. Whether you’ve accumulated debt on one credit card or ten, start by understanding the total amount of money you owe across all your cards. Then, consider details like interest rates and minimum payments for each credit card. 

Here’s how to get started:

• List all your outstanding balances: Your most current statements show you what you owe on each account. Make a list that includes the name of each card and your outstanding balances.
• Determine your interest rates: The average credit card interest rate as of 2023 is between 23% and 24.5%, which can have a significant impact on how much your debt grows every month. Check the interest rate for each of your cards to help determine how much additional debt you’ll incur each month you carry a balance. Interest rates can vary widely based on the credit card issuer, the individual’s credit score, and other factors.
• Know your minimum monthly payments: List the minimum payments for each account and add them up to determine your total minimum debt payment each month. You’ll need to budget for the minimums to avoid racking up fees, and likely need to pay more than the minimums to eliminate your balance entirely.  

Track your expenses and create a budget

It’s important to know how much money you have coming in and going out each month so you can make a budget. If you don’t already track your expenses, now is the time to start. Analyzing your spending habits can help you identify areas where you might be able to cut back and reallocate funds to debt repayment. Once you understand your habits, you can build a budget that includes plans for paying more than your minimum credit card payments. Online banking tools and budgeting apps are both useful ways to monitor your expenses in real-time and make sure you’re sticking to your budget.

Strategies for debt repayment

Now that you know what you owe and have a monthly budget, it’s time to choose a debt repayment method. Here are three popular strategies to consider.

Debt snowball method

With the debt snowball method, you organize your debts from smallest to largest and dedicate as much of your monthly income as possible toward paying off your smallest debt first. Once that’s paid off in full, you tackle the next-smallest balance. The theory behind this strategy is that you’ll gain confidence and momentum as you pay off these smaller amounts more quickly. The snowball method doesn’t take interest rates into account, just the account balance, so it isn’t always the fastest method for paying off your total debt. But if you’re motivated by small but meaningful victories, the debt snowball method could be right for you.

Debt avalanche method

Unlike the debt snowball strategy, the debt avalanche method is all about interest rates. Start by listing all of your credit card debts by interest rate, from highest to lowest. Then focus on paying off the card with the highest interest rate first, followed by the next highest, and so on until you’re debt-free. It might take longer to pay off one balance entirely with the debt avalanche method, but by eliminating your higher interest rate debt first, you can often save yourself money in the long run. 

Debt consolidation

Debt consolidation rolls all of your credit card bills into one easy-to-manage monthly payment, which can be helpful if you’re carrying a balance on multiple cards. There are a few options available. These include using a debt consolidation service, taking out a personal loan, tapping into your home equity, or using a balance transfer card. In general, debt consolidation could be advantageous if the interest rate on your new card or loan is lower than the rates on your existing cards

Be aware that your credit score could impact the options available to you and the interest rates you can get. In addition, debt consolidation services and balance transfer credit cards often come with fees, so be sure you fully understand all the costs before you go this route. 

Increase your income and reduce expenses

Finding ways to increase your income and reduce your expenses can allow you to put more money toward paying off your credit card debt. And the good news is that there are concrete actions you can take to make it happen.

Generate additional income sources

If it fits in with your current lifestyle, consider exploring a side hustle, like a part-time job, freelancing, or even starting a small business. Start by identifying the skills, talents, and interests you have that could be monetized. Offering freelance services in your area of expertise or taking on gigs like pet sitting or making deliveries could help generate the additional income you need to reduce your credit card debt. Several online platforms and apps offer part-time, hourly, and on-demand work opportunities that can put more cash in your pocket.

Reduce your expenses

Finding ways to save money can give you extra money to put toward eliminating your credit card debt. Review your monthly expenses and prioritize your needs over your wants. What non-essential items or services can you cut back on? Consider finding alternatives to any pricier habits, products, or services. For example, you could cancel your unused subscriptions or commit to cooking and making coffee at home instead of dining out. It may also pay to research competitive rates and leverage your findings to request discounts, promotions, or price negotiations with service providers. If possible, consider using a debit card exclusively to limit your spending to the money you actually have in the bank and avoid incurring more credit card debt. 

Negotiate with creditors

Although it might seem intimidating, it is possible to negotiate with your creditors for lower interest rates or more manageable payment plans. Proactive, honest communication and a friendly attitude can go a long way. You may also consider seeking professional credit counseling to assist you with debt management.

Contacting credit card companies

Many creditors will be open to adjusting how you repay your debt when you’re facing financial difficulties. Approaching your credit card company with transparency about your current financial situation allows them to offer alternative payment options or other assistance. Though this may not work in every case, it’s always worth a try, and you might be surprised by the results. Here are a few tips for successfully negotiating lower interest rates or payment plans:

• Research competitive interest rates and mention them during negotiations.
• Highlight your positive payment history or loyalty to the credit card company.
• Explore balance transfer options to lower interest rates.
• Discuss payment plans with reduced monthly payment options.
• Stay persistent and assertive, but always respectful, on the phone. 

Seeking professional help

Credit counselors are professionals with specialized training in debt, credit,  budgeting, and other financial matters. Not only can they advise you about personal money management, but they can also work on your behalf to arrange debt management plans and lower interest rates. But keep in mind that professional debt counseling services usually aren’t free. So while you may benefit from your credit counselor’s knowledge and negotiation skills, you may be charged for the service. Look for reputable credit counseling businesses by reading reviews online and checking companies’ ratings with the Better Business Bureau. 

Stay motivated and avoid further debt

Remember that paying off your credit card debt is a process, and it may not be a quick one. But you’re not alone on your debt repayment journey: Americans have accumulated over $986 billion in credit card debt, averaging about $2,700 in unpaid balances per person. If you stay focused and motivated, it is possible to become free of credit card debt. Here are some tips to help you stay the course and accomplish your debt repayment goals:

• Set realistic goals and milestones
• Commit to budgeting and tracking your spending
• Celebrate small victories along the way
• Seek support from family, friends, or support groups
• Develop healthy financial habits to prevent future debt accumulation

There is life after credit card debt 

By prioritizing debt repayment today, you can take control of your financial situation and create hope for the future. It may not be the easiest thing you’ve ever done, but it’s likely to be one of the most rewarding.

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The post How To Pay Off Credit Card Debt appeared first on Stash Learn.

If you’re not sure how to build credit, you’re not alone. The Consumer Financial Protection Bureau (CFPB) reports that approximately 1 in 10 American adults lack a credit record; that’s 26 million people. Another 19 million Americans have a credit record but no credit score because their credit history is either out of date or too thin to show up on a credit report. 

If you’re starting from scratch, figuring out how to build credit doesn’t have to be complicated. Here are some simple credit-building steps you can take to get started.

In this article, we’ll cover:

• How to build credit with credit cards
• How to build credit without credit cards
• How to monitor your progress

Build credit with a credit card

Opening a credit card can be one of the fastest ways to build credit if you use your card wisely. But how can you get approved if you have little to no credit history? There are a few options to make it more accessible:

• Get added as an authorized user: A family member or significant other can add you as a user on their credit card; that card’s payment history will then be added to your credit report
• Open a student credit card: Many financial institutions offer this type of card for college students
• Open a secured credit card: This type of credit card is backed by a cash deposit you make upfront 

If you’re not a college student and it’s not practical for you to become an authorized user on a family member’s card, that’s okay. Those solutions aren’t available to everyone. So let’s focus on building credit with a secured credit card.

Get a secured credit card

A secured credit card functions like a standard unsecured credit card, with one major difference:  you deposit cash when you open the card, which serves as collateral if you’re unable to make your payments. Generally, your secured card’s credit limit will be equal to the amount of your deposit. A secured credit card is not the same as a debit card; any money you charge to your card is a debt you have to pay back, and you’ll have to pay interest on any balance you don’t pay off each month.

Because the card issuer shares information about your credit usage with credit reporting agencies, regular responsible usage can help build up your credit history. Visa, Mastercard, and nearly all of the leading credit card lenders offer a secured card option. You can also inquire at your bank or credit union about applying for a secured credit card.

Keep your card balance low

Your card’s credit limit is the maximum balance you can have at any given time, but just because you can borrow up to the limit doesn’t mean it’s a good idea. One factor that credit agencies use to calculate your credit score is credit utilization. That’s the amount of credit you have available compared to your balance. Generally speaking, using more than 30% of your available credit at one time can hurt your credit score. For example, if your credit limit is $1,000, keeping your balance below $300 is a good guideline.

Another important reason to keep your balance low is to avoid spending money on interest or running up debt you can’t pay off without squeezing your budget. Think of your credit card as a convenient way to pay for everyday things you know you can pay off within your billing cycle, not a long-term loan. 

Best practices for keeping your card balance low:

• Keep your credit utilization at 30% or less
• Make more than one payment per billing cycle
• Don’t use your card to buy more than you can afford to pay off every month  
• If you can’t pay your full balance each month, at least pay more than the minimum

Set up automatic monthly payments

Payment history makes up about 35% of your credit score, so delinquent payments can quickly turn your efforts to build credit into creating bad credit. Additionally, late credit card payments are often subject to fees or penalties, so you’ll end up owing even more the next month.  

Setting up automatic monthly payments ensures you won’t miss the crucial deadline. Most cards give you several options for autopay, such as the minimum balance, a fixed amount, or the entire credit card balance each month. 

Request a credit limit increase

Increasing your credit limit without increasing your spending lowers your credit utilization ratio, which could benefit your credit score. After you’ve established a track record of on-time payments, your credit card company may be willing to increase your credit limit. If you have a secured card, you might have to add additional funds to your security deposit, but not always. In some cases, the institution might even automatically increase your credit limit after a certain period of time. Since credit utilization is an important part of developing a good credit score, it’s worth calling your institution to ask about your options. 

Open a second credit card

Once you’ve been using your secured credit card responsibly for about a year, you may be eligible to upgrade to an unsecured card. With your credit history established, there might be many more options for cards you could qualify for, so shop around to find the right one for you. Consider factors like the interest rate and whether the card has an annual fee. Some credit cards even offer added benefits like points or cash back that might interest you.

When you open a new credit card, it may be wise to stop using your first card so you don’t have to keep track of balances and bills for multiple credit cards each month. But don’t close that account. Credit reporting bureaus look at the age of your accounts when calculating your credit score; the longer an account has remained open and in good standing, the more it works in your favor. Essentially, older credit accounts give more credence to your credit history than new credit.    

Build credit without a credit card

Responsible use of a credit card is one of the best ways to establish your credit history, but it’s not the only path. It’s possible to build new credit without a credit card through a credit builder loan or by leveraging your rent and utility payments.

Apply for a credit builder loan

A credit builder loan (CBL) is a type of personal loan made specifically to help borrowers build credit history and improve their credit scores. Here’s how it works: Instead of the bank loaning you a lump sum that you repay over time like a standard loan, your lender will hold the loaned money in a secured savings account until the loan is repaid. You make fixed monthly payments and then get the principal back at the end of the loan term. 

Research shows that opening a CBL can increase your likelihood of establishing a favorable credit score by 24% and increase existing credit scores by 60 points or more, depending on your individual financial situation. While CBLs are not as common as other types of loans, you may be able to establish one with your bank or credit union.

Keep in mind that, just like with credit cards, making your payments on time is crucial; late payments reflect poorly on your credit score. And you’ll likely pay interest on the money you borrow, though some institutions will credit you back some of the interest after you’ve paid off the loan.

Leverage your rent and utility payments

If you pay your rent and utilities on time every month, you might be able to use your good payment history to build credit. These kinds of payments aren’t automatically shared with credit reporting agencies, but all three major credit bureaus, Equifax, Experian, and TransUnion, will include rent and utility payment information in credit reports if they receive it. 

You can’t report your payments to the bureaus yourself, and landlords and utility companies often won’t do so on your behalf because they have to pay a fee. The good news is that there are many rent-reporting services that will verify and report your payments. 

The options offered by these services and the fees they charge vary, so comparison shop to find the right one for you. Some just report rent, while others will also include various types of utilities. Some will also report your past payments, which can be a benefit if you’ve always paid on time. You’ll also want to find out which bureaus the service reports to, as not all of them include all three agencies. 

If you use a rent-reporting service to help build credit, remember that consistent on-time payments are essential if you want a positive impact on your credit score. 

Take your time and watch your numbers climb

Building credit takes patience and diligence; after all, it’s called credit history for a reason. It can take six months or more to generate your first credit score after you get started with a credit card or CBL loan. Having only that new credit won’t necessarily get you to a high credit score; keeping accounts in good standing over a longer period of time, maintaining a low credit utilization ratio, and making all your payments on time are key to increasing your score over time.

As you put your plan for how to build credit into action, keep an eye on how your credit score is affected. You can get a free credit report once a year from all three of the major credit reporting bureaus; check it to see your progress and make sure no issues bringing your credit score down. If you want to keep an even closer eye on your progress, a free credit score app will give you a more frequent look at your credit report, and many offer personalized tips for improving your credit score. And remember: building credit is just one piece of the puzzle. Your budget, savings, and investments are also core components of working toward a brighter financial future.     

The post How to Build Credit: Why You Need It and How to Get It appeared first on Stash Learn.

While each individual’s circumstances vary, trends show that, on average, Gen Zers hold the least amount of debt, while Gen Xers shoulder the highest debt burden.

For common types of consumer debt, here’s how the average debt owed per consumer breaks down per category.

Debt’s effect on your life

You may have heard references to “good debt” and “bad debt.” Generally speaking, things that may have a long-term positive impact on your financial health are considered “good debt.” That includes student loans, which may increase your long-term earning potential, and mortgages, which can add to your net worth if your home rises in value over time. When people refer to “bad debt,” they often mean things like money you owe on credit cards or an auto loan: purchases that depreciate in value. 

There’s no shame in being in debt, whether it’s the “good” or “bad” type. The difficulty is that carrying debt over time can have a negative effect on your life in a number of ways, such as:

• Cash flow: Monthly debt payments can eat into the money you have available to spend each month. If your minimum payments are particularly high, it can even be difficult to budget for necessities. 
• Credit score: Having a lot of debt or late payments can lower your credit score, making it more difficult to be approved for a loan or line of credit if you need one. Some employers even look at applicants’ credit scores as part of their hiring process. 
• Saving for the future: Every dollar you spend on debt payments and interest is money you can’t put into savings and investments that could help you work toward your long-term goals or save for retirement.
• Risk of falling behind: Even if you have only “good debt,” it can turn bad if you fall behind on payments. Late payments can lower your credit score and result in fees and increased interest rates; it can also be difficult to catch up later.
• Stress: Worrying about debt and finances can take a toll on your mental health as well as your financial well-being. The American Psychological Association reports that 65% of Americans cite money and personal finance concerns as a significant source of stress.   

But the good news is that you can counter the negative effects by learning how to get out of debt, making a plan that works for you, and taking steps now to start your journey toward debt-free living. 

How to pay off your debts faster

Paying off debt takes planning and discipline, but there are techniques you can use to succeed. Depending on the amount you owe and your current financial position, it may take you a longer or shorter amount of time to pay off your debt than another borrower. But regardless of your situation, the sooner you start figuring out how to get out of debt, the sooner you’ll be able to put the money you spend on interest back in your own pocket.

These six tips can help you make a plan and start taking action now:

1. Stop borrowing money 
2. List all your debts
3. Make a budget
4. Negotiate your interest rates
5. Use a debt repayment method
6. Put extra money toward monthly payments

1. Stop borrowing money

Don’t continue to accumulate debt. It may sound obvious, but your spending habits can allow additional debt to creep into your life, sometimes unwittingly. 

You may wish to take a look at how you use credit cards first. Remember that a line of credit is really a type of loan, and you’re paying interest on the money you borrow each time you whip out your card to make a purchase. By using your debit card instead of your credit card, you’ll only be able to spend the money you have in the bank. This may entail reducing spending on non-essential items in your budget, like entertainment. 

Another sneaky way more debt can accumulate is if you routinely use credit cards to earn points or rewards. If you pay off your credit card balance every month, before interest can accumulate, you won’t add to your debt. But it’s easy to spend more than you’d planned and wind up with additional debt if you can’t pay off the full balance when it’s due. 

Review all your auto-payments to see which ones are being charged to credit cards, and switch them to your debit card instead. That way, you won’t be adding to your credit card debt without realizing it. This is also a good opportunity to check for monthly or annual subscriptions you’ve signed up for but are no longer using; it’s easy to start a free trial and forget to cancel it.

Finally, avoid accruing additional debt in the form of loans. If you need to borrow money to make a larger purchase, like a new car or home improvements, consider whether you can delay those purchases.

2. Gather your debts

To plan how to get out of debt, you’ll need a clear picture of exactly how much you owe. Make a list of all of your debts, including student or auto loans, credit card debt, your mortgage, and any purchases you’ve made on installment plans. Track the amount you owe, the interest rate, and your minimum monthly payment for each debt. Having the complete picture will help you better understand how much you’re actually paying toward your debt each month, and whether you’re able to contribute more toward debt that carries a higher interest rate.  

To ensure you track down all your debts, you might want to take a look at:

• your bank account statements for the last year
• your credit card statements
• records in digital payment apps
• your credit report; you can get a free copy of your credit report without negatively impacting your credit score 

3. Adopt a budget that you can stick to

Creating a budget and regularly tracking your spending is a cornerstone of planning how to get out of debt and managing your money to put that plan into action. When you have a budget, you can see exactly how much money you’re bringing in, plan how to spend it, and track where it’s going. You decide what’s essential and what’s optional, giving you the power to make decisions that help you reach your debt-free goals. 

Making a budget is the first step; sticking to it is another matter. Luckily, there are many different budgeting approaches, and you can choose one that fits best with your lifestyle. 

50/30/20 budget

The 50/30/20 model is a popular approach because it provides clear guidelines for allocating your money. With this method, you divide your spending into needs, wants, and savings/debt, then allocate your after-tax earnings to each category.

• 50% to needs: Things you need for survival, like groceries, utilities, minimum loan payments, insurance, and health care
• 30% to wants: Things you want to make life more enjoyable, such as dining out, vacations, entertainment, and just-for-fun purchases
• 20% savings/debt: Savings, investing, and/or making additional payments on your credit card debt and other loans

4. Negotiate and reduce your interest rates

There may be options to reduce your interest rates for some of your debts. The more you’re paying in interest, the longer it’s likely to take to wipe out your debt, so it might be worthwhile to investigate your options.

• Credit card debt consolidation: You might be able to transfer your balance from one or more credit cards to a card with a lower interest rate. Keep in mind that you must be in good standing with your credit card payments and be able to qualify for the new lower-interest card, and there are often fees when you transfer a balance. 
• Credit card interest rate reductions: Some credit card companies have programs for reducing your interest rate. Some issuers might reduce your rate if you have a history of on-time payments or are facing financial hardship. Others have programs designed especially for people whose debt has become unmanageable. 
• Student loan options: Your student loan issuer may have a variety of options for reducing your interest rates, including debt consolidation if you have multiple loans and deferment if you’re facing financial hardship. There are also a variety of federal programs you may qualify for.  
• Other loan options: Any loan issuer might offer programs or be willing to negotiate a lower interest rate, so it’s worth calling to ask.
• Overall debt consolidation: If you have multiple debts, you may wish to research debt consolidation loans. With these programs, the financial institution provides a loan to pay off all your other debts, and then you pay off that single loan. If you go this route, make sure the interest rate on the loan is lower than the rate of all your other debt.  

Be aware that any debt consolidation or interest-rate reduction programs may have fees associated with them, so do the math to ensure any fees don’t outweigh the savings you’ll get by reducing your interest rate. 

5. Tackle your debts with the snowball method

When you have multiple debts, it may feel overwhelming. One approach that can have a big impact is to start small and work your way up: that’s the debt snowball method in a nutshell. Many people find this strategy effective and encouraging when they start their get-out-of-debt journey. 

Here’s how it works: Take your list of debts and organize them by the total amount you owe, from smallest to largest. Every month, make the minimum payment on each account. Then, pay extra on the smallest debt every month. When that’s paid in full, shift all the money you were paying toward that debt to the next largest one, and continue paying the minimum on everything else. 

Here’s a hypothetical example of how it could work in practice. Pat has the following debts:

• Store credit card: $500 balance, $25 minimum payment per month
• Major credit card: $1,200 balance, $65 minimum payment per month
• Car loan: $5,000 balance, $130 minimum payment per month
• Student loan: $15,000 balance, $190 minimum payment per month

Pat pays the minimum payment for all those loans each month, plus an extra $100 toward the store credit card. When the store credit card is paid off, Pat starts paying an extra $125 a month on the major credit card; that’s the total of the store credit card’s $25 minimum payment plus the extra $100. 

One reason this method is so effective is that you gain a sense of accomplishment each time you completely pay off a debt. And the amount you can put toward paying off debt gets bigger and bigger as you go along, just like rolling up a snowball. 

Try the avalanche method for high interest debts

The snowball method isn’t the only approach you could take. People who have some debts with especially high interest rates might want to try the avalanche method, in which you pay extra on the debts with the highest interest rates first. While the easiest method for getting out of debt depends on your situation, what matters is choosing a strategy that works best for you.

6. Pay more than your required minimum payment

The consequences of making only the minimum payment on your debts each month can add up quickly. Say, for example, you have $5,000 in credit card debt, with a minimum payment of $125 and an 18% interest rate. If you only make the minimum payment each month, it will take you nearly four years to pay off your debt, and you’ll spend a total of $2,013.21 in interest. If you up your payment to $300 per month, you’d accrue around $800 in interest and pay off your debt in less than two years. 

Even if you have a fairly low interest rate, the longer you have debt, the more you spend on interest. Putting extra money toward your monthly payment will help you get rid of debt faster, and you’ll pay less in interest as well. 

Your debt-free future

If credit card and loan payments are straining your budget, the tips above can help ease the burden, no matter how small you start. Even if you have relatively little debt now, making a plan for how to get out of debt may be a smart move so that you don’t wind up further in the hole. 

Whether you have “good debt” or “bad debt,” paying it off sooner rather than later can help you build a stronger financial future. When you get rid of debt, you can put the money you were spending on loan payments and interest into savings and investments that may earn profit over time. The institutions that hold your debt are making money from those loans; imagine how much better it would feel to have that money earning interest and returns for you instead.  

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Debt payment FAQ

What is the easiest way to get out of debt?

It depends on your circumstances and personal preferences for managing money. Both the snowball method and the avalanche method can be helpful strategies. Creating and sticking to a budget can help you put more money toward paying off debt and avoid going into more debt in the future. 

What can I do if I can’t pay my debt?

When what you owe is more than you afford to pay back, you can look for ways to reduce your payments by contacting lenders. Depending on the type of debt and the financial institution, you might have options that will reduce your monthly payments or interest rate, or even get a forbearance that pauses your payments for a period of time. 

You can also look into refinancing options for your mortgage or student loans if current interest rates are less than what you’re paying. A similar tactic can be used for credit card debt by transferring your balance to a card with a lower interest rate.

Some people also find that debt consolidation services can help. Institutions that offer a debt consolidation loan sometimes also negotiate with creditors on your behalf to reduce the balance of your debt.

Finally, you might also consider picking up a side hustle to earn extra income that you devote solely to paying off debt.

Can you remove debt without paying?

Generally speaking, once you have debt, you have to pay it off. Even if you declare bankruptcy, you’ll generally have to sell some of your assets to pay back as much of the debt as possible before the rest of the debt is discharged. And certain kinds of debt, like student loans and child support, cannot be discharged through bankruptcy.

That said, there are a few government programs for student loan forgiveness that apply to certain individuals and circumstances.

The post How to Get Out of Debt in 6 steps appeared first on Stash Learn.

That’s a common misconception held by nearly a quarter of all credit card holders, who believe carrying a balance will help improve their credit scores, according to a new study by Creditcards.com.

That misunderstanding is even greater for millennials, nearly a third of whom believe carrying a balance improve their credit.

Listen up, it’s simple: It’s usually better to pay off your credit card balances as quickly as you can.

Not only will that improve your credit score, it will save you money. Credit cards typically charge a high rate of interest, on average about 24.24%. That amount is added as a percentage of your outstanding balance every month you’re not paid off.

What’s a balance?

A balance is any unpaid amount on your credit card, that carries over from one month to the next.

The average U.S. consumer carries an unpaid balance of $7,279 on credit cards.

What’s a credit score?

A credit score is a point-based score developed by a company called Fair, Isaac Co. It’s sometimes referred to as a FICO score. It uses credit history data compiled by credit bureaus Experian, Transunion, and Equifax. Your credit usage information is regularly transmitted to these three agencies.

A credit score can range from 300 to 850. The better your credit, the higher your score. Perfect credit is 850.

How is my credit score determined?

Your credit score is determined based on your use of credit.

The most important factor is how well you handle credit, which chiefly means how timely your payments are. If you are late with payments or have stopped paying a loan, that’s going to have a negative impact on your credit.

If you fail to make a payment within 60 days of your bill due date, that will be reported to a credit bureau, which will hurt your credit rating, according to the report.

The other key thing that determines credit score is something called credit utilization. That’s essentially the percentage of the entire amount of credit that you have available to you,  that you’re using at any given time.

Say you have credit lines worth $10,000, if you’re close to maxing out your lines, that’s likely to have a negative impact on your credit.

What else influences my credit score?

Another thing that influences your credit score is the variety of loans you have.

Generally speaking, the more kinds of credit you can handle well, the higher your score is going to be. For example, if you’re managing to make timely payments on two credit cards, a car loan, and a mortgage simultaneously, your score is likely to be better than someone with just credit card loans.

Other things that influence your credit score include the length of time you’ve had credit, and whether you’ve applied for new lines of credit. The more frequently you apply for credit, the more that will affect your score.

Why does good credit matter?

Your credit score determines the rate you’ll get on everything from credit cards to car loans and mortgages. The higher your rate, the more you’ll pay, particularly for installment loans like cars and mortgages.

Women more likely to make late payments

It turns out that women may be more likely to make late payments on their credit cards than men.

The top reason, according to the survey, might be economic. Women earned an average of 82% of what men earned, according to data from Pew Research.

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The post Why Keeping a Balance Won’t Improve Your Credit Score appeared first on Stash Learn.

But how does Stock-Back®¹ stack up to a rewards credit card? Let’s compare.

Stock-Back in a nutshell

Here’s how it works: If you make a purchase with your Stash Stock-Back® Card card¹, at more than 11 million businesses in the U.S, and you can get rewarded in the form of a fractional share of stock for every qualifying purchase. Pretty simple. You can get a small percentage of stock for every dollar you spend—and you can get stock in well-known brands..

Note: You’ll need a Stash account that you’ve added money to in order to earn Stock-Back® rewards¹.

Rewards credit cards are cards that earn users—you guessed it—rewards. Those rewards are typically doled out in the form of proprietary “points” or “miles,” which can be redeemed for cash, prizes, airfare, etc.

In practice, earning credit card rewards is similar to earning Stock-Back®¹—you swipe your card, and you can watch the rewards points pile up.

Stock-Back® Rewards vs. credit card rewards

You can earn Stock-Back® and credit card rewards in virtually the same way. So, when it comes down to it, consumers are choosing between what they’d rather accumulate: stock, or points/miles.

Here are a few things to consider, and or ways to compare them:

1. Stock-Back® Rewards are fractional shares.

It’s important to remember that Stock-Back® rewards are fractional shares of ownership in a company, and they can fluctuate in value. Remember, that there is an inherent risk when owning stock—but with Stock-Back®, you can truly own what you buy and build a portfolio that reflects your individual spending habits.

2. Expiration dates

One big drawback to rewards points or miles is that they often have expiration dates—if you don’t use or redeem them within a certain time period, you lose them.

Stock, on the other hand, is an asset. It doesn’t expire, and you own it until you sell it. Studies have shown that there are approximately $100 billion of loyalty points that sit unused. And the Covid-19 pandemic has kept more people at home, giving them more reason not to spend points.  Further, about 30% of credit card users never redeem their points—so, for many, rewards points are ultimately wasted.

3. Appreciation

Another thing to consider is whether or not your rewards, stock or otherwise, will appreciate with time. In the case of rewards points or miles, the answer is no; they will not gain value over time, and will likely depreciate as rewards systems evolve.

Here’s something else to think about: The average consumer had credit card debt of more than $6,500 as of 2021. In other words, most people don’t pay off their credit card balances each month. And the interest they have to pay on those balances can quickly erase the value of any points or rewards they may earn for credit card purchases. (Stash wants to help you get out of debt, and you can earn Stock-Back® based on debit card purchases², with funds that come directly from your banking account.)

And again, stock won’t expire—so, buy (or earn) and hold it!

4. Rewards that reward

Finally, think about what your rewards are doing for you. Are airline miles or reward points earning you dividends or interest payments?

Probably not. Stock can and usually does, though. That’s effectively using wealth to build more wealth.

And it’s smart.

You can start building your investment portfolio whenever you spend. Sign up for Stash to kick things off.

The post Credit Card Points vs. Stock-Back® Rewards appeared first on Stash Learn.

According to a July 2021 analysis conducted by Stash of more than 700,000 customers, BNPL usage increased more than four times in the seven months from January to July 2021, compared to the same time period in 2020. The amount customers spent with BNPL also surged more than eight times with five of the top BNPL services. 

However, it turns out millennials are the biggest users of BNPL, making up 58% of Stash BNPL customers. Meanwhile, Generation Z customers have seen the biggest surge in BNPL usage, with BNPL adoption climbing 130% among this age group year over year. 

And Stash’s findings seem to mirror more general consumer research. In a 2020 survey by credit card research company Cardify, 44% of respondents said that BNPL is somewhat or very important in helping them decide how much to spend during the holidays, one of the peak buying times of the year. Forty-eight percent of respondents also said that BNPL might prompt them to spend 10% to 20% more than they would on a credit card.

BNPL use and investing habits

Although there may be no definitive correlation, Stash’s survey found that, across all generations, BNPL users have 38% less money invested on average on the Stash platform than non-BNPL users. On average, for customers whose income ranges between $0 and $25,000, millennial BNPL users’ total Stash investments are 28% lower than millennials in the same income bracket who don’t use BNPL. Similarly, for customers whose income ranges between $25,000 to $50,000, total Stash investments for millennial BNPL users are 34% lower than millennials in the same income bracket who do not use BNPL.

Note: This data doesn’t necessarily mean that  BNPL usage directly causes lower levels of investment. Additionally, the patterns Stash found compared data during a time when Covid-19 has been taking a toll on the economy.

Methodology

Stash analyzed Buy Now, Pay Later usage among roughly 770,000 Stash customers from January to July 2020 and from January to July 2021, using anonymized and aggregated data from customers’ external banking transactional information via Plaid. For the purposes of this research, Stash looked at transactions made with leading Buy Now, Pay Later companies Affirm, AfterPay, Klarna, Quadpay, and Sezzle, and compared it with aggregated and anonymized banking transactional data from customers who did not use these services in the given timeframe. 

Why people use BNPL

BNPL can help shoppers plan their spending over the course of a few weeks or months. It can also make it easier for people without credit, or who don’t want to use a credit card, to pace their spending. While most BNPL companies don’t report to credit bureaus, preventing users from building credit with them, some experts say that credit bureaus may start including BNPL data in the future.  

The two biggest reasons why people use BNPL are because it may be easier to make payments, and because BNPL may offer more flexibility, according to data from market research firm C+R Research, based in Chicago, Illinois. BNPL lets people break purchases into installment payments, so they can chip away at an expense over the course of several months at a simple rate of interest. That stands in contrast to credit card charges, where consumers have to pay their balances off at the end of a billing cycle, or potentially pay a higher rate of interest on the remaining charges. This also means you can budget for how much of each paycheck will need to go to a BNPL payment. 

Simple vs. compound interest

BNPL also lets people buy something and pay it off, typically over a period of months, without having to accrue significant interest, in many cases. Some companies, such as Affirm, offer payment plans with simple interest, while others, such as Afterpay and Klarna, offer zero-interest plans. (As a reminder, interest is what a lender charges on a loan. The interest rate dictates how much you’ll pay in interest relative to the original amount lent, the principal.) 

With simple interest, the lender calculates interest based on the principal amount alone. With compound interest, the lender charges interest on the principal amount, as well as any previous interest accrued. So typically, simple interest may be more favorable to the lendee. The longer it takes you to pay off the loan, however, the more likely you are to have to pay interest. 

For people who haven’t had a chance to start building credit yet, or are rebuilding their credit, BNPL can be an alternative to a credit card. BNPL providers can give people without credit access to a loan. Afterpay, for example, reportedly instantly approves applicants without checking their credit score. Other options such as Klarna and Affirm perform soft credit checks. A soft credit check appears on your credit report when it’s checked for reasons unrelated to lending money, while a hard credit check appears on your report when your credit is checked for a new loan, credit card, or line of credit. A hard credit check usually temporarily lowers your credit score, but a soft credit check doesn’t. 

Follow the Stash Way

BNPL comes with pros and cons. Know the details so you can make strong financial decisions to benefit your bottom line.

Find out more about BNPL here.

If you decide to use BNPL, consider practicing good financial habits when you do. Consider only using BNPL for things that are already in your budget, and that you can pay off quickly without accumulating interest or late fees. Make sure you account for payments in your monthly budget, and make payments automatic. If you put your BNPL payments on a credit card, make sure to pay off your monthly credit card in full so that you don’t rack up interest or hurt your credit score.

And consider following Stash’s guidance for financial well-being, called the Stash Way. Build a budget that includes room for your expenses, savings, and investing regularly.

The post Stash Survey Finds More People are Using Buy Now Pay Later appeared first on Stash Learn.

We’re both cash-strapped creative people, and we haven’t combined our money since getting married. Instead, we have a joint account that we occasionally contribute to (especially when we make money doing something comedic together), and we keep that as a rainy day fund, and also a honeymoon fund… assuming we ever get to travel again. 

Though I couldn’t imagine managing our money jointly at this point, I was curious about how other couples handle money and deal with cash problems, so I interviewed four couples.

After speaking to other couples, it seems my husband and I have common problems: One partner might come into the relationship with debt while the other has none; one person comes from a household that was open about money, and as a result has very set ideas about how to handle it, while the other doesn’t really think about it; and everyone has some growing pains putting their finances together, and talking about it. 

1-Jeremy Hammond and Mo Farrell in Queens, NY.

WHAT FINANCIAL CHALLENGES HAVE YOU FACED COMBINING FINANCES? 

JEREMY: Mo had student debt, I didn’t. Mo has a much higher wage than I do, and had much more savings coming into this [marriage]. 

HOW DID YOU SOLVE THESE DISCREPANCIES IN EARNINGS, DEBT AND SAVINGS? 

JEREMY: So it was kind of a trade off, I took on a lot of new debt responsibilities when we got married, but our combined savings is now our family savings. At the beginning it was hard to figure out what money should go where, and whether we should combine everything or just some parts of our finances. There was also a lot of anxiety around whether we needed to clear purchases with each other, what level of purchase is okay to do without approval, etc. This year my computer started to break down, and I wanted to invest in a new one, but I definitely dealt with the broken one for longer than I would have, because I wasn’t sure how I would justify the purchase to Mo. 

I think the biggest problem-solver was just time and comfort with the idea [of combining your financial lives]. It’s not really something you have much prep for before you do it, so there’s some growing pains, but those are pretty quickly solved by the immense financial strength you have as a two-income-no-child household. Combining finances has meant we’re able to save money like we never have before, and having two peoples’ brain power devoted to it has really helped to see the bigger picture of our financial lives. When you’re alone, you just see the paycheck come in and do what you’re going to do with it. Having your partner involved means each weekend when one of us gets paid we can spend a minute and talk about what would be the smart thing to do with it. 

HAS COMBINING FINANCES CHANGED YOUR ATTITUDE ABOUT MONEY? 

JEREMY: I’m definitely way more focused on saving than I was—the future is really hard to visualize sometimes when you’re in your own head, but when there’s somebody with you who you’re committed to for life it’s a lot easier to picture in a more tangible way. I was raised in a house where we absolutely never talked about money. My parents both grew up poor and never wanted their kids to feel the way they did about their family’s financial situation, so they hid it from us. Combining finances really forced the issue for me, and got me talking and thinking about money in a way I never had before. 

2-Katie and Lew Morgante in Wilmington, N.C.

WHAT FINANCIAL CHALLENGES HAVE YOU FACED COMBINING FINANCES? 

LEW: I think the biggest challenge for us was making sure we were on the same page about goals. We both like to go out to restaurants, enjoy traveling and vacations. Those were easy ones to figure out. Getting on the same page for saving, retirement and consumer debt was another thing. 

I was someone who paid a bill as soon as it came in no matter the due date so it would be out of the way. This sometimes put me in a situation where I would have little to no money available until the next paycheck. I would always pay into my retirement, savings and was not willing to dip into those during those times. 

We also have an Alexa and sometimes it rats us out. When a package is on the way it will alert us, so we have both been caught buying something because Alexa will tell us the item will be delivered today. We laugh about it and now know we can’t get away with hiding things from each other!

HOW DID YOU SOLVE THESE PROBLEMS? 

LEW: She (Katie) was able to help me figure out a plan so that I could split the bill payments up by due date, to pay what was due during the first half of the month and the second half, so I wouldn’t deplete all my money at once. It has made it so much easier and reduced my financial stress and anxiety. 

When it comes to retirement savings, I was always the big saver for this because I learned young from my mother how it can pay off to front load your retirement savings as much as possible. She [Katie] did not have a retirement plan at all and it was hard to convince her that the money she put in would not impact her take home pay in a negative way and that she was missing out on free match money her company offered. We compromised and she put in 1% to start. She just started a new job and she was excited to start her [401(k) retirement plan] with them, and at the full match of 4%!

We both came into the relationship with some credit card debt, and when we looked at our wedding plans this was an eye opener that we needed a plan to consolidate and eliminate these debts. We at first focused on them individually taking care of what we could before the wedding. I consolidated a bunch of credit cards that were carrying a balance and interest into a few 0% balance transfers and tried to pay down as much as possible. She got a loan to pay off a bunch and have one bill. We both got our debts down. After the wedding we looked at it all again to see where we were at and decided that together we could help each other rather than dividing and conquering. We moved some of her credit cards to some of my open credit cards with 0% balance transfers.  I have been making spreadsheets to keep track of the balances, promotions and the end of 0% promotions making sure we pay off or move them before we start getting [charged for] interest. We use just one credit card for monthly expenses and pay it off in full each month. It’s a cash back card so we end up with high hundreds of dollars in cash back a year that we use to pay down our debts. We sit down at least every quarter and update where we are. 

I think the biggest key is just being open and honest. No judgment, we just know what our goal is and how we will try and get there.

Since I will not spend money on myself, and I love new gadgets, I have found ways to get them without spending money. I signed up for Microsoft Rewards account and it allows you to get points for searching and using the Microsoft Bing Browser and App. I turn those rewards points into gift cards, like 5,250 points is equal to a $5 Amazon gift card, or other gift cards. When I want something, I make a goal and get searching, or even find games or surveys on my phone that pay out in gift cards. I have gotten some great gadgets and did not spend a dime, so I feel like I get my cake and eat it, too!  

HAS COMBINING FINANCES CHANGED YOUR ATTITUDE ABOUT MONEY?:

LEW: Yes, I am now much more focused on having not only an emergency savings but an account with enough to cover a few months of living expenses if needed. It is slow going but staying focused on the goal is key. I am much more of a penny pincher now I don’t spend on myself much. She has definitely seen the light on where we could be if we stay disciplined with our spending and look at our future.  

3-Liz Barrett and Doug Forand in New York, New York

WHAT FINANCIAL CHALLENGES HAVE YOU FACED COMBINING FINANCES. AND HOW HAVE YOU SOLVED THEM? 

LIZ: We have been married 21 years and we always combined finances. It never made sense for us not to do it. I know couples who don’t, but it always seemed more complicated. I’m on top of things, and Doug never wants to open the mail. I have never made more money than Doug. As a feminist, that fact always make me feel odd, but he reminds me we are a team. 

It’s a give and take. I went to law school after we were married, and he supported us. When he started his own business, I supported us, because I had a steady job with health insurance.

At this point, Doug has a better credit score than me. That drives me nuts some days, but he always says it’s because of me.

HAS COMBINING FINANCES CHANGED YOUR ATTITUDE ABOUT MONEY? 

LIZ: You have to try to look at it as you are a team. I think if you combine finances it almost brings you closer together. You are both contributing to your future. Even though I don’t make the money, I know Doug trusts me [handling our finances] and appreciates me. That is one tip, if your partner handles the finances, it’s work. All that person really wants is to be appreciated.

DO YOU HAVE ANY OTHER TIPS FOR COUPLES WHERE ONE PARTNER HANDLES THE MONEY?: 

LIZ: Doug really trusts me, and really has no interest in knowing about the details of our finances. However, I always tell him that if I die, to go to a specific place in our apartment where he will find information about our bills so that the lights don’t go out. 

4-Katie and Gideon Hambright, married in Iowa, currently in Queens, NY

WHAT FINANCIAL CHALLENGES HAVE YOU FACED COMBINING FINANCES. AND HOW HAVE YOU SOLVED THEM? 

KATIE: We kept everything separate [during] our engagement for 2 years. Once we were married, we combined everything. During our engagement, we split everything 50/50 (bills, rent). 

Before combining our money Gideon was very frugal (in a good way). Since moving to NY, we have become a one income household (I am a nurse while Gideon is a comedian and stay at home parent). I now seem to be the one monitoring our finances daily. 

WHERE HAVE YOU DECIDED TO PUT YOUR MONEY NOW THAT YOU HAVE A  ONE-INCOME HOUSEHOLD AND A CHILD? 

KATIE: We have been able to pay off Gideon’s student loans, while I still have one outstanding student loan. We have also decided that we want to look into buying a house. I feel now, more than ever, that I need to start putting more money into our savings and Roth IRA. We just now started saving money for our child’s education. In the last year it feels like money has been a huge thing on my mind. 

ANY OTHER TIPS OR NOTES FOR COUPLES COMBINING FINANCES? 
KATIE: It does take some getting used to see your combined account as “our money” instead of “my money.” 

The post How 4 Couples Combine Finances (And Live to Talk About It) appeared first on Stash Learn.

Here’s why: While a cash advance from a credit card company is still a loan, it typically comes with a different set of rules about paying back that money, including fees, a higher interest rate, and a more aggressive schedule for accruing interest. 

What is a cash advance?

A cash advance is a short-term loan from a credit card company. The money that you receive as an advance will come from your available credit and count toward your credit limit. When you’re approved for a credit card, the company will let you know your credit limit, as well as your cash advance limit. 

To withdraw cash from your credit card’s line of credit, you can go in-person to the bank, or request a Personal Identification Number (PIN) from your credit card provider. With that PIN, you can withdraw the cash from an ATM. Credit card companies may also issue blank convenience checks, which can be cashed for cash advance loans.

What are the risks associated with taking a cash advance?

The biggest risk that comes with taking a cash advance from a credit card company is the interest on that advance, which can be up to twice as high as the average interest rate for credit card purchases. 

Here’s the other critical thing to keep in mind. When you buy something with a credit card, you’re given a month-long grace period where that money doesn’t accrue interest. After a month, the bill starts accruing interest.

That’s not the case with a cash advance. There is no grace period and interest starts accruing—or accumulating—immediately, which can make paying off the advance difficult. Interest on the loan snowballs. The longer you take to pay a loan off, the more interest it accrues, which can make staying on top of that debt difficult. 

On top of the interest, banks and credit card providers usually charge fees to process the request for a cash advance. These fees are typically 3% to 5% of the amount taken out as an advance.

Here’s an example: If you take out a $1,000 cash advance with a compound interest rate of 26% and a 3% fee. If you pay that advance back in 30 days, you will still owe $30 in the 3% fee and $21.90 in interest, totalling $1,051.90. The longer you take to pay back that advance, the more it will cost you, as the interest accrues every day.

In comparison, if you spent $1,000 with a credit card with an 18% interest rate and paid the bill within 30 days, you would only owe nothing besides the $1,000 because of the grace period. 

Alternatives to taking a cash advance

If you have savings, you may want to consider pulling cash from that account instead of requesting an interest-bearing cash advance. 

Other options include borrowing money from a family member or a friend, and finding other ways to earn cash, perhaps by selling clothes or furniture online, or doing short-term freelance or gig work. You may also want to take a look at your credit card accounts. If you have cash back points from a credit card, you may be able to deposit those points as cash right into your account. 

How to avoid a cash advance

The best way to avoid taking out a cash advance from a credit card company is to make sure that you are regularly saving money to an emergency fund or a rainy-day fund.  Ideally, this fund should have $500 to $1,000, which you could use instead of relying on a cash advance.

Saving money for the short-term and long-term should be a part of your budget. Make sure you build a budget that accounts for monthly fixed expenses, variable expenses, and money for saving and investing. 

Making room for savings in your budget can help you when you need to access cash quickly.

The post Thinking of Taking Out a Cash Advance? Think Again. appeared first on Stash Learn.

Update, Tuesday, October 30, 2019: The  Fed cut the federal funds rate by a quarter of a percentage point again, due to weakening business investment and exports, and concerns about the global economy, it said in a statement. The Fed’s benchmark rate is now between 1.5% and 1.75%. The current rate cut is the third this year. The Fed also said that consumer spending remains strong and inflation is low, keeping the economy resilient for now, according to reports. Find out more about rate cuts in the story below.

Update: On Wednesday, September 18, 2019, the Federal Reserve cut its benchmark interest rate again by a quarter of a percentage point, citing the uncertainty of global economies and low inflation in the U.S. The federal funds rate is now between 1.75% and 2%. Read our story from July for an explanation of what the federal funds rate is, why the Fed is cutting interest rates, and what it means for the interest rates you pay on loans.

On Wednesday, July 31, 2019, the Fed cut its benchmark interest rate for the first time in more than a decade.

By cutting something called the federal funds rate, the Fed said it was helping to keep the economy growing, according to a statement.  The Fed may also be trying to head off the possibility of a recession in coming months as global economic growth slows and the impact of the trade war is felt more, according to reports.

Here are more details:

• The Fed, the nation’s central bank, cut something called the federal funds rate by 0.25%, or a quarter of one percent.
• The federal funds rate is now at a rate between 2% and 2.25%.
• The rate cut was not a surprise. The central bank set the stage for its current move during its last meeting in June, when it chose not to increase interest rates.
• This is only the fifth time in 25 Years that the Fed has cut rates.

Read our related coverage here.

Why cut interest rates now?

The Fed tends to cut interest rates when the economy is weak. But by all accounts, the U.S. economy is still going strong. Unemployment is at a 50-year low, inflation remains below 2%, and consumer spending is healthy.

However, there has been a slowdown in manufacturing, and concerns continue about the unresolved trade dispute with China, which could decrease economic growth domestically and globally, according to reports.

Also, while the central bank is supposed to operate independently from politics, President Trump has pressured the Fed to lower interest rates, saying the rate increases over the past few years have slowed economic growth.

It raised rates four times in 2018. The last time the Fed raised rates was in December 2018.

What does cutting interest rates do?

Cutting interest rates often lowers the cost of borrowing, which might make it more appealing for consumers and businesses to take out loans, and to buy more things, which could stimulate the economy.

Cutting interest rates could also lower the interest rates that consumers receive on savings accounts, or other interest-bearing accounts.

The last time the Fed cut interest rates was in 2008, at the height of the recession. At that time, the central bank reduced interest rates to 0% for a time to stimulate the economy. Low-interest rates helped the economy recover over time.

What does the Fed do again?

The Federal Reserve is the central bank of the U.S. It oversees 12 district banks, which together are responsible for the monetary policy of the U.S.

The Fed’s mission is to oversee the health of the nation’s financial system, and the economy. It attempts to keep the economy strong and growing by enacting policies to maintain low inflation and healthy employment levels. It does this primarily by adjusting interest rates, and lending money to the nation’s banks.

The central bank can adjust something called the federal funds rate, which is a short-term rate that it charges banks to borrow and lend money to one another. The federal funds rate forms the basis of other interest rates, such as for credit cards and mortgages, and it even factors into the yield offered by many bonds and the interest on savings accounts.

The Fed has been steadily increasing interest rates since 2014. The increases follow a seven-year period when the central bank left interest rates at or below 0%, to stimulate the economy following the recession.

Since 2015, the Fed has increased interest rates nine times.

The post What’s Behind the Fed’s Recent Rate Cut? appeared first on Stash Learn.

That’s according to credit-reporting company Experian, which released its latest annual Consumer Credit Review, a survey that ranks each state by credit score. In 2019, the average credit score in the U.S. was 703, increasing two points compared to 2018. Additionally, 59% of Americans have a credit score that falls above 700, the survey found, which is generally considered a good score. 

States with the highest and lowest credit scores

Minnesota has topped the list of highest credit scores for the past eight years, according to Experian. The winner is followed closely by South Dakota, North Dakota, Vermont, and Wisconsin on the list of highest credit scores. The states with the lowest credit scores are South Carolina, Texas, Alabama, Louisiana, and Mississippi.

Wisconsin had the biggest jump of any state this year, seeing an increase of seven points. Here’s how the top five states scored:

*Source: Experian

Here is how the bottom five states scored:

*Source: Experian

In 2019, 42 states saw increases in their average credit scores compared to 2018, while nine states saw no change. Thirty-four states reported an average credit score of 700 or higher. If you don’t see your state in the top five, you can find where your it falls on the map below.

*Source: Experian

What does a “good” credit score mean?

A credit score is a point-based score developed by a company called Fair, Isaac Co. It’s sometimes referred to as a FICO score. It uses credit history data compiled by credit bureaus Experian, Transunion, and Equifax. Your credit usage information is regularly transmitted to these three agencies.

A credit score can range from 300 to 850. The better your credit, the higher your score. Perfect credit is 850.

Banks and lenders use your credit score to assess how responsible you are with loans and debt over time. Your credit score is determined by a variety of factors including your credit history, which is based on how many credit cards and loans you have, how large a portion of your available credit you use, how timely you are with your payments, and more. In theory, this helps future lenders assess the risk you pose to them.

Credit scores are considered within these general guidelines, according to Experian:

If you’re on top of paying your bills, your credit score is more likely to fall into the good to excellent range. You can work to improve it if your credit score doesn’t fall within that range.

Increasing debt in the U.S.

While personal loan debt is the fastest-growing debt in the United States, average credit card debt grew second fastest, increasing nearly 3% to $6,194 from 2018 to 2019, according to Experian.

Personal loan debt is different from credit card debt. Consumers usually apply for a personal loan from a financial institution, and they often use it to consolidate credit card debt and other loans. It often carries a lower interest rate, according to Experian.

How to Catch Up

Raising your credit score is probably easier than you’d think. But it’ll require organization and a disciplined approach. If you have bad credit, here’s how to start improving your score:

• Make all of your payments on time—setting up payment reminders can be helpful.
• Try to keep your balances low.
• Keep an eye on your credit reports.
• Try using a free credit score app on your phone to stay on top of your score.
• Only apply for more credit if you need it; Opening too many accounts in short order can hurt your score.

The post Giving Credit Where Credit Is Due appeared first on Stash Learn.

But have you heard about the avalanche method? It’s almost the opposite of the debt snowball.

Jargon Hack.

What is an interest rate?

Interest Rate

It’s the amount that’s charged on any unpaid amount, or balance every month. The interest rate is also called the annual percentage rate, or APR, which is the amount your monthly interest translates to annually.

Find out

Here’s how it works: With the avalanche method, you list all of your debts such as credit card or auto loans, from the highest interest rate to lowest rate. Then you start paying off the debt that charges the highest interest rate first. After that, you tackle the next-highest interest rate loan, and then gradually work your way up the ladder. The logic behind the avalanche method of paying off debt is that higher interest costs you more money the longer you hold it. So, by paying off the higher interest rate debt, you’ll be saving yourself money in the long run.

• For example, a $100 loan charging 5% interest will cost you $5 in interest annually. The $100 loan charging 10% will cost you $10 a year. After five years, the 5% loan will cost you $25. After five years, the 10% loan will cost you $50—twice as much money.

By eliminating the higher interest debt first, you’re likely to save money.

Special note: Credit card debt is like a loan, extended to you by a bank or some other financial institution on a revolving basis. That means as you repay the debt, generally speaking, you are free to borrow again from your credit line.

Tactics and considerations:

• The money you use to pay off your debts should come from the area of your budget known as your fixed expenses. These are expenses you must pay each month, such as rent or mortgage, health insurance costs, and utilities. (Yes, whether you like it or not, you have to pay your debts each month.)  That should be a concrete number, representing the cash you have from your monthly income.
• Next, organize your debts by interest rate amount, from the highest rate to the lowest rate.
• Make minimum payments on all loans except the highest interest-bearing loan.
• After deducting the total amount of your other minimum payments, use the extra money you have and put it toward the highest interest loan.
• Once that’s paid off, you tackle the next highest interest loan using the same method until it too is paid off.
• Consideration: In contrast to the debt snowball method, the debt avalanche may take more patience, since paying down your highest interest rate debt may take longer than paying off your smallest loan.

Jargon Hack.

What is a minimum payment?

Minimum Payment

It is the lowest amount of money you are required to pay each month on an outstanding loan balance.

Find out

Debt Avalanche Example:

Let’s say you have $15,000 in debt as follows:

• $5,000 on a credit card; annual interest rate of 18%
• $5,000 for a car loan; annual interest rate of 10%
• $5,000 for a student loan; annual interest rate of 8%

Now, let’s say you’ve determined you have $500 a month in your budget to pay your debts, and your minimum payment for each of your three loans is $30, or $90 total. Next, add up the two loans on which you’ll be paying the minimum (the car loan and student loans, in our example). Subtract that amount from your total:

$500 – 60 = $440

You’ll pay $440 each month on your high-interest credit card debt, which will get you paid off in about a year.

$440 x 12 = $5,280

In addition to paying more on the highest-interest rate credit card, you’ll continue making minimum payments on all the other loans during that time. After that, you apply the same method to your remaining loans. Pay off the car loan first with the majority of your budgeted income for debt, and then the student loan, until all of your debt is paid off.

Whether you use the debt snowball, or the debt avalanche, the important thing to remember is that you should consider having a plan to pay off your debt.

The post How to Use the Debt Avalanche Method appeared first on Stash Learn.

In this season of goblins, demons and pumpkin spice, nothing induces a blood-curdling scream as quickly as a bill for that credit card with the super-high interest rate, or that automatic monthly debit for the gym you never use.

But fear not: As one well-versed in the art of awful money choices, I am here to help you bust the spooky spirits groaning and moaning in your financial life.

Haunted by: pricey student loans

Student loan debt can be quite a nightmare. It’s true that a useful education is a fine investment. But perhaps you took out a student loan you didn’t really need, over-borrowing to cover some not-so-necessary expenses like that luxurious California king futon from grad school. Or perhaps you’ve simply been screwed by a company that preyed on your lack of financial education to lock you in for what feels like a lifetime of debt. This isn’t about shame or blame—it’s about looking at what happened and dealing with it in the present day.

There are various methods for reducing your burden, but first, make sure you actually know what all your loans are. (Ordering a free credit report is one way to find out.)

Here are just a few ways that may help ease your burden:

Pay more than the minimum
It may seem impossible. But chances are you can pay a tiny bit more each month, and lessen the length of your unholy marriage to the student loan company. Here’s an example, citing information from the financial lender Sallie Mae: “If you owe $10,000 and have an interest rate of 8% annually, it will take you ten years to pay off your loan, assuming minimum payments of $121.32 a month…But if you bump up your monthly payment to $141.32 (just $20 more), you’ll pay off your loans in eight years, or two years earlier, and will save yourself close to $1,000 in interest payments.”

Make extra payments
Again, may seem impossible. But what if you assemble $20 worth of couch change and car change and back pocket dollar bills gleaned from the laundry? That’s an extra payment. Get some money back at tax time? That’s an extra payment. Sell your clothes at the consignment shop or on eBay? That’s an extra payment. It all adds up.

Also, remember to include your student loan interest with your annual taxes, as you may be able to deduct some or even all of it.

Haunted by: too many credit cards

You know how gremlins multiply? Yeah, that. Some financial coaches will tell you to pay as much as you can each month on your card with the highest annual percentage rate, and then stick to the minimum on the other cards until you’ve got that big guy paid off. Others encourage you to pay off the lowest balance first, using the debt snowball method.  You can see if any of your cards has a 0% APR balance transfer offer, and shift some money accordingly. There may be fees involved even if the APR is 0%, so be sure to check with your individual credit card company. You can expect to be charged 3 to 5% of the amount you’re transferring. Once you’ve got a card paid off, you may wish to cut it up but leave the account open. Part of your credit score is determined by the length of your active accounts. But ultimately you’ll probably continue accruing debt as long as you keep using those credit cards. If you need help with debt like this, consider a program like Debtors Anonymous.

Haunted by: skipping the 401(k)

So you never enrolled in a 401(k) and matching funds when you had the opportunity. Or you’re an independent contractor without any retirement savings. Hey, it’s never too late to start! Educate yourself on options for retirement savings—opt into your company’s plan, choose your own IRA, or enroll in another type of fund—and put in a little bit each month as a start.

An IRA is available to almost anyone with a taxable income, and can be a particularly great option for a freelancer/independent contractor. A Traditional IRA allows you to make regular contributions on a pre-tax basis. You’ll have to pay taxes on the total amount when you withdraw – but you’ll be hit with major fees if you withdraw before the age of 59 ½. A Roth IRA is a bit different – you can make contributions after taxes have been deducted. You generally won’t have to pay taxes or fees when you make a withdrawal, so long as you’re 59 ½ or older.

Thanks to the power of compound interest, your relatively small contribution to a retirement fund can yield big savings over time. After all, a little Halloween candy in your puffy paint-decorated pillowcase is better than none.

Haunting by: recurring debits for stuff you don’t use

Around here, we call it sleep spending. Maybe you’re not that into your meditation app, or your gym, or those boxed meal kits you never actually use. Quitting is (usually) relatively easy. Granted, your gym will probably push back at you if you’re locked into a one year program, but a relentless dedication to polite but firm communications with customer service can often at least knock a few months off the thing.

Looks like it’s your turn to haunt somebody, baby!

The post Are Spooky Financial Ghosts Groaning In your Attic? appeared first on Stash Learn.

Two years ago, cybercriminals gained access to Equifax’s network by exploiting a website vulnerability, making off with the personal information for 147 million U.S. consumers (nearly half the country’s population). That information included names, addresses, Social Security numbers, birth dates, and in some cases driver’s license numbers.

Additionally, criminals walked away with credit card details for 209,000 consumers, and personally identifying information related to credit disputes for an additional 182,000 consumers, according to Reuters.

Here are the details:

• Equifax agreed to pay up to $700 million for problems related to the security break in two years ago. That deal must still be approved by a federal court.
• The settlement is reportedly the largest payment in corporate history for a cybersecurity breach. The money will go to 48 states that launched lawsuits against the company for damages, as well as to consumers, to help them restore their online identities, and to repair other financial data.
• $425 million of the settlement money reportedly will be used to set up a “restitution fund.” While the money is slated to go to consumers who suffered financial damage as a result of the hack, it will be hard for consumers to prove they were actually affected by the breach, experts warn.
• Consumers who are already signed up for credit monitoring services–which monitor for fraudulent borrowing behavior–may be eligible for a one-time reimbursement of $125. Other consumers may be eligible for up to 7 years of free credit monitoring and identity restoration services.
• Consumers who can prove they suffered losses related to fraud and misuse of their personal information may be eligible for repayment of up $20,000.

You can find out more about the settlement here.

What is Equifax?

Equifax is one of three credit reporting agencies, or bureaus. The others are Experian and Transunion. Credit reporting agencies collect data on consumers related to all aspects of their financial lives, including bank and credit card account information, mortgages, and bankruptcies. They file this information in something called a credit report, and sell it to mortgage, automobile, and credit card companies, among others, that wish to build customer profiles for loans.

Credit reporting agencies also create something called a credit score, ranging from 300 to 850; the latter is considered perfect credit. Credit scores affect the cost of loans, and all consumers who have applied for credit have a credit score.

More about the breach

The information stolen in the Equifax break-in is most typically bought and sold by criminals on the black market, and via something called the Dark Web, an underground criminal network. So far, there is no evidence that the information has been used for that purpose. That has led some experts to theorize a foreign nation was involved in the attack, for the purpose of spying.

Numerous other companies in recent years have suffered big hack attacks resulting in the loss of important customer data. In 2018, hotel chain Marriott announced that its systems had been hacked by criminals who made off with data related to 500 million guests. Similarly, Yahoo had email addresses for 3 billion customers stolen in two separate attacks starting in 2013, and JPMorgan Chase which lost names and log-ins for about 80 million accounts in 2014. The Equifax hack attack, however, is the most significant such breach in terms of potential damage to consumers, financial experts said.

Find out more about the Equifax hack here.

The post All About the Equifax Data Breach Settlement appeared first on Stash Learn.

• Prioritize spending with cash, or a debit card. Cash is a physical thing, and you can actually see it leaving your wallet or purse when you use it for purchases. That may help you spend less.
• When you use a debit card, the money comes directly from your checking account. Generally speaking, you won’t be able to spend using the card unless you have funds in the account. (Consider opting out of overdraft protection.)
• If you must spend using a credit card, always try to pay off your balance in full each month. That way you won’t have to pay interest.

Jargon Hack.

What is an interest rate?

Interest Rate

It’s the amount that’s charged on any unpaid amount, or balance every month. The interest rate is also called the annual percentage rate, or APR, which is the amount your monthly interest translates to annually.

Find out

Interest rate

Every credit card account comes with an interest rate. It’s the amount that’s charged on any unpaid amount, or balance every month.

Here’s something else that’s important to know: When you have credit card debt, or an unpaid balance, the interest is charged daily. It’s called the daily periodic interest rate. Here’s an example:

Good to know: Credit card companies give you a grace period, generally between the statement closing date and the payment due date, to pay for your new charges. During that period, no interest will be charged. If you don’t pay your balance at the end of the grace period, you will owe interest. And any new charges will also accrue interest.

The post How to Manage Credit Card Spending appeared first on Stash Learn.

At the beginning of 2019, I pictured myself writing this article about how you really can live in New York City on a pittance if you know how to hustle.

Turns out, I was wrong. So wrong. Because the thing about the spending journal is that it can’t lie. It’s cold, hard numbers.

I’ve always thought I didn’t need a strict budget because I’m so naturally frugal, but this month taught me I need to set more boundaries. I was shocked to see that I spent $2,592.76 on items that weren’t rent or utilities.

So where did all that money go? Here’s what I learned:

1. My mistakes are expensive.

January was a fun and weird month for me because I did my first television appearance, a brief segment on The TODAY Show, and am planning my wedding for this July.

Because I didn’t think through these unusual events, I ended up driving my car to Midtown Manhattan on weekdays for rushed dress trials at different locations, which resulted in costly parking and parking tickets (I’m really a Renaissance girl of getting in car trouble), as well as buying clothes I didn’t need, couldn’t return, and didn’t end up wearing on TV.

It turns out I spent $323.60 of my total $2,592.76  (12.4 percent) on avoidable mistakes such as two $65 parking tickets, and a $68 hot pink tank top I still haven’t worn.

In a way, this doesn’t surprise me. I am a ditz. The little things are hard for me. But keeping a journal makes me realize that I’ve got to be better about planning ahead, especially with my car.

Because 12.4 percent? That’s embarrassing.

2. I’m a good friend (but maybe not to myself).

A lot of my expenditures were related to making my friends happy, which I’m proud of, but I think I’m doing it wrong.

Examples include going to a small-portioned, big-priced restaurant with a friend who was down in the dumps, treating another friend to $17 craft cocktails for his birthday (spending $20 on a cocktail can make even the best ingredients taste sour), going in on a gift card for a friend in need, showing a college student from my alma mater a few of my favorite New York City bars, and sharing a restaurant gift card with a fellow broke comedian, which meant I ended up paying $20 out of pocket.

Anyway, all these nice things added up to more than $215. I love taking friends out and buying them a drink or meal when I can, but I need to remind myself to offer only what I can afford.

3.  At least I don’t spend too much on food

According to the Bureau of Labor Statistics, the average monthly food spend (both eating in and out) was $644 per month in 2017. In January 2019, I spent only $522.29. Nice!

Ever since I started freelancing, I’ve been able to get groceries more consistently, and almost always cook at home. Sure, I get tired of roasted vegetables, grilled fake chicken, and Tofurky sandwiches, but it saves so much cash.

In January, I ate out just a handful of times, and only three times at a place with an actual waiter, and not at a grab-and-go joint. The fact that I’m able to make most of my meals at home, plus my vegetarian diet (I know it’s annoying, but it’s true) has saved me some money here, and motivates me to keep up this good spending habit.

4. Women should get beauty stipends.

The pressure to look pretty and put-together got to me this month. Typically, I dye my own hair in my bathtub (because my natural color is “sad hay”), don’t get haircuts until someone offers to do it in their basement for free, never get manicures, and buy new clothes only on my birthday.

But between the pressure to look good on TV and my impending wedding, I spent $455 on grooming and clothes, which was 17.5 percent of my expenditures minus rent and utilities.

But how mad at myself can I really be? I couldn’t go on television with ratty hair and unpainted nails and expect it to be good for my career. So I did what I had to do… and added a 15-minute back massage.

In conclusion, I think that as long as women are forced to live within the patriarchy, we should be given Beauty Stipends. #Emily2020.

What I learned from all of this

My biggest regrets fall in the car, fashion, and drinks categories. But if I can just stay in my lane, both figuratively and literally in my car, I truly believe I can get this monthly nonsense to under $2,000 per month, and use that extra money to pay down a No-APR-for-15-month credit card that will surely sneak up on me in 2020.

Wish me luck in February and beyond!

The post How Much Do You Really Spend Each Month? appeared first on Stash Learn.