Why You Should Spend With Your Debit Card vs. Credit Card This Holiday Season
By Melanie Lockert
November 20, 2018
The holiday season is approaching and you know what that means — spending money. Whether it’s buying gifts for loved ones or booking flights to travel home, the holiday season typically means a spike in spending for many of us.
And, because you may spend more than at other times of the year, you’re probably going to use credit cards. But, did you know that while credit cards offer some cool rewards like cash back, using your debit card is often a wiser choice? Read on to learn why.
1. You spend only what you have
Everyone wants to think they’re responsible with credit and only buy what they can afford. Well, a lot of people are wrong. According to a 2017 study by Magnify Money, 68 percent of consumers attributed their holiday debt to credit cards.
Of the consumers surveyed, 44 percent racked up more than $1,000 and five percent accumulated more than $5,000 in credit card balances. More disturbing is the fact that half of those consumers noted that it will take more than three months to pay off the debt they accrued during the holidays. That’s more than a quarter of the entire year!
When you use a debit card, however, you spend only what you have in your bank account. And, this helps you become more mindful and realistic about your budget. Using a debit card during the holiday season can also help you avoid fees and that dreaded holiday credit card debt.
2. You don’t have to worry about making another payment
The holiday season can make the most organized person run around like a headless chicken. Everyone’s schedule seems packed to the brim and there’s always something else added to the to-do list (Think: “Buy white elephant gift for the company party.”)
When you’re so busy, some of your normal day-to-day duties can fall to the wayside. And, if you don’t have auto-pay set up, you can potentially miss a credit card payment. Another common problem during the busy holiday season: You say you’ll “do it later” and then when you remember to pay your bill, it’s late.
When you use a debit card, however, you don’t have to add anything else to your to-do list – including making yet another payment. The money comes straight from your bank account and you don’t have to do a thing.
3. A debit card is free to use
One of the biggest perks with using credit cards is the rewards, like cash-back and airline miles. But oftentime the best rewards cards come with an annual fee and the conversion on the rewards isn’t as great as you think. In many cases, miles are literally worth about a penny per mile or less.
So, you may actually be spending your money on an annual fee, high interest rates, late fees, and more – without getting much in return.
Here’s where debit cards take center stage. Debit cards are free and can help you avoid debt.
4. Your debit card can help you save
At Chime, we’re all about helping you save money when you spend money. It’s all about balance. Am I right?
With this in mind, check out Chime’s round-up savings program, where every time you use your debit card, we round-up the purchase to the nearest dollar and put it into your Savings Account. This way you can effortlessly save and know that you’re being financially responsible at the same time.
5. Stop fraud instantly
There are no two ways about it: Fraud can be rampant during the holiday season. A lot of credit card enthusiasts think this is a solid reason to use credit over debit.
But, your debit card can offer protections that are similar to your credit card. For example, if you suspect any fraudulent uses on your Chime card or your card goes missing, you can simply go into the app and immediately put a halt on purchases by disabling transactions. No need to stay on a long customer service line (who wants to talk on the phone?!) and no need for lengthy emails. Just put a stop to it, now.
Not only that, but Chime alerts you any time you use your debit card. So, if your debit card get into the wrong hands, you’ll know right away.
The holiday season should be a time of joy and fun, not stress and debt.
Using debit instead of credit can help you keep your spending in check, plus you’ll have one less thing to worry about. So, this holiday season: Try spending only what you have and enjoy the season with family and friends. It sure beats worrying about money!
8 Reasons You Need to Pay Attention to Your Credit Score
By Brian Acton
November 15, 2018
Your credit score affects so many important aspects of your life, from your personal finances to your ability to work and live where you want. Having a good credit score can also save you hundreds or thousands of dollars annually in interest, insurance premiums, cell phone plans and more.
It pays to monitor your credit score on a regular basis so you know where you stand. Here are eight reasons you need to pay attention to your credit score.
1. It helps you qualify for a loan
Lenders take a hard look at your finances before they extend you a mortgage, auto loan, personal loan or other form of credit. They may review your income, the information in your credit report and your credit score.
If your credit score is too low, your loan applications could get rejected. It’s a good idea to monitor your credit score, and build your credit when necessary, to make sure it falls within a desirable range. Curious what constitutes a good credit score? Check out our article on credit score ranges.
2. You can get better credit cards
There are credit cards out there for just about every type of credit score. But the better your score, the better the credit cards you can qualify for. If you want a premium credit card — or just a solid cash back rate with low fees — you’ll probably need a credit score in the good-to-excellent rage.
3. The better your score, the lower your interest rates
Your credit score doesn’t just help lenders and creditors decide whether to do business with you. It also helps them determine the interest rates you’ll pay on their financial products. Generally speaking, the better your credit score, the lower your interest rates for loans and credit cards. Low interest rates can save you hundreds or thousands of dollars in the long run.
4. You could net cheaper insurance
Did you know that your credit score actually helps determine how much your insurance costs? Whether it’s car insurance, life insurance, homeowners insurance or health insurance, people with poor credit tend to pay higher monthly premiums.
Insurance providers don’t see the same credit score as traditional lenders. Instead, they see a credit-based insurance score, which looks at a combination of your insurance history and certain items in your credit report. Some states don’t allow certain types of insurers to use your credit score to determine their rates, so check your local laws.
5. Negative items could appear on any credit report
A dip in your credit score is a telltale sign that a negative item has landed on your credit report. This could mean you forgot to pay a bill, you have an account that went to collections or you declared bankruptcy. It could also mean that due to an error or even identity theft, inaccurate information is landing on your credit file. (Here are a few other ways to tell your identity has been stolen.)
If the negative item is legitimate, it’s helpful to know how it’s affecting your credit. If it’s incorrect, you should try to have it removed from your credit report ASAP by disputing the item with the credit bureaus.
6. You’re looking for your dream apartment
To avoid renting to someone who won’t pay their rent, landlords and property management companies often require credit checks for potential renters. While the fairness of this practice is open to debate, the fact remains that a poor credit score can prevent you from getting into your dream apartment. If you know your credit score ahead of time, you can take steps to improve it before you submit a rental application.
7. You’re on a job hunt
Some employers perform credit checks on job candidates before extending a job offer. While they can’t check your credit score, they will pull your credit report (though they won’t see the same information a lender or creditor would).
Not all companies do this, and several states have laws prohibiting the practice or limiting how much information the employer can see. But it’s a good idea to know your credit score and check your credit report before you begin a job hunt so you at least have an idea of how you might look to potential employers.
8. You’ll learn more about credit
Even if your aren’t planning to apply for a loan, take out an insurance policy or find a new job, it’s a good idea to be familiar with your credit score. You can look out for dips or watch it improve over time, and be prepared the next time someone is about to check your credit.
You can pull your credit reports for free every 12 months at AnnualCreditReport.com. Those reports won’t come with your credit score. You can purchase them at the time for a nominal fee. However, you can check your credit score for free each month on credit websites, like Credit Sesame, or via certain credit card issuers.
Unless you possess a magic wand or supernatural powers, improving your credit score isn’t something you can do in the blink of an eye. But here’s the good news: a better credit score is in reach — it just takes a little planning to get there.
What if you don’t have time to monitor your credit and finances every second of the day? No problem. Follow these 7 tips for a better credit score, with minimal hassle.
1. Open a Chime Account
An estimated 62 million Americans have a thin credit file, according to Experian. This means that they don’t have enough credit history to generate a credit score.
If you have no credit history at all, you’ll have to start somewhere. Opening a Chime account can help. You can open a checking and savings account by downloading the Chime mobile app. From there, you can set up an automatic deposit to savings. This will help you grow a cash cushion that you can use as a deposit for a secured credit card. This deposit doubles as your credit limit. You make purchases with your new card and your account activity shows up on your credit report.
According to Jill Caponera, consumer savings expert at PromoCodes.com, this can help you build your credit with one caveat: Make sure “you’re paying more than the minimum balance due and submitting your payments on time.”
2. Automate Your Bill Payments
Payment history accounts for the largest share of your credit score. And, putting bill payments on autopilot can help you avoid late payments, which can cost you major credit score points.
“Automating your bill payments can be super helpful, especially if you’re forgetful, busy or something unexpected happens,” says James Garvey, CEO and co-founder of credit-building app Self Lender.
Garvey knows about this first-hand. He launched the app after several late payments seriously dinged his credit score. “I was surprised such a simple mistake could have such a big impact,” he says.
3. Use Alerts to Manage Due Dates and Balances
If you don’t want to automate, you can stay on top of payment due dates by scheduling payment alerts for your credit cards and loans. When you get an alert, you can then set up a payment.
To schedule bill payments from your Chime spending account, log in to the Chime mobile banking app, navigate to the Move Money section, then choose Pay Bills from the drop down menu. You can schedule Chime Checkbook payments, or set up direct debit payments by providing billers with your Chime deposit account number and bank routing number.
Alerts can help you keep track of your balances and how much of your available credit you’re using. In other words, alerts can help you manage another aspect of your credit score: credit utilization.
“Credit utilization ratio is the amount of available credit you’re using,” says Randall Yates, CEO of mortgage marketplace The Lender’s Network.
“The lower your credit card balances, the higher your score will be,” says Yates.
4. Increase Your Credit Limits
Paying down your balances can free up available credit and improve your utilization ratio. But, debt payoff can take time.
Bumping up your credit card limits may be a faster way to see score improvement. The trick is to avoid charging up to your new credit limit. Garvey says a good rule of thumb is to try to keep your credit usage at 30% of your total limit or less.
“Assuming you have a good payment history, asking for a credit limit increase can be a good way to lower your credit utilization ratio, which can positively impact your credit score,” Garvey says.
5. Sign Up for Free Credit Monitoring
Free credit monitoring services, like those offered by Credit Sesame and Credit Karma, can help you keep tabs on your credit history as you work towards improving your score. You can also get a free credit report every 12 months from the three major credit bureaus at Annual Credit Report.
Monitoring your credit can help inform you of errors or inaccuracies on your credit report. For example, you can spot any changes to your credit report and therefore figure out what’s contributing to up and down movements in your credit score, says Nathalie Noisette, founder of credit counseling service Credit Conversion.
6. Dispute Credit Report Errors If You Find Them
An incorrectly reported balance or inaccurate gaps in your payment history can hurt your score in a big way.
You can, however, do something about errors by disputing them with the credit bureau that’s reporting the information. Noisette says she’s worked with clients that have seen their scores increase by 30 to 50 points after successfully disputing an error. If you’re not sure where to start with a credit report dispute, the Federal Trade Commission has a handy guide you can follow.
7. Pay Off Your Cards but Don’t Close Your Accounts
If you’ve successfully zeroed out the balance on one or more of your credit cards, you’ve definitely earned the right to a victory dance. Just don’t shut your account down completely if you’re trying to improve your credit score.
“Doing so could have a negative impact on your credit, as it will lower your available credit limit and raise your credit utilization ratio,” Caponera says.
And, if you end up needing a credit card down the road, you may have to apply for a new one, which could hurt your score since inquiries for credit shave off a few points each time.
The better option? Keep the card open and use it to make a small purchase every month, then pay off the balance, Yates says. This keeps the account active so your credit card company doesn’t shut it down and it’s an easy way to continue your positive payment history streak.
Improving Your Credit Score Doesn’t Have to Be Complicated
Raising your credit score doesn’t involve any secret formulas or hacks. It’s all about patience and knowledge. It’s key to know which habits have the most impact on your score, such as paying bills on time and keeping your credit card balances low.
By following the tips here, you can put positive habits into regular practice and watch your credit score improve over time.
Everything You Need to Know About a Secured Credit Card
By Rebecca Lake
October 31, 2018
A credit card can make paying bills or shopping for the holidays super convenient. But getting approved for one isn’t always a lock if you don’t have years of responsible credit use under your belt.
According to Experian, 62 million Americans have a thin credit file. Essentially, this means that they don’t have enough information on their credit report to calculate a credit score. Experian also found that 37 percent of Americans have credit scores that put them in the fair or very poor borrower category. And, a poor credit score can indeed can lower your odds of getting approved for a credit card.
Fortunately, you’re not completely shut out of the credit card game if you have thin or poor credit. Secured credit cards can give you purchasing power, while also helping you build your credit score.
What’s a Secured Credit Card?
It’s simple. A secured credit card is a card that requires you to offer up a cash deposit as collateral. The deposit is an insurance policy for the credit card company in case you default on paying back your balance.
The amount of the deposit varies, depending on the card. Typically, your deposit doubles as your credit limit. So, if you open a secured credit card account with a $500 deposit, your credit limit would be $500.
As you make purchases against that limit, your available credit shrinks. There are some secured credit cards that allow you to put down a smaller initial deposit. Some also let you increase your credit limit by adding to your deposit after opening your account.
But Wait…What Happens to Your Deposit?
After you make your deposit, the credit card company holds onto it. There are two ways you can get it back.
The first way to get your deposit back is to graduate to an unsecured credit card. Your credit card company may review your secured card account periodically. If you’ve established a record of using your card responsibly, it may switch you to an unsecured card. In that case, your deposit is refunded.
The other way to get it back is to close your account. But, you’d have to pay off your balance first. Otherwise, the credit card company could keep part or all of your deposit as payment.
Secured Credit Cards vs. Unsecured Credit Cards
The biggest difference between secured credit cards and unsecured cards is the cash deposit, mentioned earlier. Unsecured credit cards don’t require one.
Secured cards and unsecured cards work the same in terms of how you use them. When you make a purchase with an unsecured card, your credit limit is reduced by that amount. Your available credit increases when you make a payment.
Whether a card is secured or unsecured doesn’t matter to the credit reporting bureaus. Your account activity can still show up on your credit reports.
Building Credit With a Secured Credit Card
Secured credit cards can be a great starter option when you’re trying to establish your credit score. They’re also helpful for rebuilding credit if your score takes a serious hit because of something like bankruptcy or foreclosure.
That’s pretty straightforward. So how do you use a secured credit card to build (or rebuild) your score?
It’s all about your habits. Based on those five factors, the two most important things you can do with your secured card are:
Pay your bill on time each month
Keep a low balance
Making sure you pay on time is as easy as scheduling payments through the Chime mobile banking app. You just need to give your credit card company your Chime Spending Account number and routing number to set up an ACH payment.
Staying on top of your balance is simple too if your secured card has an alert feature. This lets you set a balance threshold you want to stay under. The alert lets you know when you’re getting close to that amount and this way you can pause any new charges.
Those are two easy peasy ways to give your credit score a boost. Another pro tip: The longer your account stays open, the longer your credit history grows. This can also help your score.
Using other types of credit, like a personal loan, is another way to boost your credit. Just don’t go overboard applying for new credit, since inquiries can take a few points away from your score.
Secured Credit Card APR and Fees
Every secured credit card is different when it comes to the fees and APRs they charge. Here’s a good rule of thumb to remember: lower credit scores usually equate to higher interest rates. If you’re starting from scratch with credit, you may be looking at a higher APR.
Remember, secured cards can come with more than one APR, and you may have different APRs for:
The fees you pay can also vary. Some secured cards charge an annual fee; others don’t. Some may also charge a monthly service fee, or a fee for increasing your deposit.
There are some secured credit cards, for example, that let you earn rewards when you spend. Some offer cash back, some offer points and others give you travel miles.
Secured cards can also come with features like free fraud monitoring or monthly credit score access. Some even waive late fees the first time you miss your due date.
Make sure you read all of the fine print and know what the benefits are. This way you’ll be informed.
Do Your Homework on Secured Cards
If you’re ready to improve your credit score, a secured credit card can help you do this. These cards can also potentially help you earn rewards as you spend. But remember, they’re not all the same. Take time to compare different options carefully to make sure you’re choosing the secured card that best fits your needs and spending style.
Prepaid Card vs. Debit Card vs. Credit Card
By Chonce Maddox
September 22, 2018
Some people use personal finance terms interchangeably like ‘checking account’ and ‘bank account’ or ‘interest rate’ and ‘APR’. In these instances, this is understandable.
Yet, when it comes to prepaid, debit and credit cards, it’s important to note that these cards are not the same thing. While they all may show a network logo like Visa, MasterCard, American Express, or Discover, these three types of cards are actually quite different.
With that said, these cards do have one thing in common: if you’re not using cash, you’re likely using one of them to make your purchases. Read on to learn more about the differences between prepaid cards, debit cards and credit cards.
A debit card is linked to your checking account through your bank. When you use your card to make an in-store or online purchase, the money gets deducted from your bank account. You can also use your card at an ATM to withdraw cash.
If you happen to spend more than the amount in your account, you may be charged an overdraft fee. Chime Bank provides one of the few debit card options that doesn’t have overdraft fees. Chime also offers fee-free ATM withdrawals at all MoneyPass ATMs.
Prepaid cards are not linked to your checking account so you don’t really need a bank account to have one. With a prepaid card, you load money onto the card and then use it to make purchases or withdraw money from an ATM. You can put money onto your card with any of these options:
Add funds at retailers or financial institutions like a Walmart or currency exchange location
Use a reload card which works just like a gift card (it contains a code that becomes linked to the amount of money you paid the cashier. You can then load the card over the phone using your code)
Transfer funds from an existing bank account
Be mindful that some loading methods may come with a small fee.
A credit card allows you to make purchases by borrowing from a credit limit instead of using the money you have in your checking account or funds you loaded onto a prepaid card.
With a credit card, you’ll have a minimum amount that you are required to pay each month (reflected on your bill), but it’s a wise idea to try to pay off the entire balance if possible. It’s also important to note that you’ll receive a certain limit when approved for a card. You can then spend up to this amount regularly so long as you make your minimum payments on time.
For example, if you get a credit card with a $1,000 limit, this means you can spend up to $1,000 on the card. While you can carry your remaining balance over to the next month, you will be charged interest on the balance until you pay it off. This is why it’s recommended to purchase only what you can afford to pay for within a short period of time – preferably during that same billing period.
A good rule of thumb is to only borrow up to 30% of your credit limit and try to pay the bill off in full each month. So, instead of spending your entire $1,000 credit, you may want to spend $300 or less and pay the bill off in full at the end of the monthly billing cycle. According to Experian, this is called credit card utilization and it’s a common factor when determining your credit score.
Credit cards can help you build your credit and demonstrate that you are a trustworthy borrower. In fact, credit card companies report your borrowing and payment history to the three major credit bureaus and this helps shape your credit score.
One final note about credit cards: when you decide to apply for one, make sure you understand all the fees and terms.
Prepaid Card vs. Debit Card vs. Credit Card
As you can see, there are quite a few key differences between the three cards above, so let’s discuss them in more detail.
A prepaid card is different from a debit card based on the fact that you don’t need a bank account to have a prepaid card. And, when you get a prepaid card you won’t be subject to any credit checks or inquiries into your banking history because you are using loading your cash onto the card. Another perk: you may be able to deposit your paycheck right onto your prepaid card.
While prepaid cards can look and feel like debit cards, they aren’t as safe as debit cards. Why? Since debit cards are connected to your checking account, you can easily monitor your account and spending online for free. Your money will also generally be protected if your debit card gets lost, stolen, or wrongfully charged.
However, the Consumer Financial Protection Bureau (CFPU) has put new rules in place to make prepaid cards safer for consumers. These new rules are set to go into effect on April 1, 2019.
Now let’s talk about credit cards vs. debit cards.
Credit cards are different from both prepaid and debit cards due to the fact that when you use a credit card you are borrowing money while hopefully building a solid credit history. Better yet, many credit cards offer rewards in the form of points or cash back that can be redeemed for statement credits, travel, or merchandise. Some people like to use credit cards to purchase groceries, gas, and other everyday needs in order to rack up reward points.
As long as you’re not overspending and can pay your bill off in full each month, there’s nothing wrong with using this strategy. However, if you struggle with controlling your spending, you may want to steer clear of using credit cards for your daily purchases.
Instead of credit cards, consumers often choose debit cards for everyday spending. Why? Debit is safer than cash, you can monitor your activity online with mobile banking, and you can choose a bank that doesn’t have fees.
Which One Do I Need?
If you’re not going to be using cash 100% of the time, odds are you’ll need one of these three cards.
Some people start with a prepaid card, but most choose a debit card that’s connected to a checking account for easy access to their money. Still others prefer a credit card, especially if it offers perks and rewards.
We’ll leave you with this thought: you may want to consider using two or all three of these cards for different types of spending. The bottom line: the best option is the card that works best for your spending and lifestyle habits.
10 Years After the Financial Crisis – How Fintech Is Helping
By Susan Shain
September 18, 2018
“Too big to fail.” If reading that brings a little bit of red to your eyes, you’re not alone.
Though originally popularized in the 1980s during the bailout of Continental Illinois National Bank, this phrase once again became common parlance during the 2008 financial crisis. According to the Federal Reserve Bank of Cleveland, this saying became synonymous with the unwillingness of regulators to close a large troubled bank because they believed the short-term costs of a bank failure were too high.
So, it’s no surprise that nearly half (49 percent) of Americans still have negative associations with the term “too big to fail,” according to a recent Chime survey. The generations who had the strongest negative connotations included boomers (55 percent), many of whom lost their retirement savings in 2008, and millennials (50 percent), who graduated to a nonexistent job market.
In the decade since that phrase was splashed across newspapers and discussed at every dinner table, the United States has slowly clawed its way back from the financial crisis. This brings up the question: Has anything really changed?
Ten years later, the same big banks are still at the top of the game: JP Morgan, Bank of America, Wells Fargo, Citibank, and US Bank. Across the U.S., banks had record profits of $56 billion in the first quarter of 2018. Although CEOs earn less than before, they’re still killing it. The stock market has sustained one of its longest bull runs in history, with the S&P 500 growing more than 300 percent since the crisis.
That’s despite Dodd-Frank, a 2010 bill that aimed to protect consumers by placing more controls on banks, including their lending requirements. While the bill did result in increased accountability and oversight, the current administration has begun to roll back some of its provisions. Even if the remainder of the consumer protections stay intact, the WSJ points out that many of the regulators have backgrounds in the very industry they’re supposed to be monitoring.
According to the 2017 report, only 7 percent of adults say it’s “difficult to get by financially” — about half the number who said so in 2013. And nearly three-quarters say they’re either “living comfortably” (33 percent) or “doing okay” (40 percent).
Although things have improved, that doesn’t mean everything is OK. Here’s a deeper look at the numbers.
Unemployment and income
Unemployment has dropped to 3.9 percent, lower than it was before the recession. Even the “real” unemployment rate — which includes people who’ve stopped looking for work and people working part-time because they haven’t found full-time opportunities — is only 7.4 percent.
Not counted in that percentage, though, are the people who aren’t looking for work because they can’t find childcare, are addicted to opiates, or are turned off by low wages. Of the Americans who are employed, more than one-fifth (23.3 percent) are in jobs where the median wages fall below the federal poverty line, reports the WSJ. Nearly 40 percent of adults, according to SHED, have family incomes of less than $40,000. Overall, the WSJ says median household income has only risen 5.3 percent since 2008.
Chime’s survey underscores this: 54 percent of Americans are living paycheck-to-paycheck.
More people, SHED learned, are working on the side, too: 31 percent of adults engaged in gig work in 2017, up from 28 percent in 2016.
Wealth and inequality
Chime’s survey asked people how the recession had affected their financial habits. This is what we found:
62 percent feel their savings are “in a better place” compared to 10 years ago
Despite these promising signs, the wealth gap continues to grow. One report by the Federal Reserve Bank of St. Louis went so far as to say millennials may become a “lost generation” for wealth accumulation.
“Wealth in 2016 of the median family headed by someone born in the 1980s remained 34 percent below the level we predicted based on the experience of earlier generations at the same age,” stated the report.
Those with exposure to the stock market — just half of the American population — have bounded ahead, while everyone else has been left behind. In the New York Times, Nelson D. Schwartz reports the “proportion of family income from wages” has fallen from 70 percent to just under 61 percent. The rest, he says, is largely from investments.
“The people who possess tradable assets, especially stocks, have enjoyed a recovery that Americans dependent on savings or income from their weekly paycheck have yet to see,” wrote Schwartz in the New York Times. “Ten years after the financial crisis, getting ahead by going to work every day seems quaint, akin to using the phone book to find a number or renting a video at Blockbuster.”
When the recession hit, Americans lost $16 trillion in net worth. Today, the wealth of the median American household is still 34 percent lower than it was in 2007, according to the New York Times. Why? Because for families without large investments, their wealth was wrapped up in home value.
In what The Penny Hoarder calls “The American Nightmare,” 9 million people lost their homes during the housing crash. According to CNN, the overall homeownership rate dropped from 69.4 percent in 2004 to 63.1 percent in 2016. And, of the Americans who rent, nearly half of them are cost-burdened, according to Harvard University. This means they spend more than 30 percent of their income on rent.
Debt and savings
Debt also remains a common struggle. In fact, Chime’s survey found that 65 percent of Americans have some sort of debt, with 40 percent carrying more than $10,000 and 14 percent carrying more than $50,000.
Here are some staggering stats:
Student debt, in particular, has crippled millennials. Today’s students graduate with nearly $40,000 of loans, according to Student Loan Hero.
When faced with an unexpected expense of $400, 40 percent of adults can’t pay for it, reports SHED. While that figure has decreased from 50 percent in 2013, it still isn’t good.
Twenty percent of Americans are behind on their debt payments, according to SHED; a slight increase from 18 percent in 2015.
In addition, SHED found 22 percent of adults expected to forgo payment on some of their bills in November or December 2017 — mostly credit cards. (That may be why 64 percent of the people we surveyed prefer debit cards over credit cards.)
When it comes to retirement, the picture is also bleak. SHED reports less than two-fifths of non-retired adults think their retirement savings are on track. One-fourth have no retirement savings or pension whatsoever.
The rise of fintech
Though the traditional financial industry may not have learned much from the Great Recession, entrepreneurs did.
They immediately saw a need for a new breed of financial businesses. They realized banking and financial services should no longer be exclusive, confusing and predatorial. Instead, entrepreneurs thought financial institutions should be helpful, transparent and free.
So, in the years after the crash, fintech companies started sprouting up left and right.
While the streak of new companies began to slow in 2015 — perhaps, Deloitte posits, because other technologies like bots and blockchain have attracted entrepreneurs — investments into fintech are still robust.
And, when it comes to mobile banking, those customers are more satisfied. Fifty-nine percent of the millennials we surveyed would recommend their online or mobile bank to a friend. Of those who used national banks, only 22 percent would do the same.
How fintech is helping
Although the financial crisis has had a lasting impact on Americans, it’s also created a landscape in which fintech can thrive.
So, if there’s been one benefit of the Great Recession, it’s the growth of new financial companies that value transparency and put consumers first.
New fintech startups are indeed helping today’s consumers close tomorrow’s wealth gap. For example, Chime offers comprehensive, modern banking with zero fees. With services like Early Direct Deposit, you can avoid predatory payday lenders. And, with automatic savings features, you can build your emergency fund without thinking about it.
In other words: we’ve got your back as you achieve your financial goals.
Credit Score Money Tips: 3 Tips to Fix Your Credit Asap
Your credit score is an essential part of your finances. If you are interested in buying a home or a new vehicle with a loan, you may need to fix your credit score ASAP. The difference between an excellent credit score and a poor one can be worth tens of thousands of dollars over the life of a mortgage if you can get approved at all. While fixing a credit score can take up to a decade, there are some steps you can take today to get your credit score on the mend. If you want to fix your credit score ASAP, follow along to learn more.
Fix your credit tip #1: 100% on-time payments
The biggest factor in your credit score is your on-time payment history. If you have a series of late or missed payments, your first step to fix your credit score is to turn that trend around. Late payments stay on your credit for seven years, and there is no quick fix to get them removed. But you can start the clock to remove them all for good this month with your first of a lifetime of perfect on-time payments going forward.
If you have trouble keeping up with the bills, stop using your credit cards and set the payments to automatic. This way, you never have a late payment to worry about! Even if you don’t have a monthly payment due, many credit cards report an on-time payment. Whatever you have to do to keep a 100% on-time rate going forward, do it!
Fix your credit tip #2: Pay down balances
The fastest way to fix your credit score in a hurry is to pay off revolving credit balances. A revolving credit account is an account where you can add to your balance in the future. This means credit cards and other lines of credit need to be paid down as quickly as possible to raise your score. While it is easier said than done, if you can pay your credit cards down to zero, you should see your score increase if you carried a balance in the past.
If you need help putting together a credit card payoff strategy, consider the debt snowball or debt avalanche. This is a method of focusing on paying off one account at a time while making minimum payments on the others. As you pay off each account, your focus payment gets bigger and bigger and has a snowball effect of paying off your debt accounts.
Fix your credit tip #3: Be patient
If you follow tip #1 and tip #2 and don’t do anything else, you should see your credit score go up in the long-run. If you want to fix your credit permanently, however, it takes time. Those previous late payments hurt your score less and less over time, but it will take the whole seven years for them to go away for good. There is no quick answer to that part of fixing your credit. You have to be patient.
But if you build the right credit habits and hold to them for years, your credit will improve. While you are at it, don’t mess with your credit too much. Adding new accounts, increased credit limits, and even applying for a new credit card can temporarily lower your credit score. The more you can keep your hands off and just let your credit accounts age with perfect payment records, the better off your credit will be.
Your credit score is in your hands
It’s easy to blame credit card companies, debt collectors, and banks for a bad credit score, but in reality, your credit score is in your control. If you take charge and make your credit a focus, you should be able to fix your credit over time. When you want to borrow with the best terms or use the best credit cards for miles and points rewards, you’ll be thrilled you have excellent credit. You can also get back on your feet and open a bank account online with no deposit even with bad credit through a mobile bank like Chime. They can help you restablish good financial habits.
Following these habits, I’ve been able to build my own 800+ credit score. That helped me buy my home and earn hundreds of thousands of travel rewards points for free trips around the world It couldn’t have happened without my excellent credit score. If you want to join me in the 800+ club, follow these key tips to fix your credit score starting today.
What is a Prepaid Card?
By Chelsea Brennan
June 23, 2018
If you don’t have anonline bank account or credit card and want an easy way to limit overspending, a prepaid card may be your best bet. Millions of Americans are using them to supplement or replace traditional banking services.
Yet, prepaid cards also have their drawbacks.
Here’s the scoop on prepaid debit cards. This way, you’ll be in the know when it comes to making the best choices for your finances and goals.
A prepaid debit card is exactly what it sounds like. It is an alternative banking card that only lets you spend the money that you have preloaded onto the card. You can use your prepaid card anywhere that accepts its payment network, such as Mastercard or Visa. If you attempt a purchase beyond the funds available, your card is simply declined.
When you’ve exhausted the funds on your card, companies offer you multiple ways to add more money. Depending on the provider, you can add cash via a transfer, direct deposit or cash.
Unlike a traditional debit or credit card, a prepaid card requires that you pay before you go to make a purchase. You do this by loading up your card with cash ahead of time. A debit card, on the other hand, charges you immediately after you make a purchase by deducting that amount from your bank account. And, a credit card doesn’t require you to pay until after you buy something – whenever your next bill is due or over time (you’ll typically incur interest if you don’t pay off your entire balance that month).
Who can benefit from a prepaid card?
Prepaid cards are easy to get and very useful if you’re prone to overspending. You can qualify for a prepaid card regardless of your credit history. And, they are helpful if you’re trying to avoid debt.
Because of these benefits, these cards are often a good option if you don’t have access to a credit card or you’re trying to budget using mainly cash. At the same time, a pin-protected prepaid card is safer than carrying cash. Prepaid cards can also be helpful if you don’t have access to a bank account. With this said, keep in mind that with the rise ofchallenger banks, more people can now get bank accounts.
What are the disadvantages of prepaid debit cards?
While many turn to prepaid cards for convenience, these cards have some significant limitations. In fact, prepaid cards have a bit of a bad rap and the Consumer Financial Protection Bureau will be rolling out new regulations for prepaid cards in May of 2019.
The most important disadvantage is that prepaid cards charge a lot of fees. For example, you’ll often be charged fees for an initial setup, monthly maintenance, reloading your card, ATM use, and more. Studies have shown average prepaid cardholder fees total $11.00 per month.
If you have bad credit, keep in mind that these cards also won’t help you rebuild your credit. And, you won’t have access to banking services or the ability to stop payments. Also, prepaid cards don’t offer fraud protection like a typical debit or credit card. If your card is stolen, there is no requirement for the issuer to replace the funds. Even with the roll-out of the new CFPB rules next year, prepaid cards that aren’t registered with your name and personal information won’t be required to offer this protection. Banking options such as Chime provide a great alternative to prepaid cards and allow you to open a bank account with bad credit and require no deposit.
What are the best alternatives to a prepaid debit card?
If you are turning to a prepaid card because you’re having trouble getting a credit card, want to avoid credit card interest and don’t want to ever pay overdraft fees, you do have other options.
First off, consider an online bank account such as Chime. Chime is a mobile bank account with no hidden fees. You’ll receive a debit card with free access to over 30,000 ATMs. With Chime, you can get paid up to two days early with direct deposit. You’ll also be able to use your card at any merchant where Visa is accepted. With no minimum balance requirements, overdraft fees, or monthly fees, you can get the benefits and protections of a bank without all the costs.
Secondly, if you want to build credit, consider a secured credit card as a stepping stone. These cards help establish or rebuild credit history without living beyond your means. The amount of cash you deposit as collateral becomes your credit limit. For example, if you put $500 on a secured credit card, that’s how much you can spend. It differs from a prepaid card as your charges don’t draw directly on your cash deposit, but on a credit line that you need to pay off regularly.
Whether you’re considering a prepaid card as a budgeting tool or alternative way to bank, be sure to dig into all the fees before choosing a card. And remember: prepaid cards can be expensive to use, so you’ll want to know the costs before committing to a card.
The Hidden Dangers of Credit Card Rewards
By Ben Luthi
May 9, 2018
So, you’re tempted by that offer you received in the mail: 50,000 airline miles and all you have to do is spend a few thousand bucks.
While you may not need another credit card, a reward card may be a great option for you, especially if you’re responsible with your money. For starters, earning credit card rewards can be a great way to get a little extra cash or save on your next vacation.
On the other hand, credit cards can also cost you, especially if you overspend and tend to maintain a balance. To help you avoid the hidden dangers of rewards cards, take a look at three common pitfalls of these popular credit cards.
1. You can be tempted to overspend
Some of the best credit cards out there come with huge sign-up bonuses. But beware: you typically have to spend between $3,000 and $5,000 in a short time to get those perks. And, if you don’t usually spend thousands in the span of just a few months, you may end spending beyond your means simply to get those air miles and other bonuses.
What’s more, credit card holders obsessed with racking up rewards often want to use their cards as much as possible. Yet, for some expenses, like a mortgage or utility payment, the financial institution or utility company often assesses a fee for credit card payments. For example, you may be paying a three percent fee to get two percent back on your credit card. Although the rewards seem exciting, it’s important to understand that you’re spending more than you’re getting back.
2. You may rack up more debt
If you’re not careful, overspending to earn credit card rewards can land you in debt. Why? Because if you spend more than you can pay off monthly, you’ll end up paying interest on the amount you carry from month to month.
Case in point: the average credit card interest rate is 14.99%, according to Federal Reserve data for the fourth quarter of 2017. This is much higher than any rewards rate. For example, you may get two percent cash back for using a particular card. Whereas this gives you some extra cash, it’s a lot less than the almost 15% interest rate you may be paying on your credit card balance.
Another reason you can end up in debt: credit card issuers require low minimum monthly payments and if you only pay the minimum amount each month, you can stay in debt for a long time. For example, cards typically require that you pay only one to two percent of your balance plus interest. So, if you have a credit card with a balance of $10,000, your monthly payment is just $200. If your interest rate is 14.99%, it will take you roughly six-and-a-half years to pay off your debt, assuming you don’t continue to use the card. Plus, you’ll pay $5,784 in interest along the way.
3. You may take risks with your credit
The credit card rewards game can get addicting, and there are several hobbyists who sign up for multiple credit cards to earn more sign-up bonuses. If your credit is in stellar shape and you do this responsibly, the negative impact to your credit history can be minimal.
I’ve applied for and used almost 50 different credit cards over the past few years to get big travel sign-up bonuses. And while my credit report does show several new accounts over that time, it didn’t stop me from getting a low interest rate on a mortgage last year. Yet, it takes skill to know how to play the rewards game.
As a result, most people shouldn’t engage in this “credit card churning” hobby, especially if you tend to overspend or you’re not well organized.
Three ways to benefit from credit card rewards
If you do want to earn credit card rewards, it’s important to have a responsible plan. To get started, here are three ways to reap the rewards without paying a price.
1. Pay off your balance each month
If you’re going to use a credit card, make sure that you pay off your balance on time and in full every month to avoid interest charges and other fees.
This can get tricky if you have multiple credit card accounts. If you fall into this camp, set up email or text alerts to remind you when your payments are due. You can also set an alert for your statement date, which is typically a few weeks before you due date. This way you can pay early.
2. Get on a budget
If you haven’t already created a budget, now is a good time to do so. This basic financial planning tool can help you set goals in various spending categories.
Also, when it comes to taking advantage of new credit card promotions, a budget will help you determine whether you can qualify for big sign-up bonuses without spending more money than you have.
3. Use a debit card
If you’re not sure whether credit card rewards are worth the potential pitfalls, use a debit card instead. With a debit card, your transactions will be deducted from your checking account immediately, so you don’t have to worry about trying to figure out whether you have enough money to pay off a credit card balance.
Plus, some debit cards come with extra features. For example, the Chime Visa® Debit Card offers:
A daily balance update and real-time transaction alerts.
An automatic savings program that rounds up each transaction and transfers the round-up amount to your savings account.
And, of course, there’s no interest rate on debit cards and for you, this may be the most important feature.
Don’t sacrifice financial security for credit card rewards
If you use credit cards regularly, the rewards should be considered an added benefit and nothing more. If you find yourself tempted by credit card rewards, take a step back and consider how to earn these perks in a responsible way. Remember: put your financial security first and you’ll be on your way to reaching your money goals.
What is an EMV Chip Card and How Secure are They?
By Paul Sisolak
November 1, 2017
When was the last time you actually swiped the stripe on your credit or debit card during a transaction? If it’s been a year or so, the timing sounds right.
Over the past 12 months, there’s been a huge technological shift from mag-stripe cards to those enabled with chips. In fact, chip-enabled cards represent more than 600 million cards in the U.S. alone. In spite of retailers in the U.S. being slow to embrace the new technology (in Europe and other parts of the world, retailers have by and large already adopted chip cards), you’ve likely seen merchants upgrading or replacing payment terminals to accept chip cards. While this takes place, magnetic stripes will continue to go the way of the dodo. Even if your old card hasn’t expired yet, your bank has probably already provided you with a chip-based replacement.
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This migration to chips cards, also known in the industry as EMV (Europay, MasterCard, Visa) credit cards, is accompanied by a swirl of hype. For example, EMV providers commonly state that your transactions are more secure, resistant to hackers, and foolproof to fraud. About now you may be wondering: How does that little microchip inside your card provide you with these safety measures?
Read on to learn more about the EMV cards and how you can protect your money.
A primer on card technology
Magnetic stripe technology is actually quite archaic. It dates back about 50 years and utilizes the same analog format as an old cassette tape. It’s literally magnetized and matched to your bank account information. This data, embedded on a simple mag stripe, is consistent and therefore never changes.
So, anytime you go to swipe a stripe-equipped card, it reads the same data over and over again. And this consistent information is vulnerable to fraudulent activity because thieves can decode the magnetic field and duplicate your bank information. In fact, fraudsters commonly use credit card skimmers at ATMs and other locations to glean your personal information. Stopping fraud meant canceling your old card and getting a new one with new information. Unfortunately, your new card included the same stripe technology and it was therefore just as sensitive to theft as it was before.
By contrast, the computer chip on an EMV card is where your banking information is stored, and the chip is always changing up the data on your card. For example, you may have a card number that stays the same, but the information embedded on the chip is constantly being scrambled and encrypted. In short, your card’s chip contains a special microprocessor that creates a code for every transaction, no matter the amount.
So, when you insert your card into a physical payment terminal or when you’re shopping online, the computer chip communicates with the merchant and unscrambles the coded language. Your payment information is then obtained using one of a few different types of authentication methods:
Static Data Authentication (SDA)
Dynamic Data Authentication (DDA)
Combined DDA with application cryptogram generation (CDA)
The EMV chip also ensures that both the transaction and the cardholder are verifiable (before the days of EMV cards, you’d accomplish this by entering your PIN number and card’s security code).
For example, if a thief gets his hands on your EMV card, he will have a tough time using it. Not only is it difficult to obtain the computer chip from your card (equipment to do this can cost upwards of $1 million), but the advanced encryption would make it nearly impossible to decipher your banking information. Even if your card number was stolen, and not your actual card, the would-be fraudster wouldn’t be able to use it because EMV chip technology prevents the number from being replicated and repeated. On top of this, a payment terminal won’t recognize the number and the transaction will be declined.
Follow these EMV chip safety tips
Although EMV technology makes banking more secure, identity thieves have become more sophisticated and will always try to find ways to access your money. Your Chime debit card, for instance, is chip-enabled, but you should still take precautions to protect your finances, pay safely and avoid getting scammed. Take a look at some ways to keep your money safe:
Guard your digits: At an ATM, the supermarket, the mall, or when using your laptop in a public space, never divulge your card or PIN numbers to anyone. Fraud can still occur, so if possible, opt to sign for a transaction instead of using your PIN. If a fake transaction occurs, the liability falls back on the issuing bank, or on the merchant if the business is not equipped to handle EMV transactions. Some cards have even done away with PIN numbers and employ a chip plus signature method. (Neither Chime or another bank will ever ask you to reveal your PIN number.)
Keep track of your bank statements: Banks are more vigilant today to stopping theft and may even intercept fraudulent activity before it happens. My bank, for example, recently notified me that there was an attempted unauthorized use of my debit card – before a transaction was made. But, thanks to my EMV card, the fraudster couldn’t use my card number, and the bank recognized that I wasn’t the one using the card. The moral here: Stay on top of your monthly bank statements and look for transactions, debits or withdrawals that don’t look familiar. If you spot anything suspicious, report it to your financial institution.
Opt for mobile payments: Chime’s spending and automatic savings accounts are just two ways to maximize your mobile banking experience without the need to use a physical debit card. To ensure your safety, you can also look for retailers and vendors with mobile payment technology as this lowers the risk of your information being captured. Adding your debit and credit cards to your phone and using mobile-enabled terminals can also help ensure a secure shopping experience.
Banking Services provided by The Bancorp Bank, Member FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Chime and The Bancorp Bank, neither endorse nor guarantee any of the information, recommendations, optional programs, products, or services advertised, offered by, or made available through the external website ("Products and Services") and disclaim any liability for any failure of the Products and Services.