Connect with us

News

Credit Card Debt Is Down During COVID-19. Here’s Why

Published

on

Credit card debt in the United States has plummeted since the COVID-19 crisis started, according to the most recent data from the Federal Reserve. The decline may seem counterintuitive given the pandemic’s effect on the economy. 

According to the Fed’s latest Consumer Credit report, the amount of revolving consumer debt, which is primarily made up of credit cards, fell below $1 trillion in May 2020 for the first time since May 2011 during the Great Recession. Notably, it also marks the third straight month of decline. 

With the domestic unemployment rate stuck in the double-digits and the gross domestic product (GDP), one of the most widely accepted indicators of the nation’s overall economic health, down approximately 5% in the first quarter of 2020 with further declines likely to be reported in Q2, you might expect that people would be relying on their credit cards more than ever. 

However, experts say the debt drop is exactly what they expected. Here’s why:

We Are Choosing to Spend Less

“If you look at the Great Recession, this is what happened then,” says Brian Riley, director of credit advisory services at Mercator Advisory Group, a payments research and consulting firm, who says a change in spending patterns is only one of the drivers behind the falling numbers. “Consumers know they have issues and they are unemployed, there’s a lot of self-governance and general spending is down.”

According to estimates released June 26 by the Bureau of Economic Analysis (BEA), personal income decreased $874.2 billion (4.2%) in May and disposable personal income decreased $911.1 billion (4.9%). In other words, when you have less to spend, you spend less.

At the same time, the BEA found that the U.S. personal savings rate was nearly twice as much in May (23.2%) as it was in March (12.6%), suggesting that many consumers are taking a cautious approach to using their money.

“Given the relatively long runway we had regarding COVID-19—meaning we all were told for weeks that we may have to shut things down and people may lose their jobs or have their hours reduced—a smart reduction in non-essential credit card spending also probably contributed to the reduction in balances,” says John Ulzheimer, a nationally recognized credit expert and former FICO and Equifax employee.

We Have Fewer Ways to Spend

Beyond proactive budgeting, consumers also simply have fewer options to spend their available income right now, likely contributing to the decline. According to a U.S. Census Bureau’s Advance Estimates of U.S. Retail and Food Services report, total sales for the period from March 2020 through May 2020, the most recent data available, were down 10.5% from the same period a year ago. 

“Before the pandemic, the federal government estimated each American household spent more than $3,000 a year on dining out. With this pandemic-fueled economic uncertainty, it’s a sure bet we’re all spending less on anything that’s not absolutely necessary,” says Howard Dvorkin, CPA and chairman of Debt.com, a credit repair and debt management site.

More than 54% of Americans say they are cooking at home more since the COVID-19 crisis, with 58% of those saying that saving money was the main motivation, according to an April 2020 survey by Hunter, a food and beverage marketing communications firm.

The drop is not only fueled by dining at home. Travel has taken a freefall with domestic travel spending forecast to drop 40% from $972 billion in 2019 to $583 billion in 2020, according to a U.S. Travel Association report.

Many venues, from malls to theaters to bowling alleys have put their businesses on pause in recent months or shut down entirely, reducing the number of ways to pass the time outside of the house.

For example, a June 2020 Economic Impact Report by restaurant peer review site Yelp found that 53% of restaurants that had closed since March 1 have since indicated permanent closures on their Yelp pages. 

Credit Card Companies Are Closing Accounts and Tightening Standards

If you’re unemployed and having trouble paying your bills, that also extends to your credit card debt. Issuers are getting hit with a double-dose of revenue-reducing circumstances, with some banks extending relief to customers such as pausing payments, reducing or forgiving late fees and eliminating interest charges. In some cases, entire chunks of a credit card’s balance might be forgiven. 

Although these goodwill gestures in the face of the pandemic ultimately can cut down on profits, they’re generally intended to stave off the biggest loss of all, which is when a customer defaults entirely on their credit card balance. When this happens, it’s considered a charge-off, meaning a bank has given up on trying to collect on the debt.  If your account is closed, it no longer counts as outstanding revolving debt. 

“Credit card issuers are surely charging off more during this pandemic than they did beforehand,” says Dvorkin. “There’s no way it’s the only explanation for a $100 billion drop in debt. 

Some issuers are also lowering credit limits for existing customers, which also can have an impact on the amount of reported consumer debt. 

Bottom Line  

Although the staggering drop in revolving consumer debt is significant, it’s likely due to a combination of pandemic-related factors: A significant change in consumer spending habits where people are earning less, spending less and saving more. Credit card companies are reducing their exposure by both writing off debts and tightening their lending standards.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

News

How DIY Debt Relief is Simplifying The Road to Financial Freedom | 2020-12-02 | Press Releases

Published

on

Los Angeles, California, Dec. 02, 2020 (GLOBE NEWSWIRE) — “Debt” is an anxiety-inducing topic for most Americans. According to financial experts, about 80% of Americans have some form of consumer debt and are $38,000 in debt, excluding mortgage debt. Unfortunately, financial literacy isn’t a topic that’s extensively covered in schools. As a result, many Americans lack valuable knowledge on personal finance topics — including how credit cards and loans actually work, or how to get out of debt quickly should they experience financial hardship. When times are tough, the concept of “free” money is very appealing and overrides reservations about amassing large amounts of consumer debt.

While consumers have numerous debt-relief options — ranging from consumer credit counselling to debt settlement to bankruptcy — the actual road to recovery is fraught with numerous hazards that include repayment terms with unaffordable monthly payments, repayment terms that take too long, exorbitant fees, and false promises.

With over a decade of experience in the credit and finance industries, these are problems the founders of DIY Debt Relief understand all too well. Debt relief — specifically settling delinquent accounts with creditors and collectors — cost consumers more time and money than most can afford. Compounding the problem are unscrupulous service providers that make promises they can’t keep — charging too much for the service they provide and taking too long to provide said relief. It was with these issues in mind that DIY Debt Relief was created.

DIY Debt Relief is a web-based company that provides educational videos and supporting materials to offer a “do it yourself” alternative for distressed consumers. By eliminating the need for a third-party service provider, consumers can avoid the prohibitive fees they charge — which in turn reduces the amount of time needed to settle accounts, pay off the agreed upon balances, and become debt-free. Additionally, even creditors and collectors who often refuse to work with third-party service providers are all too eager to work with consumers directly.

The content, tools and resources DIY Debt Relief provide are designed to help consumers assess, evaluate, and improve their financial situation. The information is based on United States federal laws and regulations which govern the actions of creditors and debt collectors, which means they can be accessed and utilized in all 50 states. With these assets in hand, consumers can create a plan of action to get their delinquent, unsecured debt paid off as quickly and as affordably as possible. And with the belief that credit repair is the next logical step after the debt settlement and repayment process is completed, DIY Debt Relief provides additional resources and information teaching consumers how to quickly and correctly rebuild their credit profiles and FICO scores.

The DIY Debt Relief process is easy to follow, gives the consumer control, is less expensive to implement, takes less time to complete, and can provide better results. Rather than relying on a third-party to entrust your financial future to, consumers now have the option of taking the initiative and doing the necessary work to get themselves to the debt-free future they deserve. With the goal of taking DIY Debt Relief internationally, the eventual next step is to make the videos in other languages. For right now, DIY Debt Relief’s videos educate on debt relief only in the United States — but its possibilities are endless, its effect promising, and its only trajectory from here is up.

DIY Debt Relief IG: @diydebtrelief www.diydebtrelief.com

Media Contact: support@diydebtrelief.com

This news has been published for the above source. DIY Debt Relief [ID=15547]

Disclaimer: The pr is provided “as is”, without warranty of any kind, express or implied: The content publisher provides the information without warranty of any kind. We also do not accept any responsibility or liability for the legal facts, content accuracy, photos, videos. if you have any complaints or copyright issues related to this article, kindly contact the provider above.


Source link

Continue Reading

News

Wannabe Wired: Don’t get scammed by fraudulent phone calls | Columnists

Published

on

A few weeks ago, I told you about how you can filter out spam phone calls. This week, I’m going to teach you a few of the warning signs to look out for if you are one of the unfortunate souls who has to answer every phone call that comes through.

It’s hard to believe that phone calls still play a major role in fraud scams. But despite the fact that most people won’t even answer their phone if they don’t recognize the number, the Federal Trade Commission (FTC) reported last year that of the more than one million fraud complaints they received, 74 percent were phone scams.

The sad truth is that people lose a lot of money to phone scams. And even though we like to think they won’t happen to us, we can never be too cautious. Over the years these scams have become more sophisticated by mimicking numbers that look trustworthy, have local area codes or even familiar names attached to them. There have even been reported instances of people receiving fraud calls from their own phone number.

The good news is, the people on the other end of those calls are using scams that aren’t nearly as sophisticated as their number spoofing software. Most scams use formulaic narratives that are easy to recognize once you know what to be on the lookout for. Below are some of the most common scams and how to recognize them according to the FTC.

The Unentered Lottery

This is one of the most common scams out there. A caller tells you that you’ve been selected for a prize or some kind of lottery you don’t remember entering. But the catch is, you have to send them some kind of cash retainer so you can claim it. That or they start asking you for personal information like date of birth and Social Security number. Don’t fall for it.

The Threat

Some scammers resort to fear to try and extort people. They will give you a call and pretend to be with some kind of authority, threatening to have you arrested if you don’t fork over payment for some amount they claim you owe. Legitimate representatives from law enforcement or federal agencies will not call and threaten you like this.

The Imposter

A scammer calls you up, complete with fake number and caller identification, claiming to be someone you know, maybe a boss, maybe a distant relative, maybe even someone from a government agency. They are always in trouble and always need you to help by sending along gift cards or prepaid visa cards. Quick tip: if someone calls needing you to send them money in a method that is untraceable and nonrefundable like a gift card, don’t.

The Charity Case

Since it’s that time of year again, be on the lookout for fake charity solicitation. Scammers love posing as charities. If you are planning to give to a charity this year, make sure to do your research beforehand and call the charity directly, or better yet go online and give.

There are plenty of others of course, far too many to list in detail here. But here are a few more should also watch out for: extended car warranty scams, loan scams, debt relief or credit repair scams, one ring scams in which your phone rings once and then you call the number back to find out it is a scam, among many others.

And if all else fails just follow my golden rule, if you don’t recognize the number, don’t answer the phone. If it’s important, they’ll leave a message.

For a complete list of potential scams check out the FTC’s website at consumer.ftc.gov.

Source link

Continue Reading

News

BLM hosts job fair in Lakeland to address economic inequality

Published

on

Sara-Megan Walsh
 
| The Ledger

LAKELAND — Black Lives Matter will take a step this week toward addressing Lakeland’s racial issues that won’t involve a protest or a march.  

Black Lives Matter Restoration Polk will be holding a job fair on Wednesday, from 11 a.m. to 2 p.m., at The Dream Center, located at 635 W. 5th St. in Lakeland.

Jarvis Washington, president of BLM Restoration Polk, said the event will launch the organization’s long-term effort to address the city’s issue of economic inequality. 

“We know that the lack of jobs and lack of economic development has a direct correlation to crime and poverty,” he said. “We are inspired to create economic opportunity for our community.” 

Washington said BLM hopes to help 300-500 unemployed individuals, including those affected by the COVID-19 pandemic, within the next year. While Polk County’s unemployment rate currently stands at roughly 7.3%, down from 7.9% in September, it is still more than double the rate from a year ago. 

BLM is partnering with Civitas Recruiting, founded by Lakeland resident Susan Freebern, to build connections between those disenfranchised looking for work and local businesses. 

“I like to think of it as a community-wealth building strategy,” Freebern said. 

Freebern said she focuses on using the federal Work Opportunity Tax Credit, which offers financial incentives for companies to hire people in specific targeted groups who typically face barriers to employment. This includes individuals receiving food stamps or government assistance, veterans, and those unemployed for an extended period of time. 

On Wednesday, BLM will help screen candidates that meet these criteria who Civitas Recruiting will then help place into jobs. Freebern said many of the positions she has available include manual labor but she expects others to open up after the holidays. The jobs offered will pay at least $15 an hour, according to Freebern.  

If an individual referred by BLM to Civitas for a job is hired, the nonprofit organization will receive a small donation to help fund its future efforts. 

Washington said BLM will be there to support individuals by linking them to fiscal educational resources and credit repair agencies to help them get back on a road to fiscal stability. 

“We can’t allow them to continue down the same path, it’s not creating success,” he said. “We need to provide the tools and resources to help and model them into better people — it’s always been part of our mission statement.” 

This week’s job fair is the first of a series of events that BLM hopes to plan with Civitas Recruiting to help those unemployed and lift them out of living paycheck-to-paycheck, or worse, out of poverty. 

“This is our answer to what comes next,” Washington said. “What comes next is creating opportunities.” 

Those unable to attend Wednesday’s job fair can visit BLM’s new website at www.blmrpolk.org for more information and to signup for future events. Washington said he hopes to hold recruitment and job fairs approximately every two months. 

Sara-Megan Walsh can be reached at swalsh@theledger.com or 863-802-7545. Follow on Twitter @SaraWalshFL. 

Source link

Continue Reading

Trending