The numbers were especially high for families with children, with 21 percent falling behind on rent, and among families of color. About 29 percent of Black families and 17 percent of Hispanic renters were behind, the Census Bureau reported. A separate analysis by the Federal Reserve Bank of Philadelphia, looking at people who had jobs before the pandemic, found 1.3 million such households are now an average of $5,400 in debt on rent and utilities, after those people had lost jobs and their family’s income plunged.
Economists say these data points show the failure of the U.S. safety net during this crisis, which is inflicting economic pain that will hurt families for years.
The 20 million Americans receiving some kind of unemployment aid have seen their weekly checks dwindle since August, making it harder to pay bills. About 12 million unemployed are slated to have their benefits cut off entirely at the end of the year, because lawmakers have yet to agree on extending relief for the unemployed.
“The tidal wave is coming. It’s going to be really horrible for people,” said Charlie Harak, a senior attorney at the National Consumer Law Center. “The number of people who are now 90 days behind and the dollars they are behind are growing quite significantly.”
Nashville mother Nikki Cornwell is $4,000 behind on rent and fears she will be evicted right after Christmas. Her landlord filed the paperwork already, and her court date is set for Jan. 5 — just after the federal eviction moratorium is set to expire.
“I am behind on my rent. I will get evicted soon with my kids who are in virtual school and need Internet,” said Cornwell, who lives with her mom and two kids. “I’ve had bad moments, but never anything like this.”
Cornwell, 36, lost her job in March at a factory that packages tea. She contracted the coronavirus in May. One fearful night she called 911 because she felt she couldn’t breathe. She has mostly recovered but still can’t smell anything. She had a job offer last month, but it got rescinded as coronavirus cases soared and the company decided to pull back on hires. She was getting $275 a week in unemployment, but that just ended. She has pawned jewelry and her son’s beloved PlayStation to pay for food.
“This is like a Charles Dickens novel,” said Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. “It’s an evolving story of how people at the bottom are suffering.”
Many unemployed Americans were able to delay paying rent this fall under eviction moratoriums. But those protections end soon, and landlords and utilities are eager to get paid. Economists warn low-income families won’t be able to suddenly pay back three to six months of rent at once.
The federal eviction moratorium is slated to end on Dec. 31, even as coronavirus cases spike and the economic recovery fizzles. Researchers at the Philadelphia Fed say even their conservative forecast warns evictions will spike 50 percent higher next year.
Shelbie Selewski is $2,100 behind on rent and utilities after losing her job as a medical receptionist in Macomb County, Mich. Her landlord has taped eviction papers to her door three times, and her electricity was shut off in September — on her son’s third day of virtual kindergarten. She begged friends and relatives for help to get the electricity back on, but bills are piling up again.
Selewski, 29, receives $200 a week in unemployment and recently sold the family’s TV and PlayStation 4 to prevent another utility shut-off. Her new baby was born with a collapsed lung, putting the infant at high risk during the pandemic. She and her fiance have not been able to find jobs.
“It has been the worst year ever. I’ve watched everything I’ve worked for go away,” Selewski said. “Every time I paid something and felt some peace, it felt like I got a utility shut-off notice three days later.”
Landlords and utilities increasingly worry they will have to eat this debt. Meanwhile, struggling families like the Selewskis fear no one will rent to them again after an eviction where they were so far behind on rent. Bad credit can hurt families for years.
Amid those pressures, renters and landlords are urging Congress to approve bigger unemployment payments and another round of $1,200 stimulus checks, which would go a long way toward helping alleviate the debt burden on the unemployed. Many families say they fell behind on bills this fall after the extra $600-a-week unemployment payments ended in late July.
“The longer employment stays suppressed, and people stay out of work, it will make it even harder to catch up on the debt and dig yourself out of that hole,” said Davin Reed, community development economic adviser at the Federal Reserve Bank of Philadelphia.
So far, however, Republican and Democratic leaders in Congress remain far apart on a stimulus deal, which they have been debating since July. A bipartisan compromise unveiled last week includes $25 billion for rental housing assistance, but a package released by Senate Majority Leader Mitch McConnell (R-Ky.) did not include any money for housing or utilities. The House Democrats’ Heroes Act includes $50 billion specifically for low-income renters.
“It’s much better for Congress to err on the side of helping too much than too little,” said Mark Zandi, chief economist at Moody’s Analytics. “There’s nothing scarier than losing your home, especially in January with a pandemic out of control. That would be overwhelming.”
Zandi predicts as much as $70 billion in unpaid debt by January, a painful amount that renters, landlords and utility companies will have to sort out. But he thinks the bigger damage to the economy could come from Americans watching people get evicted in early 2021 — a sign the federal government no longer cares.
“The economic damage created by this pandemic will be many times more severe if we lose faith that the government has our back,” Zandi said, adding that it could trigger a drop in consumer confidence.
Data from the Mortgage Bankers Association shows $9 billion in rent wasn’t collected in the third quarter. Without that money, landlords are struggling to pay property taxes, insurance and other upkeep costs, adding more strain to the economy.
Utility data is showing equally alarming signs of strain. New Hampshire has seen a 66 percent jump in the number of families who are 90 days or more behind on utility payments compared with 2019. Pennsylvania has seen a 67 percent increase over last year in the number of households in arrears, according to data compiled by NEADA.
Pennsylvania utilities now have an arrearage balance of $721 million, up from $433 million last year. Massachusetts shows $754 million, up from $508 million a year ago.
“For families struggling right now and trying to get back on their feet, we have to find a way to write off this debt,” Wolfe said.
NEADA is asking for $10 billion in additional Low Income Home Energy Assistance Program funding to help low-income families pay their utilities this winter. The House bill, the most generous so far, had $4.5 billion.
Cornwell and Selewski check the news daily for any sign that additional help may be on the way. Both women have sought aid from church groups, friends and local government agencies, a piecemeal system of help that is still leaving them thousands of dollars behind on critical bills.
“We didn’t cause any of this, but it feels like Congress is saying you are on your own to deal with this,” Cornwell said.
3 credit habits that you need to break
Are you using your credit card responsibly? Or do you have a few bad habits? Take a look at three common bad habits that people have with their credit cards and the best ways to stop doing them.
Habit 1: Pushing the limits
The first bad credit habit is pushing your outstanding balance close to its limit. What’s wrong with that? The first problem is that you’re giving yourself a larger debt load to contend with every month — one that accumulates interest the longer that it sits. It could be very difficult to pay down, and it could even lead to you maxing out your card.
The second problem with this habit is that it leaves you vulnerable to emergencies. You’ve taken up the majority of your available credit, so you can’t depend on it for unexpected payments. What if you need to pay for an urgent repair and there’s not enough room on your card? What can you do?
To avoid that difficult situation, you could apply for an online loan to help you cover the emergency costs and move forward. See how you can apply for an online loan in Ohio when you have no other safety nets to fall back on. It’s important that you only turn to this solution when you’re dealing with an emergency. It’s not for everyday purchases or small budgeting mistakes.
In the meantime, you should try your best to keep your credit utilization at 30% or lower — this means that your balance should be below the halfway point of your limit.
Habit 2: Paying the minimum
You pay your credit card bills on time, but you only give the minimum payment. While this habit can stop you from racking up late fees and penalties, it can still get you into hot water if you’re not careful.
Only paying the minimum for your bill will make it very difficult for you to whittle down the balance, especially when you’re continuing to charge expenses on your card. You’re only taking $20-$25 off a growing pile.
So, what can you do? If you’re paying this amount by choice, stop it — you’re only making things harder for yourself down the line. If you’re paying this amount because you don’t have any more funds, look at your budget to see whether you can cut your monthly costs to get more savings and use them to tackle your balance.
Habit 3: Using it for every single expense
You don’t need to put every single expense on your credit card. Your morning coffee? Your afternoon snack? Putting these small, everyday expenses on your card is a habit that can make your balance climb quickly.
You also don’t want to put some very important expenses on there, like mortgage payments. For one, these payments are large and will take up a significant amount of your credit. Secondly, if you need to use a credit card to make these payments on time, you need to reinvestigate your budget to see whether you can actually afford your living space.
So, what you should you do? Use a debit card, cash or checks to pay for the items above. Only put expenses on your credit card that you’re positive you can pay off in a reasonable timeframe.
Don’t let these bad habits drag you down and get you into financial trouble. Break them now, before it’s too late.
Free credit reports have been extended; here’s why it’s important to check yours regularly
Typically, you’d be able to check your credit report — at least for free — just once annually through each of the three major credit reporting agencies. But thanks to the coronavirus pandemic, credit reports are now more accessible than ever.
Credit reporting companies Equifax, Experian and TransUnion are all offering free credit reports weekly through April 20, 2022.
The move means better insight into your financial health during what, for most, is an economically challenging time. According to experts, it might also be a time that’s ripe for at-risk personal information and identity theft, too — even more reason consumers should be checking their credit on the regular.
Have you checked your annual credit lately? If not, here’s what you need to know about these free nationwide credit reports and how to get them. If you’re not sure where you fit on the credit score spectrum, you may want to start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.
Free credit reports for all?
The nation’s three credit bureaus initially started offering free weekly credit reporting last year, just after the pandemic began. In early March, they announced they’d extended the offer for another year, this time through April 20, 2022.
To request your free credit reports and access copies, you can go to AnnualCreditReport.com and provide some basic information to verify your identity (things like your date of birth, Social Security Number, and address).
Once your report is ready, you should see a detailed list of all open and closed accounts in your name, your payment history, recent credit activity and more.
Protect yourself from identity theft
There are many reasons why checking your credit activity is important, but chief among them? That’d be the prevalence of data breaches in today’s world — not to mention the risk of identity theft they come with.
“In the past, it was perfectly acceptable for people to check their credit history once a year, but now with security breaches happening on a regular basis, consumers should be monitoring their credit more closely than ever,” said Clint Lotz, president and founder of TrackStar.ai, a predictive credit technology firm.
Lotz said the Equifax breach — which exposed over 147 million Americans’ personal information in mid-July 2017 — is the perfect example of why watching your credit report is important as far as identity theft protection goes. The pandemic, he said, adds an extra layer of risk to things.
“It took them [Equifax] months before they even realized they had been hacked, and considering that they hold files on hundreds of millions of Americans, it’s fair to say that many identities were stolen by the time they caught up to it,” Lotz said. “With many of us worrying about very serious issues not related to our credit, it’s a prime time for that stolen data to be put to work by bad actors in slow, methodical ways and in the hopes that nobody notices it.”
More reasons to check your credit
Checking your credit health often isn’t just good for detecting fraud alerts and to protect your identity, though. You can also monitor your report for errors — things like inaccurately reported late payments, for example — and then dispute those with the credit bureau.
If the error gets corrected, it could improve your credit score and make a jump from bad credit to a FICO score that’s more favorable. Not sure of your credit score? Head to Credible to check your score without negatively impacting it.
You can also use your credit reports and scores to monitor your financial habits — like the timeliness of your payments or how much debt you have left to pay off. Both of these factors can play a big role in your score, as well as how likely you are to get approved for loans, credit cards and other items.
“If you’re taking out a loan, getting insurance or even applying for a new job, checking your credit will allow you to see an overview of what would be seen by others looking at your credit,” said Leslie Tayne, a debt relief attorney with the Tayne Law Group. “Staying up-to-date on your credit reports and information allows you to know exactly where you need to improve.”
Want to be sure your credit is stellar before applying for a loan or insurance policy? Consider Credible’s partner product Experian Boost, which lets you use positive payment history on utilities, streaming and other bills to improve your credit score.
Set up a monitoring service, too
Though checking your credit reports manually is smart, you should also consider signing up for a credit monitoring service. These consumer financial services check your credit information and score regularly and alert you of any changes.
If you’re interested in monitoring your credit or improving your score, head to Credible and learn more about how Experian can help. You can also use Experian Boost to get credit for on-time bill payments.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Do Personal Loans Have Penalty APRs?
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.
The Blue Cash Preferred® Card from American Express, for instance, has a 13.99% to 23.99% variable APR, but the penalty APR is a variable 29.99% (see rates and fees). Penalty APRs usually last for at least six months, but card issuers often reserve the right to extend them — especially when you continue making late payments. A look at the terms for the Citi® Double Cash Card show us that the “penalty APR may apply indefinitely.”
Penalty APRs are certainly not a trap you want to fall into, but it’s not something you usually have to worry about if you have a personal loan. Personal loan lenders can, however, charge late fees upwards of $39 per late payment. Whether your loan charges late fees all depends on how good of a loan you qualify for, and that comes down to your credit score, borrowing history and ability to make your payments.
Personal loans also tend to charge lower interest rates than credit cards, too. The average personal loan interest rate for two-year loans is currently 9.46% according to Q1 2021 data from the Federal Reserve, compared to 15.91% for credit cards.
Typically, interest rates for personal loans range between roughly 2.49% and 24%, but personal loans for applicants with bad credit can come with even higher APR — so do your research before applying.
Other common personal loan fees include:
- Interest: The monthly charge you pay to borrow money
- Origination fee: A one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs
- Late fee: A one-time fee charged for each payment that you fail to make by the due date or within your grace period
- Early payoff penalty: A fee incurred when you pay off your balance faster than planned (because the lender misses out on months of expected interest payments)
As you can see, personal loans can be costly, even without a penalty APR. It’s obviously best to avoid paying extra fees whenever possible. That’s easier to do when you have a good to excellent credit score, since you’ll qualify for better loan options.
None of the loans on our best personal loan list charge origination fees or early payoff penalties, but some may charge late fees.
Find the best personal loans
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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