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With the Fate of Public Service Loan Forgiveness Uncertain, Here are Tips for Confused Borrowers

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More than half a million Americans are working toward Public Service Loan Forgiveness (PSLF), a program that eliminates federal student loan debt for people with jobs in the public sector. But the proposed 2018 White House budget reportedly calls for ending PSLF for future borrowers — and even current participants’ status could be in doubt, with a lawsuit claiming the government has reversed previous assurances given to certain borrowers that their employment qualifies.

Final decisions have not yet been made in either scenario. But even with this uncertainty, there are steps both current borrowers and interested potential future PSLF participants can take to make themselves as secure as possible.

First, a quick primer on PSLF: The program began in October 2007 under George W. Bush, and it wipes clean the remaining federal student debt for qualifying borrowers who have made 120 payments, or 10 years’ worth (more information is available at StudentAid.gov/publicservice). So the earliest any public service worker could receive loan forgiveness under PSLF is October 2017.

“The idea is to avoid making debt a disincentive to choosing public service,” explains Mark Kantrowitz, a student loan expert and publisher at college scholarship site Cappex.com. “Think about a public defender. They might make $40,000 a year, but they’ll incur $120,000 in debt for law school. That debt-to-income ratio is impossible, so PSLF makes that career path possible — and attracts people who might have otherwise taken high-paying private-sector jobs.”

Public Service Loan Forgiveness — on the chopping block?

At this time, the biggest threat to the future of PSLF is President Donald Trump’s 2018 White House education budget proposal. The budget proposal would eliminate PSLF — citing costs — and replace all current income-based repayment/forgiveness plans with a single income-driven system. While existing borrowers would be grandfathered into PSLF, any new students who take out their first federal loans on or after July 1, 2018, would not qualify. Still, all of this can happen only if Congress passes the budget — and it remains to be seen whether this section will pass as currently written in the proposal.

If you’re one of the more than 550,000 borrowers who is already working toward forgiveness — that is, you have already taken out at least one federal loan and/or you’ve completed school and are working in public service — the proposed cancellation of PSLF won’t affect you. Again, if the program is cut, it will impact only students who take out their first federal loans on or after July 1, 2018.

But even existing borrowers working toward PSLF can’t fully relax. As first reported by The New York Times, the Department of Education added a serious wrinkle by sending letters to people saying their employment was no longer eligible for PSLF, after the borrowers had confirmed with their loan servicer that they qualified. Four borrowers and the American Bar Association have filed a lawsuit against the department, and the case is currently in progress.

That may leave many workers questioning whether or not they will ultimately be eligible for loan forgiveness after all — even if they work in the nonprofit or public sector. MagnifyMoney has spoken to experts and reviewed the rules of the program to help.

How Can I Be Sure I Qualify for Public Service Loan Forgiveness?

Qualifying for PSLF depends on meeting several specific requirements, so the first step in determining your eligibility is to make sure your loans and employment check all the boxes.

1. Your student loan must qualify for forgiveness.

PSLF provides forgiveness only for federal Direct Loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans—for parents and graduate or professional students
  • Direct Consolidation Loans

Note that loans made under other federal student loan programs may become eligible for PSLF if they’re consolidated into a Direct Consolidation Loan, but only payments toward that consolidated loan will count toward the 120-payment requirement. And, according to ED, parents who borrowed a Direct PLUS Loan "may qualify for forgiveness of the PLUS loan, if the parent borrower—not the student on whose behalf the loan was obtained—is employed by a public service organization."

2. You must be enrolled in the right type of repayment plan.

You must be enrolled in one of the Direct Loan repayment plans, some of which are income-based. The umbrella term for these plans is income-driven repayment plans, which include the Pay As You Earn and Income-Based Repayment plans. While payments under other types of Direct Loan plans, like the 10-year Standard Repayment Plan, do qualify and count toward your 120 payments, you’ll want to switch to an income-driven plan as soon as possible — because if you stick with a standard 10-year repayment, you’ll have paid off your loan in full after 10 years with nothing left to be forgiven under PSLF. Check the official PSLF site for more details. And note that private loans, including bank loans that are “federally guaranteed,” do not qualify.

3. You must make 120 on-time payments while employed full time by an eligible employer.

If you drop to part-time work, those payments won’t qualify. You must also be employed full time in public service at the time you apply for loan forgiveness and at the time the remaining balance on your eligible loans is forgiven. After you make your 120th payment you’ll need to submit the forgiveness application, which the Department of Education says will be available in September 2017.

4. Your employer must count as a public service organization.

This is the big one, and the most complicated step of the process for some borrowers to figure out. While the Education Department does address types of employers that fit under the PSLF program, there are some gray areas. Broadly, the types of employers that qualify include governmental groups, not-for-profit tax-exempt organizations known as 501(c)(3)s, and private not-for-profits. That last category includes military; public safety, health, education, and library services; and more.

Pro tip: Certify that your employer is included in the program every year.

Each year and whenever you change employers, you should fill out and send an Employment Certification form to FedLoan Servicing. The form isn’t required to be submitted on an annual basis, but it's highly recommended to fill it out annually so there are no unhappy surprises down the road. It also helps you keep track of progress toward your 120 payments and gives you a chance to find out whether there is any change to your eligibility status.

What if you fear your job’s eligibility is unclear?

The validity of that FedLoan Servicing certification form is at the center of the lawsuit against the Department of Education. Although it's important to have your employer's eligibility certified by the department, the Education Department has said the form isn't necessarily binding and the eligibility of employers can possibly change. As The New York Times put it, the department’s position implies “that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent … are not binding and can be rescinded at any time, the [DOE] said."

That puts existing borrowers in a tough spot, says Joseph Orsolini, CFP and president of College Aid Planners: “[PSLF] is sort of an all-or-nothing in that you can’t apply for the forgiveness until you’ve already done your 120 payments. So to have someone choose this career path and work for years only to be told, ‘never mind, you no longer qualify even though we said you did,’ it would be hard for them not to see that as reneging on a deal.”

That possibility is “terrifying” for Frances Harrell, 35, a preservation specialist who works for a nonprofit that supports small and medium-size libraries in caring for their collections. She completed a library graduate school program in 2013 and emerged with a total of about $125,000 in debt, including her undergraduate loans.

“Everyone I know is in public service, and we all saw the Times article [about the PSLF lawsuit] and flipped out,” says Harrell, who currently lives in Gainesville, Fla. “I felt like I had been dropped in a bucket of ice. We’re making life decisions based on this understanding, and it feels so precarious not to have any true confirmation that we’ll get the forgiveness in the end.”

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, plans to take advantage of PSLF while working toward his dream of becoming a state attorney. (Photo courtesy of Christopher Razo)

Harrell has also dealt with confusion from loan servicers and other experts — and based on incorrect advice, she nearly consolidated her loans in a way that would have reset the clock on her years of payments.

Christopher Razo, 22, who this month will begin classes at Chicago’s John Marshall Law School, is relieved that he is enrolling before the 2018 uncertainty begins. Razo is one of Orsolini’s clients, and he plans to take advantage of PSLF while working toward his dream of becoming a state attorney.

“[PSLF] is complex as it is, so my initial thought was, ‘Wow, great timing for me that I’m starting in 2017,’” Razo says. “But I understand the program affects way more than just me. [PSLF] gives you comfort to pursue public-service goals without having to make your employment about the money. I’m optimistic that [lawmakers] will see the good in the program so it can continue.”

When in doubt: Follow the '3 phone call rule'

While borrowers may think their loan servicer has all of the answers, Harrell’s situation isn’t uncommon, says Orsolini. He recommends “the three phone call rule”: Call three times and ask the same question, documenting whom you spoke to and when.

“These programs are complicated — which is one of the issues that critics [of PSLF] bring up — and you don’t always get the right information,” Orsolini says. “Before you plan your whole life around the [first] answer you get, you have to double- and triple-check that it’s right.”

If you’re taking out your first qualifying loan on or after July 1, 2018, Orsolini says “there’s not much to do besides hurry up and wait” to see what happens with the White House budget as it relates to PSLF.

“The important thing to remember is that a proposal is just a proposal, and these don’t always see the light of day,” Orsolini adds. “It doesn’t do any good to be overly worried, but you’ll want to keep a close eye on the news.”

Other types of loan forgiveness, cancellation, or discharge:

PSLF isn’t the only option. But not all types of federal student loans offer the same forgiveness, cancellation, or discharge options. See the chart below and check out StudentEd.gov pages here and here for more details.

Still, borrowers should know Trump’s desire to streamline federal programs into a single option means some of these loan types and forgiveness plans could be changed or canceled as well.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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How Tax Refund Advance Loans Really Work

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MagnifyMoney did some digging around to give you the lowdown on refund advances. Here's what you need to know.

The checkered past of refund anticipation loans

These so-called "refund anticipation loans," as they were once called, aren’t exactly new. They’ve been around since the late ’80s, when e-filing was just picking up momentum.

According the U.S. Census Bureau, these loans typically came with triple-digit APRs and hefty fees. What’s worse, 2009 data put out by the IRS suggested that these loans were marketed mainly toward low-income taxpayers. And more often than not, they were presented in ways that were misleading and falsely advertised, according to the National Consumer Law Center (NCLC).

Not surprisingly, refund anticipation loans grew to be a source of consternation among consumer advocates. To carry them out, tax-prep companies would take their cut, then deposit the remainder of the refund into a temporary bank account that the taxpayer typically accessed via a prepaid bank card.

Fortunately, these loans became a thing of the past in 2012 amidst major outcry from consumer advocacy groups like the NCLC and others. Ira Rheingold, executive director of the National Association of Consumer Advocates, tells MagnifyMoney that they were as predatory as payday loans.

"Thanks to consumer complaints and government action, things have gotten somewhat better, but these refund anticipation loans were known for sky-high interest rates and exorbitant fees," he says.

How today's tax refund advances work

Liberty Tax offers a free tax refund advance loan option.

These days, refund anticipation loans have been rebranded as tax refund advances. But the change runs deeper than just the name. According to top tax-prep servicers like H&R Block, Jackson Hewitt and Liberty Tax, these revamped products are 100 percent free for those who qualify. Advance amounts range depending on eligibility, but Liberty Tax is offering as much as $3,250.

Tax-prep servicers are exceptionally tight-lipped when it comes to the qualifying criteria. (See our handy chart below.) H&R Block is the most forthcoming, but there are still a lot of question marks. Their website says eligi

Elgibility requirements include providing proper identification and having a “sufficient” tax refund, whatever that means.

However, there are a few things that could get you declined, including having bad credit, failing to present relevant tax forms like W-2s and 1099s, or not meeting certain income requirements, among other things. If you are approved, the loan amount is deposited into a temporary bank account you can access with a prepaid debit card, unless the servicer offers a direct deposit option. Either way, the loan itself is indeed fee-free and has a 0 percent APR.

Be that as it may, experts still encourage consumers to approach with caution.

"From the perspective of the consumer, I'd say they need to be very skeptical," Adam Rust, director of research at consumer advocacy group Reinvestment Partners and managing director of the nonprofit WiseWage, told MagnifyMoney. “Private companies don't provide free services and banks don't make free loans."

H&R Block is one of several tax preparer services that offers a tax refund advance loan to customers from $500 to $3,000.

Tax advances are indeed more accurately described as loans. The cash actually comes from banks, which are reimbursed when your refund comes in. In order to offer these advances, Rust says tax-prep companies cover the bank fees, essentially making them free for the consumer.

"It's actually a cost item for the preparers, which is one more reason to suspect that these loans aren't really free," he said. "The price may say free, but that doesn't mean it can't be recovered within the cost of the tax prep."

This is where things get a little less transparent. H&R Block declined a phone interview with MagnifyMoney, so I called up my local storefront and asked if there's an additional charge for getting a tax refund advance. In other words, will my tax preparation fee be the same whether I get a refund advance or not? I was told it would be, but locking down an accurate estimate for the service isn't easy.

According to the National Society of Accountants, the average tax-prep fee for federal and state returns during the 2017 filing season was $273 for folks who itemized their deductions; $176 for those who didn't. The takeaway here is that the complexity of the return appears to increase consumer costs. To get an actual estimate, you'll need to present your tax information, but the price you're quoted is likely to vary.

In 2016, consumer advocacy group Georgia Watch sent mystery shoppers into paid tax-prep firms in low-income neighborhoods in southwest Atlanta. What they found was "a stunning lack of knowledge and professionalism from preparers, vast inconsistencies in preparation fees, and a wide range of outcomes given the same inputs at each site."

Rheingold, who was not involved in the research, isn't all that surprised by the findings.

"The quality of tax preparers in high-volume firms is often pretty poor," he said.

Hidden costs to look out for

Refund transfers

If you’re declined for a tax refund advance loan, some tax preparation companies may offer you a concession prize: the chance to get a refund transfer.

A tax refund advance may be advertised as free, but the same can't be said for a refund transfer.

Instead of paying your tax-prep fees at the time of service, you can defer it with a transfer. The tax preparer essentially creates a short-term account where your refund is deposited, at which point they'll take their fee directly. H&R Block charges $39.95 for a federal refund transfer. It's called an assisted refund at Jackson Hewitt, where it'll run you $49.95. Meanwhile, Liberty Tax says you have to "consult your tax office" for pricing details.

It's marketed for its speed and convenience, but Rust says taxpayers should think twice before opting in. Almost half of Liberty Tax's filers last year ended up getting a refund transfer, according to the company’s 2017 annual report.

"That's really telling to me because the refund advance is marked as free, but the refund transfer isn't,” Rust said. “So why are so many people paying for the transfer?"

What Rust is getting at is that it appears as though the lure of a free refund advance gets people in the door, at which point they're sold on the refund transfer after getting declined. Since offering these loans is a cost product for tax-prep companies, Rust says it's a fair assumption.

The cost of accessing your funds

Prepaid debit cards essentially serve as substitute checking accounts for those who don't have one. Many tax preparation companies offer prepaid debit card products that customers can sign up for in order to have their tax refunds deposited there. However, these cards my carry additional fees that can eat away at the value of the tax refund itself.

"One of the things we've seen is the growth of prepaid debit cards to access your refund advance," said Rheingold. "Accessing your money through an ATM [often] comes with fees, which means you're being charged to access your own money."

Jackson Hewitt puts refund advance funds on the American Express Serve Card if you're not doing a direct deposit into your checking account. H&R Block goes with the Emerald Prepaid Mastercard, and Liberty Tax uses a Netspend prepaid Mastercard.

Where to get a tax refund advance

Here's what the major tax-prep companies are offering. Again, all advances are marketed as free, and you have to apply at a participating office by Feb. 28. Jackson Hewitt is in the game as well, but their website pushes people to visit a local office to learn more.

 

H&R Block

Liberty Tax

Loan amounts

$500, $750, $1,250 or $3,000

$500, $800, $1,300, $3,250

Eligibility

According to their website: "You first must meet certain eligibility requirements such as having a sufficient tax refund from the IRS, and provide appropriate identification. You then submit an application to BofI Federal Bank, the lender. The bank will evaluate your application based on standard underwriting criteria and makes the decision to approve or deny your application."

Must visit a Liberty Tax office for eligibility requirements

When is the advance available?

Typically the same day

Usually within 24 hours

Alternatives to a tax refund advance

You can always file earlier to expedite the arrival of your refund. Without a tax refund advance, most folks who file electronically can expect their refund in less than three weeks, according to the IRS. The most common cause for delay is if you're claiming the Earned Income Tax Credit or the Additional Child Tax Credit, which will push your refund at least into late February.

Either way, for simple returns where the filer is only bringing in a W-2 and not itemizing, Rust says most preparers can probably complete the job in less than 90 minutes.

“Should that cost more than $200? Should the chance of receiving an advance justify spending that much when, instead, a low-income filer could go to a VITA site and have their return prepared for free?" he asked.

Rust is referring to the IRS Volunteer Income Tax Assistance program, which offers free tax preparation for people who earn $54,000 or less per year. Those who are above the income threshold can also opt for out-of-the-box software like TurboTax. Prices vary here depending on the complexity of your return, but it's generally much cheaper than going with a storefront tax preparer.

Final thoughts on tax refund advances

If getting a tax refund advance means adding to your tax-prep bill, Rheingold says it doesn't make financial sense to get one.

"Even if it says it's free, it's a safe bet that these places are baking the costs into the tax-prep fee to make up the difference."

That said, if you're in dire financial straits, it may be your only resource for quick cash — but buyer beware.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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What Trump’s Budget Really Means for Student Loan Borrowers

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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There has been a lot of buzz around President Donald Trump’s $4.4 trillion budget proposal outlining steep spending cuts to domestic programs, including the federal student loan program since it was unveiled Monday.

If you are a student loan borrower, rest assured that this budget won’t cause changes — at least not directly. Experts interviewed by MagnifyMoney all said the proposal barely means anything to student loan borrowers or prospective borrowers because Congress may completely ignore it, as it did last year and many years in the past.

“The president’s budget in general is just a proposal and messaging document,” said Josh Gordon, policy director at The Concord Coalition, a national nonpartisan fiscal advocacy group. “And it doesn't have the force of law. It doesn’t get voted on in its entirety.”

However, the proposal does allude to the White House hoping to reform the federal student loan program.

Trump’s blueprint would streamline income-based loan repayment plans, eliminate the Public Service Loan Forgiveness Program and scrap subsidized loans. These policies would save roughly $203 billion over 10 years. While the savings amount is larger than what Trump recommended in last year’s proposal, the proposed policy changes stay largely unchanged from last year’s, which Congress did not act on.

“The chances of it being acted as written I would say if it’s not zero, it’s close,” Marc Goldwein, head of policy at Committee for a Responsible Federal Budget, an independent, non-profit, bipartisan public policy organization based in Washington, D.C., told MagnifyMoney. “But I could see pieces of it passing, particularly if there’s a broader higher education bill or some kind of deficit reduction bill in the next couple of years.”

What to know about Trump’s proposals

Trump proposed changing student loan policies that would apply to loans originated on or after July 1, 2019. Those who are borrowing now wouldn’t be affected.

Here are three pieces of major policy change recommendations:

1) Simplify income-driven repayment programs

The new budget plan would collapse income-driven repayment plans — monthly student loan payment calculated based on income and family size — into one, under which student loan borrowers would pay 12.5 percent of their monthly income toward student loans. Borrowers in general pay 10 percent under current plans.

Borrowers may have their remaining balance forgiven after 15 years if their loans covered undergraduate education. But those who borrow for graduate-level studies would have to make 30 years of payments before their balance can be forgiven. Under current law, loan forgiveness for private-sector employees kicks in after 20 or 25 years.

2) Eliminate subsidized loans

Subsidized loans are need-based undergraduate loans that the government pays interest while the student is enrolled at least half time or while the loan is in its grace period or deferment. After that, the borrower starts paying interest. Unsubsidized loans, on the other hand, accrue interest while the student is in school, in grace or in deferment, and the borrower is responsible for repaying all of it.

3) End the Public Service Loan Forgiveness program

As an incentive to encourage students to work in the public sector, government employees or those working for qualified nonprofit organizations may have their loan balance forgiven after 120 on-time payments (which takes a minimum of 10 years). Trump suggested ending this program.

Goldwein said the fact that Congress didn’t act on any of Trump’s last budget recommendations about student loans convinces him that not much is going to change this year either.

Where is Trump’s proposal headed?

Goldwein explained that when the president puts forward a budget proposal, it’s just a policy statement that provides a sense of the president’s priorities. And there’s not usually an effort in Congress to actually enact large parts of it: It either ignores the proposal entirely or picks up pieces of it.

Gordon said this year is even less likely for Congress to act on any presidential proposal because before Trump unveiled his proposal, Congress passed a budget deal that raised spending caps over the course of the next two years.

The fact that 2018 is an election year also makes it less likely that the Senate and the House will try to pass a budget that they can agree on.

“That would be a very difficult political vote, and it seems like they are going to try to avoid that,” Gordon said.

Goldwein said a future Congress may enact some of the president’s recommendations, but it’s unclear when and how.

So what can student loan borrowers do?

Goldwein cautions future borrowers that college costs will likely continue to rise and at the same time, the government will likely have less money to subsidize higher education.

This is in part because the country’s debt keeps rising while its population ages. Therefore, a bigger share of the federal budget is set to go to interest payments and entitlement programs for seniors, Goldwein explained. Meanwhile, revenue will decrease due to massive tax cuts. On top of that, the Federal Reserve will likely keep increasing its short-term interest rates, and so student loan interest rates will tick up.

Gordon suggests concerned borrowers or future borrowers get politically involved.

“If their interest is in it, they should ask their member of Congress of that they think or what they think about this proposal, how they would change it and what it would mean for their constituency,” Gordon said. “I think that dialogue with their representative is important.”

You may want to check out our guide on paying for college or our guide to student loan forgiveness, as it’s still an available option.

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Average Household Credit Card Debt in the U.S. in 2018

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Even as household income and employment rates are ticking up in the U.S., credit card balances are approaching all-time highs. What’s behind the growth of credit card spending among consumers? In an updated report on credit card debt in America, MagnifyMoney analyzed credit debt trends in the U.S. to find out exactly how much credit debt consumers are really taking on and, crucially, how they are managing their growing reliance on plastic.

Key Insights:

  • Credit card debt is on the rise with the average indebted household carrying $8,683 in credit card debt. That’s an increase of more than $650 per household compared with this time last year — a full 8.6 percent increase. Despite the rise in debt levels, current debt levels are 22.8 percent less compared with October 2008, when household credit card debt peaked at $11,248.
  • Credit card balances and credit card debt are not the same thing. The 78 million Americans who pay their bill in full each month have credit card balances reported to the major credit reporting bureaus.
  • Assessing financial health means focusing on credit card debt trends rather than credit card use trends.

Credit Card Debt in the U.S. — By the Numbers

Credit Card Use

  • Number of Americans who use credit cards: 200 million1
  • Average number of credit cards per consumer: 2.32
  • Number of Americans who carry credit card debt: 122 million3

Credit Card Debt

The following figures only include the credit card balances of those who carry credit card debt from month to month.

  • Total credit card debt in the U.S.: $542 billion4
  • Average credit card debt per person: $4,4535
  • Average credit card debt per household: $8,6836

Credit Card Balances

The following figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

  • Total credit card balances: $808 billion as of July 2017, an increase of 8.1 percent from the previous year.7
  • Average balance per person: $4,0418

Who Pays Off Their Credit Card Bills?

  • 45 percent of households pay off their credit card bills in full each month
  • 28 percent of households carry a balance all year
  • 26 percent of households sometimes carry a balance9

Credit Card Balances vs. Household Credit Debt

At first glance, it may seem that Americans are taking on near record levels of credit debt. Over a quarter (28 percent) of American households9 carry credit card debt from month to month, and another quarter (26 percent) carried credit card debt at least once last year.

If you look at the total credit card balances among U.S. households, the figure appears astronomical — $808 billion. But that figure includes households that are paying their credit debt in full each month as well as those that are carrying a balance from month to month.

While credit balances are increasing, the amount of debt that households are carrying from month to month is somewhat lower than it was leading up to the 2008 financial crisis. The total of credit card balances for households that actually carry debt from month to month is $542 billion.

As of the third quarter of 2017, households with credit card debt owed an average of $8,6833 That is a decrease of 22.8 percent compared to October 2008, when household credit card debt peaked at $11,248.10J

And as household incomes have risen in recent years, this has helped to lower the ratio of credit card debt to income. Today, indebted households with average debt and median household incomes have a credit card debt to income ratio of 14.7 percent.11 Back in 2008, the ratio was 20.1 percent12.

Delinquency Rates

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

In the second quarter of 2010, serious delinquency rates on credit cards were 13.74 percent of all balances owed, nearly twice as what they are today. Today, credit card delinquency rates are down to 7.47 percent.13

How We Calculated Household Credit Card Debt

Credit card debt doesn’t appear on the precipice of disaster, but the recent growth in balances is cause for some concern. Still, our estimates for household credit card debt remain modest.

In fact, MagnifyMoney’s estimates of household credit card debt is two-thirds that of other leading financial journals. Why are our estimates comparatively low?

A common estimate of household credit card debt is:

This method overstates credit card debt. The Federal Reserve Bank of New York/Equifax Consumer Credit Panel (CCP) does not release a figure called credit card indebtedness. Instead, they release a figure on national credit card balances. Representatives of the Federal Reserve Bank of New York and the Philadelphia Federal Reserve Bank both confirmed that the CCP includes the statement balances of people who go on to pay their bills in full each month.

Another method of estimating household credit card debt is to use the estimate from the Federal Reserve’s Survey of Consumer Finances. The 2016 survey found that the average household with credit card debt had $570014 in debt. Unfortunately, households in this survey tended to underreport their debt according to another Federal Reserve study.

To find a better estimate of credit card debt, we found methods to exclude the statement balances of full paying households from our credit card debt estimates. Statement balances are the balances owed to a credit card company at the end of a billing cycle. Even though full payers pay off their statement balance each month, their balances are included in the CCP’s figures on credit card balances.

To exclude full payer balances, we turned to academic research outside of the Federal Reserve Banks. The paper, Minimum Payments and Debt Paydown in Consumer Credit Cards, by Benjamin J. Keys and Jialan Wang, found full payers had mean statement balances of $3,412. We used this figure, multiplied by the estimated number of full payers to find the statement balances of full payers.

Our credit card debt estimate is:3

Per Person Credit Card Debt

Once we adjust for these effects, we see that an estimated 122 million Americans carry $542 billion of credit card debt from month to month. Back in 2008, 20 million fewer Americans carried debt, but total credit card debt in late 2008 hovered around $589 billion.16 That means people with credit card debt in 2008 had far more debt than people with credit card debt today.

Average credit card debt among those who carry a balance today is $4,453 per person2 or $8,683 per household.3 In late 2008, the 102 million17 Americans with credit card debt owed an average of $5,858 per person10I or $11,248 per household.10J

Credit Card Debt: Do We Know What We Owe?

Academic papers, consumer finance surveys, and the CCP each use different methods to measure average credit card debt among credit card revolvers. Since methodologies vary, credit card debt statistics vary based on the source consulted.

MagnifyMoney surveyed these sources to present a range of credit card debt statistics.

 

Low Estimate

High Estimate

People with Credit Card Debt

110 million18A

134 million18B

Households with Credit Card Debt

55 million19

69 million20

Median Household Credit Card Debt

$2,30021

$3,50022

Average Household Credit Card Debt

$5,70023

$9,60024

MagnifyMoney Estimated Credit Card Debt per Person

$4,3515

$4,5555

Are We Paying Down Credit Card Debt?

A Pew Research Center study25 showed that Americans have an uneasy relationship with credit card debt. More than two-thirds (68 percent) of Americans believe that loans and credit card debt expanded their opportunities. And 85 percent believe that Americans use debt to live beyond their means.

Academic research shows the conflicting attitude is justified. Some credit card users aggressively pay off debt. Others pay off their bills in full each month.

However, a substantial minority (44 percent)26 of revolvers pay within $50 of their minimum payment. Minimum payers are at a high risk of carrying unsustainable credit card balances with high interest.

In fact, 14 percent of consumers have credit card balances above $10,000.27 At current rates, consumers with balances of $10,000 will spend close to $1,500 per year on interest charges alone.28

Even an average revolver will spend between $65230 and $68331 on credit card interest each year.

Credit Debt Burden by Income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances, the top 10 percent of income earners who carried credit card debt had nearly twice as much debt as average.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9 percent. On the high end, earners in the top decile had an average of $12,500 in credit card debt. But debt-to-income ratio was just 4.8 percent.

Income Percentile

Median Income

Average CC Debt

CC Debt: Income Ratio

0%-20%

$15,100

$2,100

13.9%

20%-40%

$31,400

$3,800

12.1%

40%-60%

$52,700

$4,400

8.3%

60%-80%

$86,100

$6,800

7.9%

80%-90%

$136,000

$8,700

6.4%

90%-100%

$260,200

$12,500

4.8%

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower income debt carriers. In fact, high-income earners are as likely to pay the minimum as those with below average incomes.33 If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational Differences in Credit Card Use

In 2017, Generation X surpassed the baby boomer generation to have the highest credit card balances. Experian estimates that on average, Generation X has a balance of $7,750 per person, 21.94% more than the national average ($6,354). Boomers carry nearly as much as Generation X with an average balance of $7,550.

At the other end of the spectrum, millennials, who are often characterized as frivolous spenders and are too quick to take on debt, have nearly the lowest credit card balances. Their median balance clocks in at $4,315. The youngest generation, Gen Z, has the smallest average balance of $2,047 per person.34

Better Consumer Behavior Driving Bank Profitability

You may think that lower balances spell bad news for banks, but that isn’t the case. Credit card lending is more profitable than ever thanks to steadily declining credit card delinquency. Credit card delinquency is near an all-time low 7.47 percent.13

Despite better borrowing behavior, banks held interest on credit cards steady between 13% and 14%35 since 2010. Today, interest rates on credit accounts (assessed interest) is nearly 15%. This means bank profits on credit cards are at all-time highs. In 2015, banks earned over $102 billion dollars from credit card interest and fees.36 This is 15 percent more than banks earned in 2010.

How Does Your State Compare?

Using data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare median credit card balances and credit card delinquency. You can even see how each generation in your state compares with the national median.

State

Credit Card Debt Per Debtor

Credit Card Debt Per House

Alabama

$3,710.56

$7,198.48

Alaska

$5,879.85

$11,406.91

Arizona

$4,299.70

$8,341.42

Arkansas

$3,289.01

$6,380.69

California

$4,569.51

$8,864.85

Colorado

$4,898.56

$9,503.20

Connecticut

$5,171.89

$10,033.47

Delaware

$4,338.88

$8,417.42

Florida

$4,318.35

$8,377.59

Georgia

$4,727.46

$9,171.27

Hawaii

$5,330.46

$10,341.09

Idaho

$3,791.84

$7,356.18

Illinois

$4,412.71

$8,560.65

Indiana

$3,624.05

$7,030.65

Iowa

$3,169.16

$6,148.17

Kansas

$3,854.05

$7,476.85

Kentucky

$3,457.67

$6,707.88

Louisiana

$3,767.91

$7,309.75

Maine

$3,905.56

$7,576.78

Maryland

$5,287.61

$10,257.96

Massachusetts

$4,720.53

$9,157.83

Michigan

$3,458.51

$6,709.51

Minnesota

$4,257.26

$8,259.08

Mississippi

$3,204.95

$6,217.60

Missouri

$3,763.46

$7,301.11

Montana

$3,732.83

$7,241.69

Nebraska

$3,594.46

$6,973.25

Nevada

$4,263.19

$8,270.59

New Hampshire

$4,943.44

$9,590.27

New Jersey

$5,361.06

$10,400.47

New Mexico

$4,185.93

$8,120.71

New York

$4,969.84

$9,641.50

North Carolina

$4,124.04

$8,000.63

North Dakota

$3,756.19

$7,287.00

Ohio

$3,738.95

$7,253.56

Oklahoma

$4,038.90

$7,835.47

Oregon

$3,881.17

$7,529.48

Pennsylvania

$4,209.21

$8,165.86

Rhode Island

$4,376.34

$8,490.10

South Carolina

$4,187.65

$8,124.04

South Dakota

$3,608.28

$7,000.07

Tennessee

$3,903.24

$7,572.28

Texas

$4,937.00

$9,577.78

Utah

$3,775.21

$7,323.92

Vermont

$4,199.77

$8,147.56

Virginia

$5,404.32

$10,484.38

Washington

$4,568.09

$8,862.09

West Virginia

$3,381.36

$6,559.84

Wisconsin

$3,410.29

$6,615.96

Wyoming

$3,944.72

$7,652.76

State

Delinquency Rate

Alaska

11.3%

Alabama

8.5%

Arkansas

9.1%

Arizona

10%

California

8.1%

Colorado

6.9%

Connecticut

7.3%

Delaware

10.4%

Florida

10.8%

Georgia

10.8%

Hawaii

6.5%

Iowa

6.7%

Idaho

6.9%

Illinois

7.3%

Indiana

6%

Kansas

6.5%

Kentucky

8.7%

Louisiana

10.2%

Massachusetts

6.9%

Maryland

8.5%

Maine

7%

Michigan

7.2%

Minnesota

5.3%

Missouri

12%

Mississippi

7.9%

Montana

6%

North Carolina

7.36%

North Dakota

4.22%

Nebraska

4.82%

New Hampshire

6.07%

New Jersey

7.20%

New Mexico

8.32%

Nevada

9.88%

New York

8.22%

Ohio

6.81%

Oklahoma

7.22%

Oregon

6.08%

Pennsylvania

7.05%

Rhode Island

7.06%

South Carolina

7.65%

South Dakota

5.73%

Tennessee

6.67%

Texas

7.84%

Utah

5.56%

Virginia

5.87%

Vermont

5.46%

Washington

5.36%

Wisconsin

4.47%

West Virginia

7.34%

Wyoming

6.49%

State

Silent

Boomers

Gen X

Millennials

Gen Z

Alaska

$5,456

$9,495

$8,995

$4,464


$1,518


Alabama

$3,511

$6,461

$6,485


$3,324


$1,455




Arkansas

$3,194

$5,995

$6,197


$3,240


$1,803


Arizona

$4,149

$6,967

$6,778


$3,575


$1,555


California

$4,232

$7,050

$6,578


$3,654


$1,596


Colorado

$4,004

$7,499

$7,439


$3,833



$1,514


Connecticut

$4,091

$8,179

$8,046


$3,716



$2,567


Dist. of Columbia

$5,486

$7,976

$7,393


$4,596



$2,814


Delaware

$4,147

$7,128

$7,144


$3,285



$1,608


Florida

$4,311

$7,047

$6,615


$3,639



$1,837


Georgia

$4,356

$7,517

$6,972


$3,540


$1,835


Hawaii

$4,386

$7,073

$7,355


$4,203


$1,657


Iowa

$2,367

$5,297

$6,163


$2,857


$935


Idaho

$3,477

$6,147

$6,332


$3,193


$928


Illinois

$3,641

$7,054

$7,040


$3,537


$1,556


Indiana

$3,137

$5,998

$6,174


$3,003


$1,402


Kansas

$3,187

$6,514

$6,930


$3,292


$1,421


Kentucky

$3,044

$5,727

$6,080


$3,082


$1,372


Louisiana

$3,679

$6,598

$6,561


$3,425


$1,971


Massachusetts

$3,481

$7,017

$7,022


$3,479

$1,882


Maryland

$4,341

$7,994

$7,458


$3,671


$1,749


Maine

$3,107

$6,054

$6,531


$3,375


$1,286


Michigan

$3,436

$6,049

$6,113


$2,971


$1,523


Minnesota

$3,025

$6,299

$6,898


$3,244


$1,338


Missouri

$3,265

$6,333

$6,757


$3,279


$1,346


Mississippi

$3,218

$5,634

$5,718


$3,043


$2,011


Montana

$3,285

$5,977

$6,868


$3,385


$1,506


North Carolina

$3,481

$6,566

$6,710


$3,397


$1,486


North Dakota

$2,141

$5,362

$6,646


$3,326


$1,467


Nebraska

$2,717

$5,909

$6,498


$3,136


$1,388


New Hampshire

$3,582

$7,140

$7,443


$3,519


$1,666


New Jersey

$4,126

$8,011

$7,882


$3,928


$2,241


New Mexico

$4,373

$6,906

$6,534


$3,532


$1,207


Nevada

$4,733

$6,993

$6,357


$3,700


$1,185


New York

$3,906

$7,127

$7,234


$3,986


$2,495


Ohio

$3,313

$6,383

$6,530


$3,135


$1,465


Oklahoma

$3,484

$6,789

$6,900


$3,493


$1,641


Oregon

$3,618

$6,502

$6,481


$3,245


$856


Pennsylvania

$3,282

$6,550

$7,059

$3,457


$1,545


Rhode Island

$3,524

$7,162

$7,313


$3,371


$1,786


South Carolina

$4,019

$6,537

$6,559


$3,281

$1,375


South Dakota

$2,584

$5,710

$6,900

$3,250


$1,531


Tennessee

$3,388

$6,309

$6,505


$3,308


$1,737


Texas

$4,350

$7,591

$7,119


$3,779


$1,945


Utah

$3,364

$6,411

$6,713


$3,070


$932


Virginia

$4,132

$7,956

$7,968


$3,985

$1,692


Vermont

$3,681

$6,197

$6,547


$3,297


$2,511


Washington

$3,947

$7,365

$7,190


$3,500


$1,355


Wisconsin

$2,740

$5,673

$6,289


$2,914


$992


West Virginia

$2,914

$5,573

$6,158


$3,238


$1,166


Wyoming

$3,523

$6,356

$6,889

$3,663

$1,442

Footnotes:

    1. Calculated metric using the following sources:
      1. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % with Credit Card Debt, Accessed on January 28, 2018
      2. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3 and Page 20, calculated metric, Accessed on January 28, 2018

Notes: 74.6% carry a credit card balancea X 268b million adults with credit reports in Q3 2017 = 199 million credit card users.

  1. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 4, Q3 2017, Accessed on January 28, 2018465 million credit card accounts. 465 million credit card accounts / 199 million credit card users1 = 2.3 credit cards per person.
  2. Calculated metric using the following sources:
    1. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018
    2. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 50, Table 1 Summary Statistics, Accessed on January 28, 2018

    Notes: 199 million1 * 55% a (Carried debt at some point last year) = 110 million people with credit card debt.

    199 million1 * 67% (Not full payers) b = 134 million people with credit card debt.

    Average estimate is 122 million with credit card debt.

  3. Calculated Metric using the following sources:
    1. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018
    2. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 50, Table 1 Summary Statistics, Accessed on January 28, 2018

    Notes: 199 million1 * 55% (Carried debt at some point last year) * $4,5555e in debt per person = $501 billion in debt

    194 million1 * 67% (Carried debt at some point last year) * $4,3505d in debt per person = $583 billion in debt

    Average estimated total credit card debt is $550 billion.

  4. Calculated metric using the following sources:
    1. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3, Debt Balance Credit Card Debt Q3 2017, Accessed on January 28, 2018
    2. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table A-1 Summary Statistics by Payer Type, Accessed on January 28, 2018
    3. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018

    Notes:

    5d- estimate of average credit card debt using Minimum Payments and Debt Paydown in Consumer Credit Cards
    $808 billion in outstanding credit card balancesa
    Estimate that 33% pay balance in full each monthb
    Full payers carry an average balance of $3412 before paying it offb

    [$808 billion - ($3,412 (full payer balance) * 33% full payer * 199 million credit card users1)] / (199 million credit card users * (100% - 33% not full payers)) = $4,350

    5e- estimate of average credit card debt using 2016 Report on the Economic Well-Being of U.S. Households

    $808 billion in outstanding credit card balancesa
    Estimate that 45% pay balance in full each monthc
    Full payers carry an average balance of $3412 before paying it offb

    [$808 billion - ($3,412 (full payer balance) * 45% full payer * 199 million credit card users1)] / (199 million credit card users * (100% - 45% not full payers)) = $4,555

    Average estimated credit card debt per person is $4,453.

  5. Calculated metric using the following sources:Current Population Survey, U.S. Census Bureau, Table HH6 Average Population Per Household and Family: 1940 to Present, Accessed January 28, 2018Average per person credit card is $4,4535 and the average household contains 1.95 adults over the age of 18. $4,453 * 1.95 = $8,683.
  6. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3, Debt Balance Credit Card Debt Q3 2017 and Q3 2016, Accessed on January 28, 2018
  7. Calculated metric using the following sources:November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3, Debt Balance Credit Card Debt Q3 2017, Accessed on January 28, 2018Notes: $808 billion / 199 million1 = $4,041.
  8. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018
  9. Calculated metrics using the following sources:
    1. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % with Credit Card Debt September 2008, Accessed on January 28, 2018
    2. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 20 and Page 3, Calculated metric, number of people with credit reports Q3 2008 Accessed on January 28, 2018
    3. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3, Outstanding credit card balances Q3 2008, Accessed on January 28, 2018
    4. Survey of Income and Program Participation, 2008 Panel, Wave 4, US Census Bureau, Debt by Year, Table 2. Percent Holding Debt for Households, by Type of Debt and Selected Characteristics: 2009, Credit card debt, Accessed on January 28, 2018
    5. Current Population Survey, U.S. Census Bureau, Table HH6 Average Population Per Household and Family: 1940 to Present, Average number of adults per family, 2008, Accessed January 28, 2018
    6. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table A-1 Summary Statistics by Payer Type, Accessed on January 28, 2018

    Estimate G:

    76.6% of people with credit reports had balances on credit cards in September 2008a x 240 million adults with credit reports in Q3 2008b= 183 million credit card users.

    $866 billion in outstanding credit card debt in Q3 2008c
    Average balance of $3,412 for “full payers.”f
    33% full payersf

    [$866 billionc - ($3,412f (full payer balance) * 33% full payerf * 183a/b million credit card users)] / (183a/b million credit card users * (100% - 33%f not full payers)) = $5,365

    Estimate H:

    76.6% of people with credit reports had balances on credit cards in September 2008a x 240 million adults with credit reports in Q3 2008b= 183 million credit card users.

    $866 billion in outstanding credit card debt in Q3 2008c
    Average balance of $3,412 for “full payers.”d
    44.5% in debtd

    [$866 billion - ($3,412 (full payer balance) * (100% - 44.5% (estimate of full payer)) * 240 million people with credit reports)] / (240 million people with credit reports * (44.5% in debt)) = $6,352

    Estimate I:

    Average estimated credit card debt per person is $5,858.

    Estimate J:

    Average per person credit card is $5,85810I X 1.92 adults per housee = $11,248.

  10. Calculated metric using:
    1. U.S. Bureau of the Census, Real Median Household Income in the United States [MEHOINUSA672N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MEHOINUSA672N, Accessed January 28, 2018.
    2. Average household credit card debt Metric 6

    Credit card debt to income ratio = 8,0683b/59,039a=14.7%

  11. Calculated metric using:
    1. U.S. Bureau of the Census, Real Median Household Income in the United States [MEHOINUSA672N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MEHOINUSA672N, Accessed January 28, 2018.
    2. Average household credit card debt Metric 12J

    Credit card debt to income ratio = 11,248b/56,076a=20.1%

  12. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 12, % of Total Balance 90+ Days Delinquent, Credit Cards, Accessed on January 28, 2018
  13. 2016 Survey of Consumer Finances, Board of Governors of the Federal Reserve System, Table 13 16 Means Credit Card Debt, Accessed on January 28, 2018
  14. Statement balances are the balances owed to a credit card company at the end of a billing cycle. Full payers will pay off the entirety of their statement balance each month. Finding an estimate of full payers’ statement balances was not an easy task. The Federal Reserve Bank of New York does not provide estimates of full payers compared to people who carry a balance.In order to get our estimates, we turned to academic research outside of the Federal Reserve Banks. In the paper, Minimum Payments and Debt Paydown in Consumer Credit Cards by Benjamin J. Keys and Jialan Wang, we found robust estimates of the statement balances of “full payers.” According to their analysis (see Table 1-A), full payers had mean statement balances of $3,412 (when summarized across all credit cards) before they went on to pay off the debt.We multiplied $3,412 by the estimated number of full payers to get the estimated balances of full payers.
  15. Calculated Metric using the following sources:
    1. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % with Credit Card Debt September 2008, Accessed on January 28, 2018
    2. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 20 and Page 3, Calculated metric, number of people with credit reports Q3 2008 Accessed on January 28, 2018
    3. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 3, Outstanding credit card balances Q3 2008, Accessed on January 28, 2018
    4. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table A-1 Summary Statistics by Payer Type, Accessed on January 28, 2018
    5. Survey of Income and Program Participation, 2008 Panel, Wave 4, US Census Bureau, Debt by Year, Table 2. Percent Holding Debt for Households, by Type of Debt and Selected Characteristics: 2009, Credit card debt, Accessed on January 28, 2018

    Estimate G:
    76.6% of people with credit reports had balances on credit cards in September 2008a x 240 million adults with credit reports in Q3 2008b= 183 million credit card users.

    $866 billion in outstanding credit card debt in Q3 2008c
    Average balance of $3,412 for “full payers.”d
    33% full payers, we calculated

    $866 billionc - ($3,412d (full payer balance) * 33% full payerd * 183 million credit card usersa/b) = $659 billion

    Estimate H:
    76.6% of people with credit reports had balances on credit cards in September 2008a x 240 million adults with credit reports in Q3 2008b= 183 million credit card users.

    $866 billion in outstanding credit card debt in Q3 2008c
    Average balance of $3,412 for “full payers.”d
    44.5% full payerse

    $866 billionc - ($3,412d (full payer balance) * 44.5% full payere * 183 million credit card usersa/b) = $518 billion

    Estimate I:
    Average estimated credit card debt is $589 billion.

  16. Calculated metric using the following sources:
    1. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % with Credit Card Debt September 2008, Accessed on January 28, 2018
    2. November 2017 Report on Household Debt and Credit, Federal Reserve Bank of New York, Page 20 and Page 3, Calculated metric, number of people with credit reports Q3 2008 Accessed on January 28, 2018
    3. Survey of Income and Program Participation, 2008 Panel, Wave 4, US Census Bureau, Debt by Year, Table 2. Percent Holding Debt for Households, by Type of Debt and Selected Characteristics: 2009, Credit card debt, Accessed on January 28, 2018
    4. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table A-1 Summary Statistics by Payer Type, Accessed on January 28, 2018

    Notes:

    76.6 percent of the adult population uses credit cardsa X 240 million adults with credit reportsb = 183 million credit card users X 44.5% with debtc = 82 million with credit card debt

    76.6% of the adult population uses credit cardsa X 240 million adults with credit reportsb = 183 million credit card users X 67% with debtd = 123 million with credit card debt

    Average estimate is 102 million with credit card debt

  17. Calculated metrics using the following sources:
    1. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018
    2. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table A-1 Summary Statistics by Payer Type, Accessed on January 28, 2018

    Notes:
    56% carrying debta x 199 million credit card users1 = 110 million in debt
    67% carrying debtb x 199 million credit card users1 = 134 million in debt

  18. Calculated metric using the following sources:
    1. Current Population Survey, U.S. Census Bureau, Table HH6 Average Population Per Household and Family: 1940 to Present, Average number of adults per family, 2008, Accessed January 28, 2018
    2. 2016 Survey of Consumer Finances, Board of Governors of the Federal Reserve System, Table 13 16, Credit Card Debt, Accessed on January 28, 2018

    43.9% of U.S. households carry credit card debtb x 126.24 million U.S. householdsa = 55.4 million households

  19. Calculated metric using the following sources:
    1. Current Population Survey, U.S. Census Bureau, Table HH6 Average Population Per Household and Family: 1940 to Present, Average number of adults per family, 2008, Accessed January 28, 2018
    2. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018

    55% of U.S. households carry credit card debtb x 126.24 million U.S. householdsa = 69.4 million households

  20. 2016 Survey of Consumer Finances, Board of Governors of the Federal Reserve System, Table 13 16, Credit Card Debt, Accessed on January 28, 2018
  21. Do we know what we owe? Consumer debt as reported by borrowers and lenders, Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw, Federal Bank of New York Economic Policy Review, Page 27, Table 2 SCF and CCP Househohold debt by account type, Accessed on January 28, 2018
  22. 2016 Survey of Consumer Finances, Board of Governors of the Federal Reserve System, Table 13 16 Means, Credit Card Debt, Accessed on January 28, 2018
  23. Do we know what we owe? Consumer debt as reported by borrowers and lenders, Meta Brown, Andrew Haughwout, Donghoon Lee, and Wilbert van der Klaauw, Federal Bank of New York Economic Policy Review, Page 27, Table 2 SCF and CCP Househohold debt by account type, Accessed on January 28, 2018
  24. The Complex Story of American Debt, Pew Charitable Trusts, Page 9, Accessed on January 28, 2018
  25. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table 1 Summary Statistics by Payer Type, Accessed on January 28, 2018
  26. Recent Developments in Consumer Credit Card Borrowing, Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw, Accessed on January 28, 2018
  27. Board of Governors of the Federal Reserve System (US), Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest [TERMCBCCINTNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TERMCBCCINTNS, January 24, 2017.November 2017 interest rate on accounts assessed interest 14.99%: $10,000 * 14.99% = $1,499.
  28. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table 1 Summary Statistics by Payer Type, Accessed on January 28, 2018
  29. $4,3505D * 14.99%28 = $652
  30. $4,5555E * 14.99%28 = $683
  31. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table 1 Summary Statistics by Payer Type, Accessed on January 28, 2018
  32. 2017 State of Credit Report”, Experian, Accessed January 28, 2018
  33. Board of Governors of the Federal Reserve System (US), Commercial Bank Interest Rate on Credit Card Plans, Accounts Assessed Interest [TERMCBCCINTNS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/TERMCBCCINTNS, Accessed January 28, 2018
  34. U.S. Bureau of the Census, Sources of Revenue: Credit Card Income from Consumers for Credit Intermediation and Related Activities, All Establishments, Employer Firms [REVCICEF522ALLEST], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/REVCICEF522ALLEST, September 7, 2017.
  35. Calculated Metric using the following sources:
    1. State Level Household Debt Statistics 1999-2016, Federal Reserve Bank of New York, population, Accessed January 28, 2018
    2. State Level Household Debt Statistics 1999-2016, Federal Reserve Bank of New York, Credit card balance per capita, Accessed January 28, 2018
    3. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % with credit card debt, Accessed on January 28, 2018
    4. Minimum Payments and Debt Paydown in Consumer Credit Cards, Benjamin J. Keys and Jialan Wang, Page 59, Table 1 Summary Statistics by Payer Type, Accessed on January 28, 2018
    5. 2016 Report on the Economic Well-Being of U.S. Households, Board of Governors of the Federal Reserve System, Page 35, Accessed on January 28, 2018

    Notes:
    Total credit card balance of state= Per capita credit card balancesb x State populationa
    Number of credit credit card users= Populationa x % carrying credit card balancesc
    Balance of transactors= $3,412d X 45%e X Populationa x % carrying credit card balancesc
    Population carrying credit card debt= 55%e X Populationa

    Average credit card balance = (Total Credit Card Balance of state - Balance of Population Not Carrying Debt) / Population Carrying Credit Card Debt

  36. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, % With Severely Delinquent Credit Card Debt, Accessed on January 28, 2018
  37. Federal Reserve Bank of New York/Equifax Consumer Credit Panel, tabulated by the Federal Reserve Banks of Philadelphia and Minneapolis and accessed via the Consumer Credit Explorer, Credit Card balance by age, Accessed on January 28, 2018

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The Cost of Filing a Sexual Harassment Lawsuit, Plus Ways to Save and Fight

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Even in the era of the #MeToo movement, the picture is still rather bleak for victims of workplace sexual harassment who may not have the financial means to seek recourse.

According to a 2016 U.S. Equal Employment Opportunity Commission Task Force report, one in every four women have experienced sexual harassment at work. That number could be even higher. That number could be even higher.

Fearing that their claims will be ignored and their careers will be put in jeopardy, as many as 70% of sexual harassment victims choose not to come forward, let alone file legal claims against their abusers, according to Maya Raghu, director of Workplace Equality and Senior Counsel at the National Women’s Law Center.

In a Gallup poll conducted in the wake of the Harvey Weinstein scandal, some 42% of women said they had been sexually harassed.

As movements like #MeToo and Time's Up gain more traction, many more women are coming forward through various channels, and resources are being pulled together to help them battle perpetrators and unlawful practices.

The Gallup survey suggests that the #MeToo social media campaign has encouraged more women to take legal actions against the abuser: About 38% of the women surveyed said they were more likely to sue the perpetrator they believed had sexually harassed them. This is a much higher percentage than the same question garnered 20 years ago (18%).

However, a provision buried in the new 2018 tax law could possibly deter victims from taking legal action than before. In the past, victims could deduct the attorney’s fees from a settlement subject to a confidentiality agreement, so that the amount taxed is equal to the portion of the payment the victim keeps.

Under the current tax law, which was passed late last year, employees who settle sexual harassment lawsuits and agree to a nondisclosure agreement may no longer be able to deduct their legal expenses on their taxes. Instead, they would be taxed on the full settlement.

Sen. Robert Menendez (D-N.J.) proposed this amendment last November before the existing tax bill was signed into law. The proposal came in wake of the #MeToo movement, following a flurry of sexual harassment scandals from Hollywood to Capitol Hill. Legal experts say the provision that was intended to curb corporations from seeking confidentiality — an instrument to keep victims quiet — might have unintentional consequences on the victims’ end: The way the rule is written, it would have the same effect on plaintiffs in such settlements..

Anthony C. Infanti, a professor at the University of Pittsburgh School of Law who focuses on tax law, told MagnifyMoney the provision was written so broadly that other expenses related to sexual harassment claims could be deemed eligible for tax deduction.

For instance, he explained, women going to therapy to discuss sexual harassment subject to a confidentiality agreement may not be allowed to deduct such medical expenses from their taxes.

“It’s so broadly written that it’s not targeted at perpetrators and their employers, who seem to be the intended targets,” he said.

Infanti stressed that many victims may have legitimate reasons for wanting a nondisclosure agreement, whether it is to maintain a low-profile life when the perpetrator is a famous figure, or protect their career. If the price of agreeing to a nondisclosure would be a huge tax bill, this could well prevent from them going through all the grief associated with coming forward in the first place.

“To a certain extent you have to give some agency to the victims, let them also make decisions for themselves rather than having Congress make the decision for them about what they should or shouldn’t be able to do, what’s good for them and what’s not,” Infanti said.

Whether victims will be able to deduct fees from taxes is unclear right now. It’s up to the courts and IRS to interpret the provision. But this gives more reason for sexual harassment victims to seek ways to address the issues without having to suffer from devastating economic hardships.

Once you decide to seek justice, here are the steps you should take, and resources to take advantage of:

“The thing is there are some legal options, but they aren’t perfect,” Raghu told MagnifyMoney. “And it takes a while sometimes to obtain justice, and unfortunately there are no guarantees even for someone who manages to persist, who’s able to find an attorney. It’s very very difficult.”

1. Follow your employer’s reporting guidelines

First, you should look to see if your employer has a sexual harassment policy before reporting the incidents. The employer should conduct an investigation, which doesn’t always happen or isn’t always as thorough as it can be, Raghu said.

But it’s important to go through the internal procedure before seeking external assistance. Raghu said that’s because if someone eventually chooses to file a lawsuit, his or her employer can assert as a defense that the victim didn’t take advantage of the internal reporting procedure.

Read our guide to report sexual harassment at work.

2. File a complaint with the EEOC

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Once an investigation is conducted, or the company doesn’t act, Raghu said the victim can go to his or her federal, state or local civil rights agency, and file a complaint citing discrimination. The EEOC is the federal agency that enforces laws against workplace discrimination. It has offices throughout the country.

Raghu said it is a prerequisite for the victim to file a complaint with the EEOC before filing a lawsuit, and the victim doesn’t necessarily need an attorney at this point.

What happens is that the EEOC will in many cases try to get the parties to come to some resolution without requiring a full-blown litigation. But if that doesn’t happen, the EEOC will investigate, asking the employer for a written answer to the charge. The victim will need to provide documents supporting the complaint, such as evidence of harassment and retaliation. The investigation is based on facts provided by both parties and additional information the EEOC gathers. The agency can either find the claim viable and can go forward with filing a lawsuit in court or they make a determination that the discrimination didn’t occur.

Sexual harassment is considered a form of sex discrimination that violates Title VII of the Civil Rights Act of 1964. If the EEOC determines that sexual harassment did occur after investigation, it will issue the victim a Right to Sue notice.

3. File a lawsuit

Once you have received the letter of Right to Sue, you can file a lawsuit under the federal anti-discrimination law. This has to happen within 90 days of receiving the green light from the EEOC. This is the time when victims need to work with an employment discrimination attorney.

4. Explore alternative options

Many victims may not have the financial means to take their employer or even an individual colleague to court and risk losing their case. Raghu acknowledges that few cases get to the point of trial or even a settlement. If you can’t find any legal defense funding and you still want to take action, you may want to come forward in public, Raghu suggested.

What we’ve seen in the last few months is that many victims have been talking openly about their experiences to the press and on social media, bringing the incidents to light without necessarily going through the legal process.

Catharine A. MacKinnon, who teaches law at the University of Michigan and Harvard University, wrote in a New York Times op-ed that the #MeToo movement is accomplishing what the law has not.

If you suspect the perpetrator has routinely harassed other people, maybe you can find allies in your company, or through former employees. Allegations of sexual harassment are being taken seriously as the social movements against predator behaviors run deep. You may feel more empowered coming forward as a group than battling on your own.

Just last week, 10 women signed a public letter accusing a Northwestern University journalism professor of sexual harassment and assault. The 10 former students of Northwestern’s Medill School of Journalism have received overwhelming public support from alumni and professors. The accused professor denied all the allegations, but will take a leave of absence while the case is being investigated by the university, according to the Chicago Tribune.

5. Prepare for the cost

To be sure, waging a legal battle against workplace sexual harassment can be a costly, time-consuming and mentally exhausting process. Victims may already have experienced substantial economic harms as a result of harassment in the first place. Many cannot afford legal representation, and very few cases get to the point of a trial or even a settlement unless they are representing themselves, Raghu said.

Raghu said some private attorneys may take on a sexual harassment lawsuit on a contingency basis, meaning that the lawyer would charge nothing — or sometimes they may ask the defendants to pay their costs — if you lose the case. On the other end, if the victim wins, the attorney would take anywhere from 20 to 50 percent of the money from a settlement or judgment.

Attorneys’ rates vary depending on the complexity of the case, the location of the attorney and the agreement between the plaintiff and the lawyer. But Raghu said those with a history of reaching larger settlements/judgments may charge a higher percentage for the case. In other cases, she said the lawyer may take a sexual harassment lawsuit on a partial contingency basis, requiring the client to pay for certain expenses, such as court filing fees, travel costs, etc., no matter whether they win or lose the fight.

If you are determined to pursue your rights through the legal system, there is legal and financial assistance available for victims. Here are some examples:

The National Women’s Law Center is the home of the TIME'S UP™ Legal Defense Fund, an initiative launched by women in the entertainment industry on Jan.1, 2018. Over $20 million has been raised to subsidize legal support for individuals who have experienced workplace sexual harassment and retaliation.

A screenshot of the TIME’S UP website.

When victims seek assistance, Raghu said the center connects them to a network of attorneys who will take their case for a reduced fee, or in some cases, pro bono. Depending on circumstances, their cases may be eligible to receive support by the TIME'S UP™ Legal Defense Fund. But there’s no guarantee of representation, Raghu adds.

NWLC’s Legal Network for Gender Equity, launched last October, now has 530 attorneys across the country. It has received almost 1,500 requests for assistance from workplace sexual harassment victims, Raghu said.

Equal Rights Advocates (ERA), a national civil rights organization based in California, defends laws that prohibit sex-based discrimination, and advances gender equality in the workplace partly through representing women in lawsuits. For more information or referrals, contact Equal Rights Advocates.

6. Weigh the pros and cons of signing a nondisclosure agreement

As the new tax law is currently written, people who decide to settle a sexual harassment lawsuit and sign a nondisclosure agreement may no longer be able to claim their legal fees as a deduction on their taxes. This was one way that plaintiffs could formerly offset the taxes they would likely have to pay on the settlement amount.

Infanti said the court and the IRS will be the final interpreters of the new provision under the tax law when such cases appear. At this stage, he said, there is not much that sexual harassment victims who may want to seek a confidentiality agreement can do besides put pressure on their state representatives to amend the law.

Potentially, employees may choose to change what type of claims they are pursuing in order to avoid a huge tax bill.

For example, “if you are a woman of color, you may be experiencing sexual harassment but also racial harassment, or racial discrimination or national origin discrimination that are all related,” Raghu said. “Or maybe there are sex discrimination claims that are not sexual harassment, for example.”

Raghu said all related information can be incorporated into the strategy when attorneys are litigating these cases or trying to negotiate a settlement agreement for the victims. If there are multiple claims other than sexual harassment, perhaps a settlement could be structured in a way that separates the allocation of the settlement from those other claims, so that the related attorney's fees aren’t taxed, according to Raghu.

In any case, this is even more of an incentive to find a qualified attorney knowledgeable in cases of sexual harassment or discrimination who can craft the right strategy for your situation.

7. Know the risks

Reporting sexual harassment comes with potential dangers, which have prevented so many from coming forward. Raghu advises victims to consider a few things before taking action:

  1. Understand what sexual harassment is. A December Reuters/Ipsos poll found that Americans hold very different views on sexual harassment. The EEOC defines sexual harassment as unwelcome sexual advances, requests for sexual favors, other verbal or physical harassment of a sexual nature, as well as offensive comments based on gender, which don’t have to involve sex. Sexual harassment occurs when it creates a hostile or offensive work environment, or when it leads to someone’s unemployment or demotion, according to the EEOC. Learn more about sexual harassment from this NWLC guide.
  2. Don’t be surprised if the employer dismisses your complaint or simply doesn’t believe your account. You may experience retaliation, which has deterred many women from coming forward. Retaliation comes in various forms that include firing, demoting and cutting salaries of an employee who filed a sexual harassment complaint. Retaliation is illegal but happens frequently. In 2013, roughly half of all complaints filed with the EEOC were retaliation allegations, with 42 percent of findings of discrimination based on retaliation, according to the agency.

Therefore, for practical reasons, you should:

  1. Document evidence of harassment, infractions, retaliation, correspondence with your supervisor and the human resources department.
  2. Start looking for other employment while trying to obtain justice. You can reach out to co-workers and former colleagues, and network with your industry contacts for job opportunities.
  3. Start putting money aside in case you have to leave the company as a result of retaliation following your harassment accusation. It is critical that you have a financial cushion to fall back on when you need to move on in your life. Generally, three to six months’ worth of necessary living expenses should be able to navigate you around job loss.

Check out this list of resources put together by the NWLC:

Federal Agencies
Department of Education Office for Civil Rights
Department of Health and Human Services Office for Civil Rights
Department of Labor
Equal Employment Opportunity Commission

General Resources
LawHelp.org
AVVO

Finding an Attorney
American Bar Association
National Bar Association
National Employment Lawyers Association
Directory of Local Bar Associations

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New Balance Transfer Offer: The Amex EveryDay® Credit Card from American Express

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The beginning of a new year is a common time for credit card issuers to change their current card offers by adding or removing features. So far this year, there have been many changes to cards in the balance transfer market with several main issuers making significant changes  — for better or for worse — including American Express and Citi. While Citi chose to pull back some features of their existing BT offers, American Express debuted a new balance transfer offer with the The Amex EveryDay® Credit Card from American Express.

The key features of the The Amex EveryDay® Credit Card from American Express include*:

  • $0 annual fee
  • Intro 0% for 15 months on balance transfers and purchases; after the promo period ends, the rate changes to a Variable APR of 14.24%-25.24%
  • $0 balance transfer fee for transfers requested within 60 days of account opening.
  • 2x points at U.S. supermarkets, on up to $6,000 per year in purchases (then 1x); 1x points on other purchases

*Terms apply, see rates & fees

The Amex EveryDay® Credit Card from American Express is the first major balance transfer offer from American Express, and this shows their willingness to appeal to a wide range of consumers. While intro 0% cards with $0 intro fee balance transfer fees are common, this new offer is a standout among other balance transfer cards since cardholders can benefit in numerous ways — from transferring a balance without a fee to earning rewards on new purchases to taking advantage of the purchase intro period.

This allows you to use one card for a variety of needs instead of having one card for a balance transfer, another for rewards, and an additional card for a purchase intro period.

What does this offer mean for competitors?

American Express’s new offer may be great for consumers, but other issuers may feel threatened — and they have every reason to be. This offer carries all the desirable features of several cards in one card. Competing balance transfer cards such as Chase Slate® and Citi® Diamond Preferred® Card– 21 Month Balance Transfer Offer may have some of the features offered by The Amex EveryDay® Credit Card from American Express, but they don’t have everything.

Looking at balance transfer cards offered by credit unions, they may offer shorter intro periods (usually around 6 or 12 months) than other BT cards on the market but they often offer consumers lower ongoing APRs than cards from big banks. Therefore, if you’re looking for a card with a low variable APR once the intro period is over, credit union cards may have a slight edge.

Overall, issuing banks and credit unions may have to add additional features to their cards to compete more directly with American Express, and it’ll be interesting to watch their response to this new cards release.

Citi Simplicity® Card - No Late Fees Ever shortens its balance transfer intro period.

In January, Citi reduced the balance transfer intro period for their Citi Simplicity® Card - No Late Fees Ever by three months from intro 0% for 21 months to intro 0% for 18 months (after, 15.24%-25.24% Variable APR). This card had one of the longest offers on the market, but now competes with many other 18-month intro offers. However, Citi® Diamond Preferred® Card– 21 Month Balance Transfer Offer still offers intro 0% for 21 months on balance transfers.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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13 Ways you Can Improve Your Finances on Your Lunch Break

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If you work full time, you know how hard it is to keep up with all the little things outside of your job. But have you tried putting your lunch break to good use? Instead of spending the hour chatting at the watercooler while you munch on a snack from the vending machine, grab something healthy and use the rest of the time to tackle some important odds and ends — like your finances. Below, we share 14 tasks that you can accomplish over lunch that will help you build a better financial future. 

Pay your budget a visit

Check your budget from time to time so that you can visualize the progress you’re making toward paying down debt or saving. Make it a habit. “This will help you stay on track and help you feel motivated to keep working hard toward reaching your goal,” said consumer finance expert Andrea Woroch. She suggests using an app like Mint, which links all of your financial accounts in one place and provides a real-time snapshot of your spending and saving habits.

Write down your goals

Rather than just thinking about your financial goals, write them down in a diary or on a vision board. “You’re more likely to stick to your budget if you write down your plans and are specific,” said Marshay Clarke, a certified financial planner at Betterment, a financial advisory site. Make sure to revisit your goals periodically to stay on track.

Open a savings account

You’re more likely to save money if you have somewhere to put it. During your lunch break, you can easily open a savings account at your current bank or with an online bank that offers a high-yield savings account. While you’re at it, set up a recurring monthly transfer from your checking account for automatic savings.

Save with ease

There are apps that help you save and take minutes to set up. Dr. Elizabeth Dunn, co-author of the book “Happy Money,” is an adviser for the Joy app and their free FDIC-insured savings account. The app allows users to automatically save extra cash without having to do much extra work. “This is important because just adopting the goal to save money doesn't seem to change people's financial behavior,” Dunn said. “But getting a little nudge to save a manageable amount of money can make a difference.”

Other apps that allow you to save incrementally are Digit and Qapital. Digit will recommend how much you should save, based on your spending habits and financial obligations, whereas with Qapital, you create your own saving rules.

Earn more

If cash is really tight, or you want to save for a large purchase, maybe it’s time to pick up a side hustle with Fiverr or TaskRabbit. Plenty of people have been known to use their lunch hours to pick up riders as Uber or Lyft drivers, too. Put those extra funds toward a future goal, like a vacation or down payment for a new home.

Get familiar with your insurance

If something unforeseen should happen in your home, like a fire or a robbery, do you know what you’re covered for? If not, take a few minutes to find out so that you’re not caught off guard should something occur. No insurance? Research policies online over lunch.

Sign up for credit monitoring

Knowing your credit score is important because it can positively or negatively affect your ability to secure a loan, qualify for certain credit cards and, in some cases, get a job. A free service like Credit Karma or Credit Sesame will monitor your score and send you emails if something is amiss.

Think about the future

Use an online retirement calculator to determine if you are saving enough for your long-term goals. If you’re falling short, consider increasing your 401(k) elections from your paycheck, or set up an automatic deposit from your bank account to your investment account.

Also, check your retirement account online and make sure your beneficiaries are in order. It only takes a minute to add a beneficiary and you’ll have peace of mind that your funds will go to the right person(s) should you pass away.

Review your paid subscriptions

Review those subscriptions you’re being billed for each month. You might be paying for things that you rarely, or never use. If those New Yorker magazines are piling up, or you can’t remember the last time you listened to Amazon Music, it might be time to cancel.

Negotiate with service providers

Call your phone or internet provider to see what promotions they are offering. Or, contact your credit card provider about a possible APR reduction. If you have good credit, you might be in luck.

Review your credit card statements

Do you blindly pay your credit card bills each month? Even if you use autopay, you should take a few minutes each month to scan your statements to ensure that all of the transactions belong to you and are accurate.

Get fit

Take a walk or attend an exercise class. Health care is expensive, and the better you take care of yourself, the better your chances of avoiding costly medical bills. Some life insurance providers offer reduced rates to customers who show a certain level of fitness activity on their fitness trackers. Fitness can pay!

Sharpen your financial skills

Skip the digital Solitaire or Candy Crush and read a financial book, like “The Wisdom of Finance," by Mihir Desai. Doug Kinsey, a certified financial planner and partner at Artifex Financial Group, enjoyed the book so much that he took Desai’s Harvard HBX course, Leading with Finance, which you can complete online. “Another helpful HBX course is Economics for Managers,” said Kinsey. “Either one of those courses will help almost everyone by providing greater insight into how the world works from an economic and financial perspective.”

Clarke recommends the financial books "Rich Dad Poor Dad," by Robert T. Kiyosaki, and "A Random Walk Down Wall Street," by Burton G. Malkiel. So take a look at those, too.

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Here’s How the GOP Might Finally De-Fang the CFPB

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Update: The Consumer Financial Protection Bureau on Monday released a new five-year strategic plan, outlining a less aggressive approach to its mission of protecting consumer rights.

The consumer watchdog revised its mission and vision for 2018 through 2022. Under the new mission, the CFPB will be “equally protecting the legal rights of all,” including consumers and big financial institutions the bureau regulates.

"If there is one way to summarize the strategic changes occurring at the Bureau, it is this: we have committed to fulfill the Bureau’s statutory responsibilities, but go no further," said the federal agency’s acting director Mick Mulvaney, in a press release.

Refocusing CFPB’s mission is in line with a spade of drastic changes to the bureau under Mulvaney, who was tapped by President Donald Trump to take the helm at the federal agency in November.

The CFPB had already had quite a few eventful weeks prior to the memo. Or, according to critics and consumer advocacy groups, it had endured a flurry of "assault" launched by Mulvaney.

In the past few weeks, Mulvaney has: 

  • Requested $0 in quarterly funding from the Federal Reserve, instead, saying it would make do with dipping into its reserve fund.  
  • Issued a call for public comment on its enforcement, supervisory, rule-making, market monitoring and education activities. 
  • Wrote to the CFPB staff in a memo that the agency will have a more limited vision.  

Meanwhile, the CFPB, under Mulvaney, has: 

  • Dropped a lawsuit against four online payday lenders whom the CFPB alleged in its original complaint had preyed on working families by making loans with interest rates up to 950%.  
  • Announced it would “reconsider” federal restrictions on payday loans. 
  • Announced a yearlong delay to the effective date of a 2016 prepaid rule that would have protected prepaid cardholders.  
  • Dropped a four-year investigation into World Acceptance Corporation, a payday lender, from which Mulvaney has received $4,500 in campaign contributions in the past. 

The moves show that Mulvaney, as expected, is actively seeking to overhaul the consumer watchdog. MagnifyMoney interviewed several experts, who all say this trend of reversing rules, dropping investigations and limiting the mission of the consumer watchdog will continue. 

Yet it’s not all bad news. After a long-fought legal battle, the CFPB won a major court victory this week. In a case questioning the constitutionality the CPFB, the Court of Appeals for the District of Columbia Circuit reversed its own decision that ruled it unconstitutional in 2016.

Conservatives have long decried the independent nature of the agency and its sweeping level of oversight in the financial sector, which includes the freedom to write new rules and regulations in the interest of consumer protection.

What’s at stake? 

The CFPB is a U.S. government agency responsible for establishing consumer protection regulations and regulating key parts of the financial sector, such as the mortgage and debt collection industries. It was established in the wake of the 2008 financial crisis as a centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

The agency has zealously targeted bad actors in the financial industry since its creation, reclaiming nearly $12 billion for more than 29 million consumers. Its latest high-profile actions included fining Wells Fargo in the unauthorized accounts scandal and creating new rules around payday lending. It has also rolled out new regulations in the mortgage, credit card, debt collection and prepaid card sectors.  

The Trump administration and Republicans have long sought to curtail the CFPB’s power as part of a broader effort to lighten federal regulation over financial institutions.    

Richard Cordray was the agency’s first director, holding office from 2012 until he announced he was cutting his tenure eight months short at the end of November 2017. He had been criticized by Washington conservatives but well-received by Democrats and consumer advocates.  

Mulvaney, head of the Office of Management and Budget, took over the bureau in a drama that unfolded into a lawsuit. The fight over who is the legal boss of the bureau is still ongoing 

A former South Carolina representative, Mulvaney had said in a 2014 interview with the Credit Union Times that the CFPB was “a joke...in a sick, sad kind of way.” In 2015, he co-sponsored a legislation to eliminate the agency.  

How the GOP could dismantle the CFPB 

Legislative action … not likely 

Last year, the GOP tried to pass the Financial CHOICE Act, which would have repealed the Dodd-Frank Act and, along with it, the CFPB. The bill passed the Republican-led House in June along party lines, but didn’t make it to the Senate. 

Republican supporters of the act claimed the Dodd-Frank Act was unnecessary. Meanwhile, legal experts said deregulation would pose systemic risk, negatively affecting financial reform. 

Jim R. Copland, legal director for the Manhattan Institute and a critic of the CFPB, told MagnifyMoney eliminating the agency completely would be difficult under the current Senate structure. 

“Without 60 votes you cannot get ordinary things through the Senate,” Copland explained. “And neither party seems willing to compromise with the either on most legislation.” 

Copland added that an unusual case would be for the Supreme Court to strike down some elements of the CFPB, forcing the Congress to restructure the agency. But he thinks it’s unlikely to happen given the court has been hesitant to do so with Obamacare. 

Melissa Stegman, senior policy counsel on the federal policy team of Center for Responsible Lending, a nonprofit, nonpartisan organization based in Washington, D.C., said she thinks legislative action to get rid of the CFPB is “extremely unlikely.”  

“My impression is that there isn’t even much of an appetite to do that legislatively, because Mulvaney is already doing it through the administrative process,” she said. “They don’t even really need to purse anything externally. It’s like a self-sabotage as opposed to having the sabotage coming from the Congress.” 

Death by a thousand paper cuts 

Indeed, there are plenty of administrative maneuvers to scale back the bureau, which is well underway. It’s clear Mulvaney is already utilizing this strategy, given the small ways he has already scaled back the agency’s operations.  

He has support from Republicans on Capitol Hill as well.  

In late October, Senate Republicans killed an arbitration rule that the consumer watchdog wrote, which would have made it easier for Americans to file class-action lawsuits against big financial institutions. The treasury department had released a report against the rule in an unusual move the day before.  

“The administration can’t get rid of an agency constructed by the Congress, although they certainly can change the focus and direction of an agency,” Copland said. “I think that’s happening. At least once they get their nominee in place.” 

Stegman pointed out Mulvaney’s appointment itself is a backdoor way to overhaul the bureau. 

Freshly appointed in November, Mulvaney announced a 30-day hiring freeze at the CFPB and an immediate halt on any new regulations, rules and guidances. 

In a Jan. 24 memo to the CFPB staff, an adapted version of which was published in The Wall Street Journal, Mulvaney said he had no intention of shutting down the bureau, but the agency will have a different mission under his leadership. 

“We will exercise, with humility and prudence, the almost unparalleled power Congress has bestowed on us to enforce the law faithfully in furtherance of our mandate,” wrote Mulvaney. “But we go no further. The days of aggressively ‘pushing the envelope’ are over.” 

Mulvaney’s deregulatory agenda has critics on guard. 

“He’s made public comments [that] he sees his constituency and the people that he cares about equally as corporations and consumers, which is completely counter to the CFPB’s mission to specifically protect consumers,” Stegman said. ”That’s really concerning.” 

Under Mulvaney, Stegman expects cases that may have been under investigation to be dropped, and changes be made to rules that already have been made final. 

For instance, the Home Mortgage Disclosure Act, a 2015 rule expected to assess trends in mortgage lending and originations, ensuring that companies follow the laws, was announced to be reopened last December. 

Stegman said concerns have also risen that CFPB’s Consumer Response Database, a public database that stores more than 1 million complaints about financial products and services since 2011, may go private. 

Besides the CFPB’s research agenda possibly dramatically shifting, Stegman worries that pending CFPB rules — such as on erroneous debt collections or exorbitant overdraft fees — will “never see the light of day or be harmful for consumers.” 

“It’s not a priority for Mulvaney,” Stegman said. “So he’s not gonna pursue this.” 

This story has been updated. It was originally published Jan. 31, 2018

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A Beginner’s Guide to Monetizing a Hobby

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Making extra money from a side hustle can be extremely gratifying, especially if it’s something you love doing.

And it seems like it’s never been easier to pick up side gigs or monetize your hobbies. There are 57.3 million freelancers in the U.S., according to a 2017 survey commissioned by the Freelancers Union and Upwork, up from 53 million a couple of years ago. In 2017, they collectively earned $1.4 trillion.

Make no mistake: Hobby-based businesses can become big undertakings. Juggernauts such as Facebook, Chanel and Microsoft all have roots in personal hobbies.

The Panel Study of Entrepreneurial Dynamics II, a multiyear survey of nascent entrepreneurs, found that nearly 26% of budding U.S. entrepreneurs started their businesses from a hobby.

But turning your hobby into a business can get complicated, to the extent that it could kill your passion for it. It is, in the end, a commitment that requires hard work. With proper planning, you may be able to strike the right balance of success and satisfaction from monetizing your hobby.

Learn the essentials

We asked career experts and hobbyists-turned-business owners to share their advice and the lessons they learned about starting hobby-based businesses, to help you start off your endeavor right.

Do research, assess your goals

Benjamin Warnick, a professor of entrepreneurship and strategic management at Washington State University, told MagnifyMoney that once you add money into the equation, a hobby isn’t just about personal enjoyment anymore; it morphs into a business that needs to create value for customers.

“People aren’t going to pay you just to do something you enjoy,” Warnick said. “If you can find a way to identify what people value — [Ask yourself] ‘How can I make life better for them in some way and how can I tie my hobby to that?’ — then you are on to something.”

Anna Juhl, a former nurse manager, quit her job at age 52 to pursue her passion for cheese and travel, but she did so carefully. Juhl now runs a business called Cheese Journeys, offering cheese enthusiasts tours in European and American destinations. She didn’t act on impulse; she had a plan.

Anna Juhl in England on a scouting trip in preparation for her first cheese tour. (Courtesy of Anna Juhl)

Juhl, who ran an artisan cheese shop and restaurant in Salt Lake City back in 2000 after working her full-time job as a nurse manager, did her homework before piloting a cheese-themed tour to Europe in 2013. She knew that food travels were on the rise. And she was confident that and her expertise in artisan cheese and love for food and travel would give her an edge in the market.

When her husband’s job led them to New York in 2007, it was a good opportunity for her to leave behind her previous career, and Juhl started brainstorming a cheese-travel business. During the first six months, she found herself spending hours reading up on food, travel and everything she needed to know about running the business. With help from industry experts in Europe, who coached her through the basic tour process, she launched a pilot England tour in 2013, 15 months after quitting her job.

Juhl said she was lucky that she was able to pilot the business with her own savings instead of taking out loans. She had to cover a considerable amount of money upfront, and she lost money in the first couple of tours. The fact that her husband has a good-paying finance job also helps, although Juhl admits that the switch to full-time entrepreneur was not without stress: She didn’t take a paycheck for a few years and any money she made was invested back into the business.

Then again, Juhl’s initial goal was not to make profit, she said; rather, her new business was a transition into retirement. She was prepared not to make a profit the first few years as she worked toward building a business that would allow her and her husband to travel while having a steady stream of income at retirement.

Looking back, Juhl said self-assessment really helped her focus in this midlife career shift.

“Know what you want from it, how much do you want to work and set your own goal so you build a business that meets your goals and not the expectation of somebody else’s.”

Indeed, entrepreneurship demands a big-time commitment. The word “passion” has its roots in Latin, meaning suffering, Warnick pointed out, so hobbyists need to ponder how much they are willing to sacrifice before launching their leisure-based business.

Start small, test it out

Nancy Collamer, career coach and author of Second-Act Careers, told MagnifyMoney that it’s wise for hobbyists to start testing out businesses as a side gig in their free time.

“Let’s say you are great at baking,” said Collamer. “What you may want to do is just on a very small scale, offer your brownies for sale during the holidays to some friends.”

A side hustle allows you to gauge the market interest and to test out pricing, she said. Once you have a taste of it, put a little more time into the work than you would on a hobby basis. If it doesn’t feel right, stop right there before you waste too much money or time on it.

“Keeping one foot in stable employment can really help ease the transition,” Warnick said. “So if you have alternative sources of income, especially in the early stage of the business, you can explore and then gradually scale up the business, instead of putting tons of money into it and then realizing it’s not going to work.”

Expect challenges

You may be excellent at what you love to do, but a business is a business. When you try to commercialize your expertise, there is a lot more work that goes into the process than you would probably have expected.

“That’s everything from marketing your services to keeping your books to producing your products, to finding the cheapest materials, to keeping your office clean every day,” Collamer said. “You are doing it all.”

The business side of the hobby entrepreneurship — bookkeeping, accounting, digital marketing — can be really daunting.

“Curating, researching and building the tour, that was easy,” Juhl admitted, “Executing the tour, super fun. Doing all the other related business things can be challenging.”

Gianna Leo Falcon, a New York-based freelance photographer, told MagnifyMoney the learning curve was very steep for her, a person who’s not quite business-oriented.

Gianna Leo Falcon, a New York-based freelance photographer. (Courtesy of Gianna Leo Falcon)

Prior to becoming a professional photographer in 2015, Falcon did occasional freelance portraits and headshots. She recalls constant frustrations with clients who booked shoots but ended up not showing up. To protect herself, Falcon later learned to ask for down payments.

“I’m really an artist. I just want to show up and shoot,” she told MagnifyMoney. “Invoices and how to get paid online are really confusing. I’m navigating and learning that stuff as I go along.”

Outsource labor if needed

Experts say being your own boss not only requires possessing a variety of skills and knowledge of the business but also knowing your own strengths and when to outsource some of the labors you have no interest in or talent for.

“You don’t have to be able to do everything,” Warnick said. “So if you got the expertise in the domain of your hobby, maybe you could bring on someone who’s a little bit more of the business side who can help you commercialize the hobby.”

As Juhl’s business has grown, she hired a bookkeeper, a website developer and a publicist so she can focus on the centerpiece of the business — booking and executing the trips.

“It’s a personal relationship that I have with people who travel with me,” she said. “So I have to make sure that I’m available to do what my role is, really what I’m best at.”

Find your clients

For any business to succeed, you need to find people to buy your services. But where do you start? Here are a few ideas.

Find complementary service providers

A good place to start is networking with complimentary service providers, Collamer said.

For example, if you want to be a wedding photographer, find other people who offer wedding services, Collamer suggested.

“They are going to be thrilled to meet you,” she said. “Because if it’s someone who has a wedding venue and they meet with couples, you might become one of their preferred service providers and that becomes a steady stream of clients for you.”

Get involved in trade groups and associations

There are established associations and trade publications within almost every hobby, be it specialty foods or heavy machinery. Get involved with those communities because they might have information and resources you need to grow your business. Better yet, they may be able to refer you to potential clients.

“Don’t think you need to reinvent the wheel,” Collamer said. “There are lots of people who are already probably [having] successful businesses that are related to what you want to do that you can learn from.”

Prioritize marketing

Juhl said she had a hard time finding customers when she started her cheese-travel business until the marketing and media support came in much later.

A year into the business, she realized that relying solely on word of mouth was not enough to attract customers; marketing should be a crucial piece of a business plan. Juhl eventually joined American Society of Travel Agents and other travel organizations so she could network and gain credibility. Through the association, she worked with agents who took on the responsibility of booking the international cheese tours. She sells the tours at an average $6,000 per person, and the travel agent charges a 5 to 10% commission. Soon after she started working with an agent, a group of semi-retired food and travel enthusiasts booked her trip.

In addition, she has hired people to help with website development, marketing and media relations.

Each year, she also budgets for a renting booth at large industry conferences where her potential guests attend. Those efforts come with thousands of dollars of additional travel expenses, booth rental fees, hotel, food and registration costs, which have become necessary overhead, and she has to include them into the monthly budget. But she said they are absolutely worth it.

In Falcon’s case, she is a full-time contractor for a wedding service that operates in several locations around the country and specializes in digital marketing. Falcon works as the company’s New York liaison and photographer. The firm brings her a steady stream of clients, which frees her up from the marketing piece of the puzzle. By booking clients for her, Falcon said the company takes a substantial cut from each project payment. Falcon said she could potentially earn more if she worked for herself, but she admits that booking is hard work, and she is grateful that someone else is doing it for her.

If you are looking to seriously grow your freelance gig and want your name out there, you may want to educate yourself about social media and digital marketing. That said, don’t get hung up if you are uninterested in this sort of things or simply don’t have time for them. It may be worthwhile to hire a marketing professional who specializes in your industry.

Find a place to sell your hobbies

Whatever service you offer, it’s critical to find an avenue where you can commercialize your hobby. Booming e-commerce makes it easier than ever to do so. Third-party platforms can relieve you of the hard work of finding buyers, but the trade-off is that they take a commission of what you earn.

For artists and crafters, if the idea of creating a website and learning digital strategies freezes you, marketplaces such as Etsy, Amazon and eBay may be a good fit.

The downside is that those places take a cut from your listings and transactions. For instance, Etsy charges a $0.2 listing fee for each item and a 3.5% transaction fee on sales.

Although the marketing task is off your hands when you sell your items through a marketplace, you also face competition from thousands of other sellers. Compared with the full control you would have over design, marketing and SEO with your own website, you have less freedom on those fronts with a third-party platform. You will be subject to those companies’ policies and rules.

If you have in-demand services to offer — anything from writing and web design to bookkeeping and accounting — third-party platforms like Upwork, Freelancer, TaskRabbit will be of help. Again, you have to somehow offset the time and effort saved from finding clients. The three services charge a 3 to 30% service/project fee.

And don’t forget the oldie but goodie Craigslist, where Falcon snagged her current contractor job.

Figure out your rates

It may be a bit strange to tie money into the things that you love to do, but knowing your market value is extremely important if you hope to profit off your passion.

The hobby community you are in is a great resource for you to find out the average fees. If you don’t feel comfortable asking about rates, there are tools available online to help you figure out the value of your time.

A screenshot of website http://sparetime.arkivert.no/en

BeeWits, a project management software company, has released a freelance rates calculator. Similarly, this website by FINN.no, a Norwegian online marketplace for classified ads, helps users figure out how much their spare time is worth.

Writers and journalists may want to check out The Freelancer’s rates database, where freelancers can add what they’ve earned for certain projects for a variety of publishers.

Watch out for these common missteps

Assuming other people will enjoy your hobby as much as you do

“It’s easy to think, ‘Oh, I love yoga. Why wouldn’t everybody love yoga?” Warnick said.

Guess what? Others may not care for it. This is why you need to do your market research and figure out if there is demand for your passion.

Trying to do everything

Collamer said often when people try to do everything themselves, they end up spending too much time daunting over overwhelming tasks that they are uninterested in. But really, they should outsource labor when they are able to.

“The key of building any business is to know when you reached a level where you need to call in help to ensure that you don’t burn out and that you can manage all the aspects of what you do well,” Juhl said.>

Not thinking like an entrepreneur

Your hobby might be something that you really enjoy today, but once you decide to commercialize it, be prepared to tackle the not-so-exciting work.

You need to educate yourself about everything from the zoning regulations in your particular town, business registration, marketing, taxes and everything else that comes with running a business, Collamer said. “It’s not all going to happen automatically.”

Going all in at the beginning

Before establishing yourself as an entrepreneur, it may not be wise to you quit your job and jump into your business all at once because it may not be a good fit for you.

Running a business is a big commitment, both in terms of your time and finances. Juhl and Falcon both had other streams of income or savings to support themselves while they built their hobby-based businesses. Juhl’s cheese tours weren’t profitable for the first couple of years. Falcon said it took her a good five years to solidify herself as a photographer while working other jobs.

Don’t forget about taxes

Running your hobby business may come with lots of uncertainties, but taxes are certain.

Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting, told MagnifyMoney that people who made money off hobbies used to be able to deduct related expenses within certain limits, yet under the new tax law, expenses related to a hobby won’t be deductible at all. Luscombe said this makes it logical for taxpayers to treat a hobby as a business.

Luscombe urges freelancers or contractors to keep separate records of all the income and expenses related to the business. If part of your home is dedicated for business purposes, for instance, a home office or a kitchen exclusive for producing items for sale, you need to allocate the square footage used. That is, dividing the space used for the business by the total square footage of the house, and that would be the percentage of expenses, such as insurance and utilities, that you can allocate and deduct from your taxes.

Under the new law, pass-through business owners can deduct up to 20 percent of their qualified business income from a partnership, S corporation or sole proprietorship.

Individuals earning less than $157,500 ($315,000 for married couples) are eligible for the fullest deduction. So if you’re going to make money off your hobby, Luscombe said this new benefit is another reason to try treat it as a business.

If you are running a business on your own, you’re most likely seen as a sole proprietorship owner for tax purposes. You will have to report business-related income and losses on a Schedule C (Form 1040) each year, Luscombe said.

If you made more than $600 from any particular client, you should expect to receive a Form 1099-MISC. Likewise, if you paid anyone at least $600, you will have to issue the same form. For more information on how the new tax law affects small-business owners, check out our guide on the topic.

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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Places Where Americans Live the Most Balanced Lifestyles

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

As Americans, we’re often focused on status markers, like the amount of money we make, but research indicates that time we spend with people we care about, good health and income equality are some of biggest factors that lead to happiness. It’s not just how much we earn, it’s what we have to do to earn it, what we get in exchange for it and whether we have the time and health to enjoy our friends and family.

In other words, a balanced life.

To figure out where people are most likely to find that kind of balance, we compared seven measures in the 50 biggest metropolitan areas of the U.S.

We looked at the following (full methodology below):

    • Average commute times
    • How much of their incomes residents spend on housing
    • How many hours people work compared to how much they earn
    • Local income inequality
    • How many people are in very good or excellent health
    • Whether they get enough sleep at night
    • How local prices for typical consumer goods and services (excluding housing) compare with the national average

Below are the places that ranked highest — and lowest.

Places with the most balanced lifestyles

For clarity, we used the name of the major city in a metro area (i.e., Grand Rapids, instead of Grand Rapids-Wyoming-Muskegon, Mich.)

1. Grand Rapids, Mich.

Residents of Grand Rapids work a little harder for their money than those at other top cities on our list, but that money seems to work a lot harder for them, too. Generally, housing only costs 18% of income, commutes are under 22 minutes, prices on consumer goods are about 5% lower than the national average, and income inequality is relatively low. Maybe that’s why 56% of the population are reported to be in very good health (the ninth highest), even though 14 other cities have fewer sleep-deprived citizens. Of course, we might expect denizens to be made of hearty stock, given all the opportunities for outdoor activity for those who can make it through the notoriously harsh winters.

Score: 83 (out of 100)

2. Salt Lake City

Another city with a vibrant outdoor culture, Salt Lake City takes the number two spot with a score of 81. The key seems to be the widespread prosperity: Salt Lake City has the second-lowest income equality of any metro we reviewed, which is especially impressive considering the median income was $69,490 in 2016, considerably more than the national median of $55,322. And it only takes an average of 22 minutes to commute to those high-paying jobs (about the same as Grand Rapids), where workers spend about an hour less a week than average Americans. Prices for goods and services are about on par with the national average, but Salt Lakers spend 20% of their income on housing — about 1% less than people in the other cities we reviewed. Almost 57% of the population are reported to be in very good health, and more than two-thirds report getting at least seven hours of sleep a night.
Score: 81

3. Minneapolis

The Twin Cities are home to more people in very good or excellent health than anywhere else on our list. Maybe it’s because they get so much rest; only four other places report lower rates of sleep-deprived citizens. Income inequality is a touch higher than in Grand Rapids and Salt Lake (but still the fifth lowest on our list) and the average commute is about three minutes longer, but residents get more money for their time. Housing costs about 20% of the median income, and goods are priced about 4% lower than the national average.
Score: 80

4. Raleigh, N.C.

The Research Triangle Area places fourth on our list, thanks to a very healthy (third on our list) and well-rested (sixth for fewest sleep-deprived citizens) population. Commute times are fair at about 26 minutes on average, as is the percentage of median income that goes to cover the median housing costs (20 percent). In terms of income inequality, Raleigh also runs middle of the pack among cities we reviewed, ranking 23rd, but that’s a big jump from the first three cities on list, which ranked third, second and fifth. Moreover, Raleigh ranks 18th for both the amount they earn for how long they work and the cost of consumer goods compared to the national average.
Score: 71

5. Kansas City, Mo.

A healthy showing on average commute times (under 23 minutes), income inequality (8th lowest on our list) and share of income that goes towards housing (19%) sends KCMO to the fifth spot on our list. Kansas City ranks in the top half of our list for citizens who aren’t sleep deprived (22nd), percentage of the population in very good or excellent health (19th) and income earned compared to hours worked (24th). The place where they rank lower than more than half the cities on our list is in local prices compared to national averages (27th), but they should still expect to pay about 3.7 percent less than most other Americans for goods and services.
Score: 68

Places with the least balanced lifestyles

50. New York

It probably doesn’t surprise anyone that New Yorkers endure the longest average commute times (over 35 minutes), and pay the highest prices for goods and services of America’s 50 largest metro areas. It also sits at the 49th slot for income inequality. While New York has one of the highest median housing costs (San Francisco is the most expensive), it’s somewhat offset by higher median household income. But not too far offset; residents of only three other cities spend a larger portion of their income on housing. Lending credence to the famous epithet of “the city that never sleeps,” 41% of New Yorkers report being sleep deprived (Detroit is the most sleep-deprived, with just over half of residents reporting fewer than seven hours of sleep a night). With 31% of the population reported in good or excellent health, New York ranks 35th out of 50 in that area. One bright spot is placing 8th for the amount of money New Yorkers earn for the number of hours they work. Sadly, that didn’t help New York’s score much.

Score: 20

49. Miami

Not to be outdone, Miami also ranks dead last in two areas we measured: The cost of housing relative to income and income inequality. Miami fares poorly in other areas, too, like the number of hours worked relative to the amount of money earned (43th), average commute time (41st), and prices for goods and services relative to the national average (39th). It runs in the middle of the pack in other two categories, coming in 26th for both the percentage of people in very good or excellent health and the number of people getting at least seven hours of sleep a night.

Score: 22

48. Philadelphia

Philly doesn’t rank last in any area, but it falls in the bottom ten for all but two categories: Average commute time (40th), income equality (41st), very good health (45th), enough sleep (47th) and consumer prices (47th). It does slightly better in the percentage of income that goes toward housing (35th), but has a stronger showing in the number of hours citizens work relative to how much they earn (15th).
Score: 23

47. Los Angeles

Citizens of LA earn a lot for the hours they work, but that doesn’t help too much given the high price of housing — only two other cities spend more of their incomes on housing (San Diego and Miami). The cost of goods and services are the highest outside of New York City and San Francisco. Add to that high income inequality (ranked 45th), that famously horrific commute (45th) and poor health (42nd) to get a low score.
Score: 24

46. Tampa, Fla.

Another Florida city in the bottom five, Tampa’s biggest flaw is the ratio of hours worked to income earned (ranked 45th). Tampa doesn’t rank that low elsewhere, but it doesn’t rank high in anything, either; its top showing is a rank of 31 in the percentage of people who get at least seven hours of sleep a night. Average commutes clock in over 27 minutes (35th), and only half the population are reported to be in good or excellent health (32nd). The city ranks even lower for the prices of goods and services (40th) and the percentage of income that goes toward housing (41st).
Score: 26

Methodology:

The top 50 Combined Statistical Areas (CSAs) are ranked on a 100-point scale on the following seven measures:

  1. Average commute time, as reported in the 2016 American Community Survey (“ACS”)
  2. Percentage of income spent on housing, calculated as (the median monthly housing cost) / (median household income / 12 months), as reported in the 2016 ACS
  3. The number of hours worked relative to income earned, calculated as (the mean average number of hours worked) / (divided by the mean monthly household income / 12 months), as reported in the 2016 ACS
  4. Gini coefficient to represent income inequality, as reported in the 2016 ACS
  5. Price index, calculated as (Price Index for Goods + Price Index for Other) / (2), as reported by the Bureau of Economic Analysis in the “Real Personal Income for States and Metropolitan Areas, 2015” release
  6. Share of the population in very good health, calculated as (percentage of the population in very good health) + (percentage of the population in excellent health), as reported in the 500 Cities Project (2016) from The Centers for Disease Control and Prevention (“CDC”)
  7. Share of the population who gets fewer than seven hours of sleep a night, as reported by the CDC. Data was not available for the following metro areas, so the unweighted average for available areas in the same state was used: Greenville, S.C. and Harrisburg, Pa.

The sum of all ranks was then divided by seven, for a maximum possible score of 100 and a lowest possible score of zero.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kali McFadden
Kali McFadden |

Kali McFadden is a writer at MagnifyMoney. You can email Kali at kali.mcfadden@magnifymoney.com

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