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

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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 that doesn’t pay cards in full each month 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 lower than October 2008, when household credit card debt among those that don’e pay in full each month 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 estimates only include the credit card balances of those who carry credit card debt from month to month – they exclude balances of those who pay in full each month.

  • Total credit card debt in the U.S. (not paid in full each month): $542 billion4
  • Average credit card debt per person: $4,4535
  • Average credit card debt per household: $8,6836
  • Average APR: 14.99%
  • Average interest owed over 12 months: $1,183 (assuming 2.5% minimum monthly payments)

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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7 Foods That Are Getting More Expensive in 2018

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The new year can bring a tightening of budgets after the holidays, so the last thing many consumers want to hear is that food staples may cost more.

But retail food prices are forecasted in 2018 to rise between 1 percent to 2 percent, according to the U.S. Department of Agriculture.

Be prepared to see a possible difference on your grocery receipts and restaurant bills for these items:

  • Eggs: Expected to increase 4 percent to 5 percent in 2018, following a drop in 2017 and 2016.
  • Cereal and bakery products: Expected to increase 3 percent to 4 percent.
  • Fresh fruit: Expected to increase 3 percent to 4 percent.
  • Dairy products: Expected to increase 1.5 percent to 2.5 percent.
  • Beef and veal: Expected to increase 1.5 to 2.5 percent in 2018, following a drop in 2017.
  • Pork: Expected to increase 0.75 percent to 1.75 percent.
  • Poultry: Expected to increase 0.25 percent to 1.25 percent, potentially impacting popular bar fare like chicken wings.

The price increases can be particularly alarming considering an average family spends approximately 6.6 percent of their household income on food and 43 percent of those expenditures on food away from the home, according to the U.S. Department of Agriculture. Rising food prices can affect families from all demographics but especially those in low-income situations.

Why food prices rise

There are many reasons behind price changes that may not seem obvious.

“The biggest drivers of rapid increases in prices tends to be weather-related events,” says Greg Colson, associate professor of agriculture and applied economics at the University of Georgia. “So it’s droughts, it’s floods, particularly droughts recently, that tend to drive very rapid increases.”

Another important thing to note is that food prices on average, including the price of eggs and poultry, actually dropped back in 2016, by an average of 1.3 percent. Also in 2016, retail egg prices declined 21.1 percent as egg-laying flocks recovered from the Highly Pathogenic Avian Influenza (HPAI) outbreak.

The number of animals in both dairy and poultry sectors also increased, leading to decreasing prices in 2016. These trends continued into 2017, which makes the rising food prices of 2018 seem surprising. But it may just be the market leveling out.

“There’s a seasonality, a cycle to all this, it’s tough (to forecast) because in general forecasting we’re looking at averages, or we’ve got trends or cycles, it’s easy, but forecasting shocks is very hard,” says Colson. “Nor can you predict, is it going to be a minor or a major drought next year?”

When experts forecast prices, they look at averages and use trends or cycles, but forecasting shocks is tough to do, Colson said. Experts can’t predict if there will be a drought next year, and if there is a drought, they also can’t predict how severe it would be.

Food-at-home prices are typically more volatile than food-away-from-home prices, according to the USDA, because the cost of dining out reflects more than the price of food. In fact, food-away-from-home prices rose an average of 2.6 percent in 2016, while food-at-home prices fell 1.3 percent — the first time such prices have declined since 1967. While eating at home has long been considered a more affordable choice, that was especially true in 2016.

Costs associated with food service, wages and benefits have been increasing and are potentially partially responsible for the percentage differences in rising costs. For example, when Dunkin’ Donuts’ store prices rose in 2016, Dunkin’ CEO Nigel Travis told investors this was due more to changes in minimum wage requirements than commodity pricing.

How outside factors affect food prices

Being aware of what and how external factors affect food prices can help you make sense of how and when you’ll see these changes.

For example, fuel prices and commodity costs can affect what you see on the price tag. Lower fuel prices don’t just affect your gas tank, they also make food prices lower, as transportation costs for commodity goods as well as for distribution make it cheaper for producers. And in 2017, the USDA said there were more egg-laying birds, which helped drive down the cost of eggs.

“There’s a lot of moving parts,” Colson says. “And so even if there’s no magical events in the U.S. if there’s positive/negative shocks elsewhere around the world, it can leave a big impact on the market.”

In the third quarter of 2017, spending at restaurants and other eateries increased 2 percent from the same time last year, according to NDP Group, a market research company. NDP Group attributed most of that increase to rising menu prices.

Although food prices are expected to rise in 2018 because of numerous variables, there’s no need to panic when planning out the monthly grocery budget. Due to the deflation in 2016 and the first half of 2017, 2018 prices are expected to stay below 2015 prices, according to the USDA.

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The Supreme Court Made it Much Harder to Sue Your Employer as a Group

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This week’s U.S. Supreme Court decision holding that private-sector employees may no longer unite to bring class or collective actions against an employer has shaken the historical ground that workers’ rights stand on.

Some of the nation’s 126 million private-sector workers fear what they see as a reversion to 1920’s and ‘30s “yellow dog” contracts that offered take-it-or-leave-it arbitration agreements during one of our nation’s toughest times for the working class.

Differing views on decision

The decision came on Monday, the vote 5-4, with Justice Neil Gorsuch, who joined the Supreme Court last year, writing for the majority.

While some view the decision as a victory for employers, others see it as a further weakening of the ability to fight for fair employment standards in an economic climate where many Americans are living paycheck to paycheck.

In her dissent, Justice Ruth Bader Ginsburg called the decision “egregiously wrong.”

This ruling comes a year after the 10 largest settlements in employment-related categories reached a record high $2.72 billion, according to the 14th annual edition of the Workplace Class Action Litigation Report by Seyfarth Shaw LLP, a Chicago-based law firm. The aggregate settlements of the top 10 are almost $1 billion more than they were in 2016, despite 2017 being a more favorable year overall for employer rather than employee victories, the 2018 report notes.

“I think it’s going to potentially reduce a lot of very costly litigation for employers,” said

Suzanne Boy, an employment law attorney with Henderson Franklin Attorneys at Law in Fort Myers, Fla. “While it certainly does not erase the employees right to bring a claim, it just limits the potential for them to bring them as a group essentially.”

Attorney Benjamin Yormak, who represents employees and is a board-certified expert in labor and employment law, noted that the point of a class or collective action is to streamline the litigation for consistency in the results and to save on costs.

“But the ruling from the Supreme Court does the exact opposite,” said Yormak, an attorney based in Bonita Springs, Fla., who often represents employees with wage and hour disputes.

While Yormak said he believes wage and hour litigation will be the hardest hit, other workplace conditions could become more difficult to fight as well.

Some members of Congress and candidates for office voiced their concerns this week on social media.

What’s changed?

The Federal Arbitration Act, enacted in 1925, specifies that agreed-upon individual arbitration contracts must be enforced, unless that agreement violates another federal law, which, according to those on the dissenting side, is the National Labor Relations Act, which was enacted 10 years later.

The NLRA provides “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

In what Yormak calls an “epic case,” the problem is that the NLRA and the FAA “are not in harmony with one another on this issue.”

Both sides were looking for direction from the Supreme Court, but the outcome was not what he and employees such as those he represents had hoped for, Yomak says.

Who’s affected by the ruling?

Expect a dramatic increase in the number of employers who require arbitration agreements to be signed by their employees, both Boy and Yomak said.

The Economic Policy Institute, a Washington, D.C., nonprofit think tank, notes: “For over eighty years, the National Labor Relations Act has guaranteed workers’ right to stand together for ‘mutual aid and protection’ when seeking to improve their wages and working conditions. However, today’s decision clears the way for employers to require workers to waive that right as a condition of employment.”

According to the EPI, 56.2 percent of private sector employees are already subject to arbitration proceedings that are laid out by their employer, and of those employers, 30 percent include a class-action waiver.

With this new ruling and the number of employers who require such agreements projected to rise sharply, the ways they might implement them could be less-than-transparent, such as the blanket take-it-or-leave-it policies emailed to employees that sparked the three cases that were consolidated by the Court and that served as the basis for the decision.

What you can do

The EPI is asking Congress to ban mandatory arbitration agreements and class and collective action waivers.

“Workers depend on collective and class actions to combat race and sex discrimination and enforce wage and hour standards,”Celine McNicholas, Director of Labor Law and Policy for the EPI said in a statement. “It is essential to both our democracy and a fair economy that workers have the right to engage in collective action.”

For employees, attorneys recommend having awareness and taking a few steps, such as these:

  • Watch out for class-action waiver. “If an employee is presented with an arbitration agreement, he or she should certainly look closely as to whether or not one of these waivers is in there, because they may not be,” said Boy. She adds that if an employee refuses to sign it, an employer can rescind the job offer.
  • Find out the financial ramifications. Boy advises employees to look at the ramifications from a cost perspective, such as how the cost shifting is defined and if it’s split in half between employer and employee.
  • Pay attention to other provisions. Determine if there is a jury trial waiver or what kind of confidentiality is included in the arbitration agreement.

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Survey: Nearly 40 Percent of Students with Loans Consider Dropping Out of College

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What To Do if a Student Loan Refinancer Rejects You

Today’s college student bears the weight of trying to succeed academically as well as his growing debt from student loans.

According to a new MagnifyMoney.com survey, nearly 40% of current students with loans have considered dropping out to avoid racking up more student loan debt. And of the students who thought about leaving before earning their degree, over half were more than $20,000 in debt.

It’s no secret that student debt is causing many individuals to consider whether their degree is even worth the financial stress. An analysis by The Hechinger Report revealed that 3.9 million people with student loan debt dropped out of college during the 2015 and 2016 fiscal years alone.

For fall 2017, total undergraduate enrollment dropped by nearly 224,000 students from a year ago, according to the National Student Clearinghouse Research Center. The center said it’s the sixth consecutive year of total enrollment declines and does not cite reasons, but our survey found financial concerns seem to play a role in student enrollments and dropouts.

The survey was conducted via Google Consumer Surveys’ online student panel from April 23-May 7, 2018. It included responses from 3,069 college students. Approximately 2,000 of respondents had at least some student loan debt.

Key findings: Work, kids add to financial strain

In our survey, 39% of our respondents with student debt said they have considered stopping college before graduating so their financial situation wouldn’t get worse. For those students, balancing school with part-time work was also a major worry, with more than half citing the juggling act as a main reason they considered quitting.

Nearly 45% of those who contemplated dropping out said they worked 20 hours or more per week, with 20% saying they worked more than 40.

Still, 35% of the students in our study who had thought about leaving weren’t working at all, signifying that loan debt is still a major stress for those who don’t earn extra money while in college.

Concerns such as children and expected income seemed to play a large role in these anxieties as well: 30% of students listed balancing work and family as a main reason they had thought about quitting, while 26% said they considered quitting because they were worried about not making enough in their chosen career field.

Debt amounts hit $50,000 and up

In addition to the 52% of our in-debt respondents who owed $20,000 or more, nearly 25% were facing at least $50,000 in total loans. Additionally, almost 10% owed $100,000 or more.

Loan structure varies widely among these students. Based on our survey, 48% of our respondents said they had at least some private loans, while 52% were exclusively using federal aid.

No one-size-fits-all plan for paying off debt

There was no clear favorite strategy for paying off debt. While 39% of people said they would use an income-based plan to manage their loans, 25% said they would use a standard repayment plan. Still, another 26% weren’t yet sure how they would deal with the debt.

Despite the stress caused by student loans, most of our respondents were generally positive about their job prospects after school.

Nearly half said they thought they would make at least $20,000 extra per year as a result of their degree, with 34% of them saying they expected to earn at least $30,000 extra.

Tips for dealing with student debt

Student loans don’t have to be such a headache, though. With the proper planning and preparation, students can work around the overwhelming costs of loan debt and keep the stress of repayment at bay from their daily lives.

Jeremy Wine, supervisor of student loan counseling services for Take Charge America, a Phoenix-based nonprofit credit consulting agency, shared tips for approaching the repayment process.

    • Think ahead. As our survey shows, worrying about loans during college can be a major source of anxiety among students. Still, Wine said it’s best to set up a plan of action long before you put on your cap and gown. “Realize that it’s there and that it’s something you have to pay back,” he said. He added that a nonprofit loan counselor can help you lay out a set of repayment goals and a budget that fits your financial situation.
    • Look at repayment options. If you have federal student loans, there are a number of flexible repayment options available to you. Contact your loan servicer to enroll.
    • Don’t waste money. It may be tempting to use the loan funds on items such as a new computer or a car payment. Wine said it’s best to only use the money for tuition and fees, even if that means getting a part-time job to pay for the rest.
    • Consider consolidation carefully. Student loan consolidation or refinance involves paying off each of your loans with a new loan. Refinancing your debt can help lower your interest payments and make your loans easier to manage. Typically, you’d take out the new loan with a private lender. Just know that if you refinance federal student debt with a private loan, you’ll lose access to flexible repayment programs offered to federal borrowers. There is a consolidation program available for federal loans specifically, however, which is another option.

 

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3 Online Alternatives to Warehouse Clubs

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With a 2-year-old daughter and a full-time job, life is hectic for Dallas mom and marketing professional Amanda Tavackoli. Often, there’s not enough time to think about or run to the store to pick up a pack of diapers, baby wipes or paper towels.

“Both my husband and I work full time, so it’s sometimes difficult for us to schedule everything that needs to happen,” says Tavackoli, 37.

Instead of squeezing a grocery run into her busy schedule, Tavackoli opens the Amazon Prime app on her phone, orders her household supplies, and within two days, they arrive at her doorstep.

Convenience, especially for families, is a factor in the popularity of purchasing household goods through subscriptions like Amazon Prime, says Paul Farris, a marketing professor at the Darden School of Business at the University of Virginia.

Amazon Prime reached 90 million U.S. subscribers, according to 2017 data from Consumer Intelligence Research Partners, a Chicago-based research firm. Almost 95 percent of these members said they will “definitely” or “probably” renew their subscription, according to a July to September 2017 survey by the firm.

At the same time, some of Amazon’s brick-and-mortar competitors are struggling to keep up.

Although Costco Wholesale has about 91.5 million cardholders as of November 2017 — 1.5 million more than Amazon Prime subscribers — the membership warehouse had only a 90 percent renewal rate in 2017, according to its annual report.

And Sam’s Club, the membership warehouse owned by Walmart, recently announced plans to close 63 of its clubs throughout the country and is converting as many as 12 of these facilities into e-commerce fulfillment centers. These closures reduced the company’s number of clubs to 597.

In recent years, Sam’s Club has also experienced low membership renewals. At the beginning of 2016, the renewal rate for its Plus members was only about 35 percent, from 2015 to 2016.

Farris says in addition to Amazon’s convenience factor, its free two-day shipping has helped the company dominate the playing field.

“Everybody in the world is trying to figure out how to handle free shipping,” he said. “Amazon has the (sales) volumes to make that work in a way that is much more difficult for other operations to generate.”

And Farris says Amazon’s ability to transcend local supply shortages has also made it and other e-commerce options more popular in comparison with traditional wholesale clubs.

One factor that favors brick-and-mortar Costco is price. In two separate price comparison studies conducted by investing news magazine Barrons in June 2017 and the San Francisco Chronicle in May 2017, Costco’s prices for a basket of top common household items were often cheaper than on Amazon.

However, the price difference doesn’t bother Tavackoli.

“It’s probably a little bit more expensive to go with something like Amazon, as opposed to running over to Sam’s Club,” she said. “But the convenience outweighs the cost for us, hands down.”

These online options for buying bulk are three alternatives to shopping at brick-and-mortar warehouse clubs.

1. Amazon Prime Pantry

One of the most popular perks of Amazon’s Prime membership ($99 a year) is its free two-day shipping. Amazon Prime also offers members in select cities free same-day delivery and same-day delivery for orders $35 and over. For some household essentials, subscription holders can have orders delivered within one to two hours.

Members have access to Prime Pantry, which ships bulky items like paper goods, trash bags, and oversized boxes and bags of snacks, such as chips and granola bars, that people traditionally purchase at warehouse clubs. Delivery boxes hold up to 45 pounds, and there’s a flat $5.99 fee per box.

“My own family’s use of Prime is that it’s so much more convenient,” Farris said. “You don’t have to worry about hauling it back home.”

Prime also gives its members much more than just fast delivery. Prime members can stream music, movies, and TV shows and gain access to Audible channels. There are also deals and exclusive opportunities for Prime members when shopping.

2. Boxed.com

Boxed.com was founded in 2013 by a group of tech entrepreneurs.

Boxed.com gives consumers another way to buy a large variety of brands in bulk online. In addition to simply buying in bulk, Boxed.com customers are offered curated boxes of products. For example, Boxed.com packages a wide range of snack options, like Cheez-Its, peanuts and Pop-Tarts, and ships them together in one box to customers.

With each order, Boxed.com users can choose to receive free samples, much like when shoppers walk down the aisle of a wholesale store like Costco.

And unlike Amazon, Boxed does not charge customers a subscription fee. Orders that meet a minimum price of $19.99 are shipped for free and ship within one business day.

3. Jet.com

Jet.com is another online one-stop shop that offers everything from household essentials to jewelry and patio furniture.

But Jet’s standout perk is its “real-time savings engine.” This tool allows Jet.com to pack specially marked items in boxes with other products, which the company says lowers the shipping costs for Jet.com and, in turn, lowers the price tag for its customers.

Farris says options like Jet.com could provide specific goods that local stores may not carry or have in stock when shoppers are there in person.

Jet.com, which does not charge a subscription fee, also gives users who know they won’t be returning an item the option to save money by opting out of the ability to return that item for free. Also, for orders over $35, Jet.com ships for free with delivery within two to five days.

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Buy, Sell, Wait? Solving the Move-up Home Dilemma

Editorial Note: 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 prior to publication.

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Jeff Neal, 33, of Lancaster, Pa., bought a bigger house last year when his wife was pregnant with their third child.

They planned to sell their two-bedroom home first, but the buyer backed out of the deal after the couple made an offer on a four-bedroom house in the same city. Fortunately, Neal’s relatives pooled money and lent him the cash so he could pay off the 30-year mortgage on the first home. As a result, the Neals were able to buy their next home before selling the old one.

Neal, who runs an e-commerce website, eventually became the landlord of his first house for a painful eight months, during which time he drove 35 minutes most weeks between his new house and his old one to make sure things were running properly. The  total cost of maintenance, taxes, insurance and utilities for his old house amounted to more than $9,000. Owing not just money, but gratitude, to generous relatives left Neal feeling even more unsettled.

“It was challenging, nerve-wracking, and stressful,” Neal told MagnifyMoney.

This spring, Neal sold the old house and paid back his relatives. Although he liked the perks of buying before selling — namely a (relatively) relaxing moving experience — he said next time he would try to sell a house before buying anything new.

Second time’s a charm? Buying a home the second time around sounds easier — you’ve gone through the process before and understand the ups and downs — but the process of juggling two transactions at once can be daunting. You’re both buyer and seller now. The seller in you might want to take advantage of a standout spring real estate market, but the experts we talked to have said that personal circumstances matter more.

May is the best month for home-selling, according to real estate research firm ATTOM Data Solutions. A recent report found that homeowners who cashed out in May received, on average, 5.9% above asking price. June was a close second, with sellers taking home a 5.8% premium. On the flip side, the housing market cools down in the fall and colder months (though homeowners in steamy Miami are reportedly better off selling in January). ATTOM data suggest that October and December are the best months to buy, when sellers received a 1.6% premium on average.

So, buy first or sell first? When is the best time to start the process? MagnifyMoney spoke with real estate experts who analyzed four common scenarios for move-up buyers and listed pros and cons of each.

Selling before buying, timing the market

From a pure economic standpoint, experts said it would be ideal for move-up buyers to sell their homes in the spring, and wait until fall to buy their next house. But real life is often far more complicated. Other factors go into the process of buying besides price, and the stress that comes with two moves may not be worth a better bottom line.

However, for those who can time the market this way, experts said this strategy does work to a homeowner’s advantage. When the two separate transactions are not contingent upon each other, you may enjoy much more freedom and peace of mind than if you sell and buy almost simultaneously.

“When you’re selling and you’re not contingent on the front end, it’s a pretty clean sale and you’re not worried about this other purchase,” said Daren Blomquist, ATTOM’s senior vice president. “On the back end, when you’re actually buying a property, you’re a non-contingent offer, which will put you ahead of the line of a lot of other buyers who are continuing on their home-selling.”

George Ratiu, who leads research for the National Association of Realtors, told MagnifyMoney that those who are in a position to sell in the warmer months and then purchase in the fall months may be working professionals without children. They have a lot more flexibility in timing, as they are not tied to the school calendar.

But there’s an inconvenience factor in delaying the time between when you sell and when you buy. You will have to factor in the housing costs during the gap, as well as the pain of moving more than once.

While such a delay could save you some money, Ratiu cautioned that trying to time the real estate market is about as fruitful as trying to time the financial market — both are unpredictable. Plus, local market conditions can vary from regional or national trends.

“I think trying to time the market is a difficult proposition and one which should take a backseat to a buyer’s circumstances,” Ratiu said.

Selling before buying, but almost simultaneously

In most cases, Blomquist said, move-up home buyers sell their old home first and take the profit from that sale and roll it into the purchase of another home later, but not that much later. The processes happens almost simultaneously because people don’t want to have an interruption in moving, he said.

But because these purchases are typically contingent upon the selling of the old home, three parties are involved in the process, which adds a layer of complication.

“It’s not just you as a buyer qualifying for a loan,” Blomquist said. “It’s another buyer qualifying for a loan on your home. That just multiplies the number of things that could go wrong, that would trip up the sale of the home.”

In hot markets, such as the San Francisco Bay Area, sellers fearful of not being able to find that new house wait longer, exacerbating an already tight inventory. And they have good reason to worry: If it takes longer than you thought to find another home, you risk paying more on intermediary housing expenses.

“You are sitting there without a permanent place to live and that is a risk in and of itself, although I would say that’s a lower risk then taking on two 30-year mortgages at the same time,” Blomquist said.

Buying before selling

This could indeed be a risky proposition for those who buy a new home before selling the old one. Upside: You can take your time moving, which offers a certain level of freedom.

“If the market tanks, you may not get as much profit out of that sale later on,” Blomquist said. “Or if you lose your job, you may not be in a position where you’d want to be owning a home” — much less two homes.

But for those who are close to paying off or have already paid off the mortgage on their first home, the circumstances change pretty dramatically: It’s a lot easier to see that old property as an income generator even if you are not able to sell it right away.

Experts say that people who have this flexibility in their timing and finances are most likely to be retirees. (More on them in a second.)

A bridge loan may tide you over. Younger families like the Neals who buy a house before selling the first, but perhaps lack interest-free financial assistance from relatives, may want to consider a bridge loan. A bridge loan provides the short-term funding required to purchase the new home, buying you time to get your current home ready for sale. Ideally, you would move into your new home, sell your old property, then pay off the loan quickly.

The strategy is not for every real estate buyer because it comes with risks. Plus, bridge loans are not easy to obtain for many. Borrowers in general need to have excellent credit, a low debt-to-income ratio and home equity of 20% or more.

Blomquist said bridge loans work best in tight housing markets where sellers are confident that their first home will sell easily. Read more about bridge loans in this guide.

Hold onto that first home as a rental instead of selling

Retirees who have paid off their first house, and therefore wouldn’t shoulder two mortgages when they buy their next home, may want to hold onto the first home as a rental instead of selling. Or, young professionals moving for a new job where home prices are significantly lower might be able to swing two house payments.

“If you’re able to hold on to that first home, it can become a rental that can generate positive income for you potentially if the numbers work out,” Blomquist said. “And over time, if you own it for another 20 or 30 years, it will likely appreciate in value as well.”

To be sure, not everyone can afford to do this. But if you are able to manage it, a lender will likely count your rental earnings as income, which will also help you to cover the mortgage payment.

However, as we learned in the last recession, home prices don’t always appreciate — sometimes they slide. Maintaining two properties is also no easy task. Ratiu suggested you check your financial goals and time horizon, and think through whether it’s realistic for you to manage all the headaches that may come with renting a residence before deciding to become a landlord.

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2018 Summer Flight Delay Study: Best and Worst Airports Ranked

Editorial Note: 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 prior to publication.

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With the start of the summer travel season weeks away, a record number of travelers are again expected to flood airports from coast to coast. U.S. airlines enplaned 201.8 million passengers between June and August 2017, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS).

As airline activity heats up so does the potential for flight delays, which can ruin even the best laid travel plans. In a new study, the MagnifyMoney research team took a look at which airlines have the worst summer delays to help travelers prepare for what’s to come.

To see which airports suffered the most delays during the summer travel season, MagnifyMoney.com analyzed Department of Transportation airport arrival data for the 50 busiest U.S. airports between 2008 and 2017.

Key findings include:

  • Summer is worse than winter for delays. More than half (52%) of airports have more summer than winter delays, although both seasons averaged an on-time rate of 77.1% for the airports we reviewed.
  • Don’t fly in June (if you can help it). June is the worst month for summer airport delays. Three-quarters (76%) of airports reviewed had the most summer delays in June. And the overall on-time rate for June was 76%, compared with the summer average of 77.1%.
  • Summer delays are getting worse. Some 54% of airports had worse summer arrival rates in 2017 than they did in 2016, with an average on-time rate across all airports of 76.1%, versus 76.5%.
  • Expect 3 out of 4 flights to be on time. The average on-time rate across all 50  airports in 2017 was 76.1%, versus 76.6% over the 10-year period between 2007 and 2016.
  • Delays are getting worse at the biggest airports. More than half (56%) of airports had worse on-time arrival rates in 2017 than they did over the previous 10 years.
  • It’s rough on the coasts. The numbers showed that Newark-Liberty, LaGuardia and San Francisco had the worst summer delays of all airports reviewed, while Honolulu, Salt Lake City, and John Wayne Airport in Orange County, Calif., had the least.

 

The worst airports for summer delays

Newark-Liberty International Airport (Newark, N.J.)

Rate of on-time arrivals over 10 years: 67%, down 2.3% from its 10-year average

A major United Airlines hub, an international U.S. gateway airport and an entry into New York City.

LaGuardia (New York City)

Rate of on-time arrivals over 10 years: 68%, up 0.7% from its 10-year average

A popular airport for those living in Manhattan.

San Francisco

Rate of on-time arrivals over 10 years: 69.2%, up 0.4% from its 10-year average

A United Airlines hub, an international U.S. gateway airport and a popular origin-and-destination market.

JFK

Rate of on-time arrivals over 10 years: 70.5%, down 0.2% from its 10-year average

A hub for JetBlue, a major U.S. international gateway airport and a popular origin-and-destination market.

Boston Logan

Rate of on-time arrivals over 10 years: 72.5%, down 3.5% from its 10-year average

A focus city for Delta Air Lines and JetBlue and a U.S. international gateway airport.

Chicago O’Hare

Rate of on-time arrivals over 10 years: 73.3%, up 3.4% from its 10-year average

A United Airlines hub and a major U.S. international gateway airport.

Airports with the fewest delays

Honolulu International, a popular origin-and-destination airport, again has the best summertime arrival rate, at 86.7%. It was followed closely by Delta’s Salt Lake City hub, at 86%. Both airports also have the best year-round arrival rates, at 85.9% and 85.7%, respectively. Out of all four seasons, Salt Lake City outperformed Honolulu in spring and fall.

The winner for most-improved: Los Angeles International Airport had the biggest improvement in summer flights landing on time, up 5.5% between 2016 and 2017, according to MagnifyMoney’s study. The airport is in the middle of a major construction project that included a major relocation of 21 airlines between May 1 and May 17, 2017, as Delta Air Lines moved from terminals 5 and 6 to terminals 2 and 3. These moves helped cut congestion on the airport’s taxiways and runways, leading to the improvement at LAX.

Other airports making the cut for the fewest summer delays include Detroit Metro, California’s Norman Y. Mineta San Jose International, Minneapolis-St. Paul, Oregon’s Portland International, Seattle-Tacoma and Phoenix Sky Harbor.

What’s driving delays?

Struggle in Newark

Only two of three planes landed on time last summer at Newark-Liberty International Airport. The airport had the lowest on-time arrival rate for all seasons of any of the 50 airports we reviewed, and, on average, 30.5% of its arrivals were late in 2017.

It doesn’t help that delays at Newark and LaGuardia, along with JFK, are exacerbated by them being located in one of the most congested airspace corridors in the world  — the Northeast. They’re also hurt by an antiquated air traffic control system that struggles to manage that airspace. Congestion in the New York airspace is responsible for nearly 75% of all air traffic delays in the country every day, according to New York-based advocacy group Global Gateway Alliance.

This could be a problem for travelers this summer, since Newark is one of United Airlines’ busiest hub airports, serving 14.6 million passengers in 2017. When there are delays at Newark, they tend to ripple across the U.S., which could cause inconveniences for passengers this summer.

West Coast woes in San Francisco

San Francisco International Airport is plagued by fog during the summer. When this happens, arriving aircraft can’t do parallel landings on the airport’s two runways due to reduced-visibility conditions. That means one runway is closed, causing delays.

The hurricane effect

The airport where on-time arrivals declined by the most was Houston Hobby, which saw a 6.8% year-over-year drop in summer on-time arrivals. That was likely driven by the aftereffects of Hurricane Harvey, which made landfall in August 2017 and snarled air traffic in the area. For the month of August alone, Hobby’s on-time arrivals dropped 22% year over year, the study found.

How to handle flight delays like a pro

Flight delays have become a normal part of air travel, but there are things you can do mitigate the damage as much as possible.

Be prepared. This is key is when booking your flights. Try to take early-morning flights because these are much less likely to be delayed or even canceled because the plane is usually already parked at the gate.

Know your rights. Every airline is required by the DOT to have a contract of carriage that outlines what they will and won’t do for passengers in case of flight delays or cancellations. In a nutshell, if the flight is delayed by weather or other acts of God, airlines don’t accept liability, as outlined in Delta’s contract of carriage. Similar clauses are followed by the major U.S. airlines.

Check the numbers. You can also check an airline’s on-time statistics and delay causes at the DOT’s Bureau of Transportation Statistics or look at the DOT’s monthly Air Travel Consumer Report, a summary of causes of delay numbers reported by each carrier. The FAA also has flight delay information on its air traffic control System Command Center website. The website has a map of the United States that shows airport delays by color code. It also allows you to search for delays by region, airport or major airport.

There’s an app for that. The FlightView app is a must-have for your travels. The free version offers the following: the ability to track flights by flight number or route; see a real-time map showing an inbound plane’s current position and national radar weather; get notifications on flight status, delays or cancellations; view a map showing a red-yellow-green delay status of airports in the U.S. and in Canada; check the percentage of current arrivals and departures that are on time, late and very late, as well as active FAA delay programs to foresee the direct or trickle-down effect that an airport delay will have on your own flight; and share your flight status via email, text or social media.

Get notified. Sign up for airline flight status notifications on your smartphone. You’ll get flight updates that can sometimes be more accurate that those given at the gate. And these notifications can give you a leg up on being reaccommodated during long delays or cancellations.

Canceled. Now what? If the worst happens, don’t go to a long line at an airline’s customer service desk for reaccommodation. Instead, either go online to a website or a smartphone app and reschedule your own flight. If you need help, call an airline’s customer service desk.

Use your status. One of the many perks of having elite status on an airline is access to a dedicated phone number you can call for flight issues. Airlines put their best agents on these lines because they want to accommodate their best customers.

Whip out your card. If you have a luxury credit cards like the Chase Sapphire Reserve®, you have extra protection when things go wrong. If you book a flight with the card and it’s canceled or cut short by things like severe weather, you can be reimbursed up to $10,000 per trip for your pre-paid, non-refundable travel expenses, including passenger fares. Or if your air travel is delayed more than six hours or requires an overnight stay, you and your family are covered for unreimbursed expenses, such as meals and lodging, up to $500 per ticket. Other cards with trip delay/cancellation insurance are here.

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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Student Loan Interest Rates Are Going up Again

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Interest rates on federal student loans will go up for the second year in a row, with borrowers for the 2018-19 school year paying 0.55 to 0.6 percentage points more than last year to take out loans from the Education Department.

  • Direct subsidized loans for undergraduate borrowers: 5.00%
  • Direct unsubsidized loans for undergraduate borrowers: 5.00%
  • Direct unsubsidized loans for graduate or professional student borrowers: 6.60%
  • Direct PLUS loans for parent, graduate and professional student borrowers: 7.60%

Why loan rates are going up

Federal student loan interest rates reset every year. Per legislation signed into law in 2013, the rates are based on the high yield of the 10-year treasury note during the last auction held before June 1. The rates remain in effect for all loans disbursed in a 12-month period between July and June of the following year. On May 9, the 10-year note had a high yield of 2.995%.

Once the auction occurs, the rates are calculated by adding several percentage points to the 10-year treasury note yield, to cover the “administrative costs” of issuing the loans, according to the 2013 legislation that enacted this system. For undergraduate loans, the rate is calculated by adding 2.05 percentage points. For direct unsubsidized graduate loans, add 3.6 percentage points, and for PLUS loans, add 4.6 percentage points.

Interest rates, in general, have been on the rise over the last few years, so the bump in cost of borrowing isn’t a surprise. The good news is that Congress set a cap on student loan interest rates when it came up with the new formula. The bad news is those caps are pretty high, so student loan interest rates are likely to continue rising, as long as we remain in this rising-rate environment.

Interest rates cannot exceed 8.25% for undergraduate borrowers, 9.5% for graduate borrowers with direct unsubsidized loans and 10.5% for PLUS loan borrowers. Even though rates increased significantly this year, they have much more room to grow, which we may see if rates continue along the path they’ve been on recently.

What this rate change means

For the most part, borrowers with existing federal student loans will not see their rates change, as all federal student loans disbursed after July 1, 2006 carry fixed interest rates.

Students and parent borrowers taking out federal education loans between July 1, 2018 and June 30, 2019 will pay the new interest rates listed above. The rates will remain in effect for the life of the loan.

How to lower your student loan interest rates

Student loan borrowers have few options for lowering their interest rates. You could either combine all or most of your federal student loans with a direct consolidation loan once you leave school, but that may or may not save you money (more on that in a minute). You could also refinance your student loans with a private lender, but in exchange for potentially lower interest rates, you give up the benefits exclusive to federal student loans, like income-driven repayment plans and student loan forgiveness. Private lenders may or may not offer loan deferment or forbearance (as federal loans do), which allow you to suspend payments if you go back to school, fulfill military service orders or experience financial hardship, among other qualifying circumstances.

You can preserve those benefits with a direct consolidation loan. Your interest rate on that loan will be the weighted average of the interest rates on the combined loans, rounded up to the nearest one-eighth of one percent. The weighted average is what makes this a tricky decision: If your loans with the highest unpaid balance have the lowest interest rate, you may end up with a lower interest rate when everything’s combined. But if your largest balances have the highest rates, you could actually receive a higher interest rate.

If you’re comfortable refinancing with a private lender, keep in mind you’ll need good credit to qualify for the best rates. You can check out our list of the best student loan refinance offers to get a sense of your potential savings.

How to reduce the amount of interest you pay on student loans

Refinancing and consolidating aren’t the only ways you can reduce how much you fork over to the Education Department. Consider committing to one or both of these strategies:

Pay the interest as you go

Unless you have a direct subsidized undergraduate loan, you will be responsible for paying the interest your loan accrues while you are enrolled in school at least half-time, in your grace period (the time between leaving school and entering repayment) or in deferment. When you enter repayment, that interest will be added to your principal loan balance, meaning you will end up paying interest on that interest. By paying the interest as you accrue it, you can avoid this situation, called interest capitalization.

Of course, many students may not have the means to make such payments while in school, but if you can, you may save yourself a lot of money in the long run. This generally only applies to borrowers of direct unsubsidized loans and graduate PLUS loans, as the Education Department pays the interest on subsidized student loans while the borrower is in school, grace period or deferment, and parent PLUS borrowers generally enter repayment once the loan is disbursed.

Pay more than the minimum

Once you enter repayment, your loan servicer will send you a statement saying how much you owe each month. You can pay more than that, and by making extra payments toward your principal balance, you can reduce the amount of interest you pay over the life of the loan. This is a nice alternative to refinancing your student loans to a shorter term, if you’re worried about taking on a higher, required monthly payment.

Make sure you tell your loan servicer that you’re making an additional payment and you’d like it to apply to your principal balance. Otherwise, the servicer may hold onto the money as a future payment. While that means you may not have to pay the next month, you’re also not saving anything by sending over your money early. It’s a good idea to check our account after making such a payment, to ensure the servicer processed it properly.

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I’m Always the Broke Friend in My Group — Here’s What I Do to Cope

Editorial Note: 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 prior to publication.

 

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At some point or another most of us have had — or will have to —  miss out on dinners, nights out and events with our peers simply because we can’t afford to participate. In other words, we’ve all been the “broke” friend.

Whitney Griffin said she’s used to being the broke friend in her social circles. Griffin, 32, is college educated —  she earned a bachelor’s in art from Florida State University in 2009 — yet has never earned more than $19,000 in a given year. It’s not for lack of trying, she told MagnifyMoney, however, she purposefully chose a career path that is fulfilling yet not exactly lucrative.

“There’s something to be said for enjoying your life,” said Griffin, who lives in Asheville, N.C. and has worked various jobs in both art and business. “I’ve chosen jobs that I’ve enjoyed more so than I would make money at.”

It’s when she runs into friends who have more cash to burn that she’s reminded of the financial consequences of her professional decisions.

“When people say ‘oh you should visit Ireland’ or ‘you should take this cruise,’ I’m just sitting there in my head thinking, ‘I should really get health insurance.’”

Financial inequities can be difficult to deal with at any age, as evidenced by Michael Little. Little, a 71-year-old retiree in West Linn, Ore., told MagnifyMoney in his early days of marriage and starting a family, he realized how different his lifestyle was compared with friends who earned more and did not have children.

At a time when everyone’s lifestyles are made public on social media, it can be even more difficult to stay on a path of frugality when it feels as if your peers are doing exactly the opposite.

MagnifyMoney spoke to Little, Griffin and other self-professed “broke friends” to compile a list of strategies and tips they use to cope.

Stick to your values

Little, now retired from a career as a software developer and systems analyst, lived frugally from the start.

“I grew up pretty poor in Indiana,” Little said. “We had a roof, we had good food. I never felt any less than any of my friends. That influenced me — that you could enjoy yourself and be frugal when you have to.”

As a teenager, he hung with a group of friends he described as more well-to-do.

“They [would] just go out and do stuff, and I didn’t have any money,” he said. “I would say I’m not really hungry and go out and get a soft drink or something like that. I was a little uncomfortable with it as a kid.”

When he married his wife Debbie at 30, they had children right away and a lot of expenses. He was in school and again didn’t have as much money as his peers who didn’t have children.

“I learned a lot of financial discipline from my wife,” said Little. “She’s really good about saying ‘well, I can’t afford that.’”

Make the most of what you can get for free

Hunter Jamison, 19, said a scholarship is the only way he’s able to attend New York University, which can cost up to $72,900 per year, according to The College Board.

He learned to find ways to socialize with peers who have more disposable income than he does.

When a friend suggests they grab a bite to eat, he doesn’t waste an opportunity to use his prepaid campus meal plan.

“If someone wants to meet up and has the meal plan, I’d be like ‘hey do you just want to go to the dining hall,’” he said. “If they don’t, I suggest we cook something because it’s a lot cheaper to buy groceries and cook than to always eat out.”

He also takes advantage of school events where there will be free food and discounts all over the city for NYU students like free access to some museums.

Be the planner

When Heidi McBain, a licensed professional counselor in Flower Mound, Texas, was in graduate school, she had to make her dollars stretch. She decided to take the lead, planning ways to spend time with her friends so they wouldn’t have a chance to propose a super expensive activity.

She said she often suggested they do something outside, like bike riding or hanging out at the beach. If she wanted to have friends over, she’d cook at home or invite them to bring a dish and make it a potluck.

“I was in a very expensive area and I didn’t have any money but I’m also pretty extroverted so I like to be around people,” said McBain. “I had to be really creative in how I would spend time with people.”

Look for free or inexpensive family outings

Little and his wife would look for things to do around town that were free or inexpensive for their family. They had picnics instead of going out to eat at a restaurant and went to the movies on Tuesday afternoons as opposed to Saturday nights.

“Every vacation I ever went on as a kid … we went camping,” said Little. He did the same with his children and continues to pass his love for the outdoors down generations.

He often took his family on camping trips to the mountains. There, his children could get filthy playing in the sand and enjoy roasted marshmallows.

“Tomorrow, I’m taking my grandson up on the mountains and we are going to take him sledding.

It’ll cost me the price of a tank of gas and some snack food,” said Little in an interview with MagnifyMoney.

Don’t fall into the ‘drinks’ trap

“One of the easiest ways to kind of blow through money is dining out” and meeting up with friends at bars, said Griffin. “It’s really easy to blow through a tab without noticing.”

So she limits herself to having only one drink — and not finishing it so she’s not obligated to get the next round — and the cheapest thing on the menu. She says it’s often a salad or something else inexpensive.

While in graduate school, McBain realized if she signed up to be the designated driver, she wouldn’t have to deal with pressure to spend money on drinks.

“If I didn’t have money, I would always drive,” said McBain. “People always love having a DD, so that worked out really well.”

Going out? Eat and drink ahead of time

When Griffin wants to go out to eat or out on the town with her friends, she plans to eat and drink a bit ahead of time, so she doesn’t spend as much money when she’s out.

“If I’m really wanting to go out and party, then I’ll bring my flask on the side,” she told MagnifyMoney. “I tend to pack my lunch box every day that I go to work anyway, so I have no problem filling up on snacks.”

Focus on the bigger picture — your goals

You may need to sacrifice going out to dinner once or twice to join your friends at another time at an event or on a vacation, and that’s OK.

“It’s about choices,” said McBain. “People get invited to stuff all of the time, regardless of how much money you have, it’s about being really choosy.”

During her graduate school days, she would cook at home or pack her lunches to save money so if something big came up, she could still go.

“If there was a new restaurant and everybody was going, I had saved money very rarely eating out so that I would have it for the bigger things,” said McBain.

Find your frugal tribe

“Find friends that are sympathetic to your situation,” said Jamison. In any environment, there definitely are people that are frugal like you.”

He said this makes it so that not spending money doesn’t mean you’re not socializing.

“There are definitely a lot of people — even if they have money — that don’t spend money left and right,” said Jamison.

You can even make frugality social. For example, Griffin suggests hosting clothing swaps when you need new wardrobe pieces in the name of environmental conservation. Everyone would clean out their closets before the event. During the event, the clothing is displayed and people can browse and take what they want, with no money involved.

There are also many online Facebook groups, like Frugal Homemaking and Living and Frugal Family Life where affordable-minded folks get together to share tips and support one another.

Be frank with friends who don’t understand your situation

There will always be that friend who just doesn’t understand when you have to constantly turn them down.

“I had one friend and he was one that didn’t get it,” Little told MagnifyMoney. “He came from a family with a lot of money.”

He would invite Little and his wife to go on couple’s vacations and out to $200 dinners.

If Little balked, his friend would respond with something like, “You guys have really nice jobs you should have the money.” But he was putting his money into retirement, something he knew his friend didn’t need to do because he inherited close to a million dollars. After an invite to Costa Rica, Little finally broke it to his friend.

“I told him if I’d inherited $700,000, a new car and a condo in Florida and had no kids, I would retire today,” Little said. “I think it finally woke him up.”

It can be frustrating to feel like you’re always playing the “sorry, I’m broke” card, but it shouldn’t be an issue for your real friends.

“If you have a good friendship, you should be able to say ‘I really would like to go but I just don’t have the funds to do that,’” said McBain.

“People need to give themselves permission when friendships change to not have to feel like they need to stick with it,” she added.  “Really, the heart of most friendships is spending time together.”

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Brittney Laryea
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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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What to Know Before You Sublet Your Apartment This Summer

Editorial Note: 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 prior to publication.

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We’ve all been there. You landed a summer internship or a new job in a different city, or you have to move into a new house before your lease is up.

Rather than doubling up on rent or losing your deposit, consider a sublease. Leasing your apartment to another tenant allows you to get out of Dodge and keep some cash, but you could find yourself in unwanted — and expensive — legal battles if done improperly.

Here’s how you can manage a sublet legally to avoid unnecessary stress and hassle.

Create a sublease agreement

Even if you find a reliable subtenant, it’s a good idea to get your agreement in writing. You can find sublease samples online. The samples are basic boilerplates where you can put in the amount of rent, due dates and what the security deposit is.

Some people are able to make a profit off a sublease. Some have to take a loss, such as renting for a price lower than the rent they pay, if they are in a rush to find a subtenant. And others take the same amount of rent to break even. It all depends on the specific sublease situation, said John Bartlett, executive director of the Metropolitan Tenants Organization in Chicago, a tenant advocacy group.

“It is best to rent the unit to a trustworthy person,” Bartlett said. “And if that means suffering a small loss, then that is better rather than holding out to get the full rent or renting to someone with a less than stellar rental record.”

To avoid unexpected costs while you’re away, you can add additional clauses to the agreement to make sure your subletter complies with the terms of the lease. A few common examples:

  • Require the subtenant to take responsibility for any damage to the apartment during the stay.
  • The subtenant should keep furniture in good condition, assuming you plan to leave personal items.
  • If you live in a city that has specific recycling requirements, you can ask your subletter to follow those rules to avoid fines.

Ask for a security deposit

If you are subletting your apartment, experts suggested you take at least one month’s rent as a security deposit. You can request more if you think it’s appropriate, but for tenants of rent-stabilized apartments in New York, you can only take one month’s rent as a security deposit by law.

Remove yourself from the lease, if you can

Bartlett said in many leases, the tenant and subletter appear on the same lease contract. As a result, they will be jointly liable for damages or missed payments. That means that the landlord can go after one tenant or both if things go wrong.

If you don’t plan to return to the apartment, Bartlett recommended you try to convince the landlord to take you off the lease and sign a new lease with your subtenant. That would be the ideal situation for you, but the landlord has little incentive to sign a new lease if they can get you, the tenant on record, to pay rent should things go awry with the subtenant, Rozen said. Your landlord may refuse, but it’s worth a try. Sweetening the deal by paying a negotiated fee to your landlord may be worth it, Bartlett said.

Things you should do before subletting your apartment

Subletting means you become the landlord to the subletter, and there’s no contractual relationship between the subletter and your actual landlord, Jennifer Rozen, a New York City tenant lawyer, told MagnifyMoney.

If a subletter fails to pay rent, or damages the apartment, as long as the lease is still in effect, you could still be on the hook for the full rent amount or the damages, tenants’ rights experts said.

Given the potential risks involved in subletting, here’s some homework you need to do before giving your apartment key to your subtenant:

Before you do anything, review your state’s landlord-tenant laws and regulations. Every state has its own sublet laws, so it’s a good idea to understand your rights and obligations as a tenant.

In some places, like Illinois and New York, you have the legal right to sublet as long as the landlord doesn’t reasonably deny it. In New York, requests must be in writing and sent by certified mail with an attached proposed sublease that includes the subletter’s information. The landlord has 10 days to look over your request and ask additional questions, but Rozen says the entire approval process could take as long as two months. In other states, including Iowa and Kansas, you cannot sublet unless your lease permits it.

No laws prohibit subletting, but the subletting procedure may vary greatly based on specific leases. You should see if your lease has restrictions on subletting. If the lease or the state law requires you to contact the landlord and go through a formal process, then you need to abide.

In many states, landlords cannot unreasonably deny a subtenant, but they do want to be involved in a sublease, according to Bartlett.

“They’re not going to want some person that they don’t even know who it is to live in their unit,” Bartlett said.

Once you are clear on your obligations and responsibilities, you can start looking for a subtenant. Experts interviewed by MagnifyMoney strongly advised that you interview your candidate(s) and do your due diligence.

One way to protect yourself as a tenant is to call your potential subletter’s previous landlords to inquire about his/her rent payment history, Bartlett said. Rozen said it’s legal for you to request W-2s, recent pay stubs and credit reports from the prospective subtenant, or recent bank statements if this person is a freelancer or unemployed.

“You definitely shouldn’t get yourself in a situation where you no longer have the right to be in the apartment because you find the sublease, [but] you don’t know whether the person is financially viable,” said Rozen, who has represented hundreds of residential and commercial tenants.

If you want to go forward with a subtenant whose financials are questionable, you could ask him or her to pay upfront the partial or full rent amount for the sublease. “That’s the safest thing to do because the only thing you can do as the tenant of record is pay the rent to avoid getting sued by the landlord, then you have to go after the subtenant,” Rozen said.

What’s the risk of subletting without asking your landlord?

Although it’s best to inform your landlord of the sublease and follow the rules, in reality, many people don’t do that. It’s fine if you don’t get caught, but the consequences could be severe if you do.

In many leases, Bartlett said, there’s a clause stating that the unit is only for the person named on the lease. If the landlord finds out that a tenant has sublet their property while keeping it in the dark, the landlord could terminate the lease and demand that you leave the property. You could be liable for any damages or unpaid rent, experts said.

In New York, if your landlord finds out about a subtenant he or she didn’t approve, or simply doesn’t want the subtenant, the landlord may send you a legal notice requiring you to remove your subletter in 10 days. The landlord cannot directly evict the subtenant without getting you involved. Miss the deadline and your landlord could terminate your lease and try to evict you in housing court, which in turn, removes the subtenant. Or worse: “If you have a legal fee provision in your lease, then the landlord would be entitled to collect their legal fees from you if you go to court … and lose,” Rozen said.

What to do when things go wrong?

When she was in law school, Rozen sublet her apartment, but her subtenant wouldn’t leave the apartment when the lease was up and stopped paying rent.

In that situation, Rozen said the tenant would have to file a claim in court against the subtenant. Such cases often takes months, unless your subtenant voluntarily moves out after the case is filed. In Rozen’s case, her subletter finally left the apartment willingly, but he skipped on two months’ rent and left town. It was too late for Rozen to sue at that point.

“I will never make that mistake again,” Rozen said. “I was a poor law student.”

If your subletter doesn’t pay rent or damages your apartment, Rozen said the first step is to write a demand letter explaining the situation and threatening to sue if they don’t repay the rent or the costs.

If a demand letter doesn’t work, an easy and inexpensive way to handle the situation is to file a small claims lawsuit, which typically doesn’t require hiring an attorney, Rozen said. You could collect up to a few thousand dollars, depending on your state. In New York, for instance, the maximum is $5,000.

Resources for tenants

There are many housing advocacy groups across the country dedicated to helping tenants. When involved in disputes with your landlord or your subletter, you can turn to local organizations for legal advice and assistance. To find your local tenant advocacy groups, check out this Tenant Rights page on the U.S. Department of Housing and Urban Development website.

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.

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

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