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A Reason Nearly All Purchases Should Be on a Credit Card

Advertiser disclosure You're our first priority. Every time. We believe that everyone should be able make financial decisions without hesitation. While our website doesn't feature every company or financial product that is available on the market We're pleased that the guidance we offer, the information we provide as well as the tools we design are independent, objective, straightforward -- and cost-free. How do we earn money? Our partners compensate us. This can influence the products we review and write about (and the way they appear on our website) However, it in no way affects our suggestions or recommendations that are based on many hours of study. Our partners are not able to be paid to ensure positive ratings of their goods or services. .

The reason nearly every purchase should be made with a credit Card

Credit cards are secure and convenient they can help you build credit, they make budgeting easier and also earn rewards. No, you aren't required to take on debtand do not have to pay interest.

by Virginia C. McGuire Virginia McGuire was previously a credit cards writer for NerdWallet. She is a journalist who has covered personal finance and real estate, business, architecture and design. Her writing has appeared in the Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.

and Paul Soucy Lead Assigning Editor Credit cards, credit scoring, personal financial planning Paul Soucy has led the Credit Cards content team at NerdWallet since the year 2015. He served as an editor for USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance editing and writing business with a focus on business and personal finance. He was editor of USA Today Weekly International Edition for six years and received the top honor of the year from ACES: The Society for Editing. He has a bachelor's degree in journalism and a Master of Business Administration. His home is in Des Moines, Iowa, with his wife, two sons, as well as the dog Sam.

Updated Nov 3, 2022

Edited by Paul Soucy Lead Assigning Editor Credit scoring, credit cards Personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He worked as an editor at USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also developed a highly successful freelance writing and editing business with a focus on personal and business finances. He was editor of the USA Today Weekly International Edition for six years and received the top distinction by ACES: The Society for Editing. He holds a bachelor's degree in journalism as well as a master of Business Administration. His home is in Des Moines, Iowa, with his fiancee, his two sons and the dog Sam.

The majority or all of the products we feature are provided by our partners who compensate us. This influences which products we feature and where and how the product appears on the page. However, this doesn't affect our opinions. Our opinions are entirely our own. Here is a list of and .

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Cash used to be king. The majority of people paid for their purchases with cash or checks (which are functionally equivalent to cash) and stored credit cards for huge frequent purchases -if they had credit cards at all. Nowadays credit card transactions are accepted nearly everywhere, and some do not carry cash at all.

The general rule is that NerdWallet recommends whenever possible:

Credit cards are safer to carry around than cash and offer stronger fraud protections than debit cards.

You can earn significant rewards , without having to change the way you spend money.

It's easier to track your spending .

A responsible use of credit cards is one of the simplest and fastest ways to earn credit .

Using credit cards . Spend your money as usual, pay your balance in full every month, and you'll enjoy the many benefits of credit cards without being in debt or paying any interest.

The top credit card for 2023.

Cash back or 0% APR balance transfer -- shop our Best-Of Awards to see the top credit cards of the year.

>> MORE:

Credit cards are safer to carry and use

When you loose your wallet, or are taken hostage, the money you were carrying is likely to disappear for ever. If thieves go on a shopping in your credit cards there is a chance that you won't be held responsible for fraudulent purchases. It may take some time to sort out the resulting mess, but you won't lose any of your money.

Debit cards, too, pose a risk. If your credit card is misused in a fraudulent manner it is the issuer that loses money. If your debit card is used in a fraudulent manner, . Assuming you notify the fraudster promptly you'll get your money back -at some point. It could take some time until things are sorted out. In the meantime there is a chance that checks will bounce. automated payments could be rejected due to lack of funds and you may have a hard time covering your bills.

>> MORE:

Credit cards earn easy rewards

Credit card rewards exist to make it easier for users to use their credit card, and are highly persuasive. With a flat-rate credit card that pays the same amount for every purchase, you could earn back 1.5 percent, or even percent of each dollar you spend, whether in cash, points or miles that you can redeem for travel or other things. If you spend $1,000 per month and you can make between $180 and $240 each year, without any effort.

Other cards earn greater rewards for specific areas of spending, such as food, gas or dining out. Combine a handful of cards, and you'll boost your rewards significantly.

For example, say that a family has four top cash-back credit cardsthe, the and . Using them strategically, that family could make hundreds of dollars each year in cash back:

Spending

Rewards rate

Annual rewards

Groceries

$400 per month

6%

$288

Restaurants

$150 a month

* 5% for 3 months

* 3.3% for nine months

$81

Gas

$100 per month

* 5% for six months

* 3% for 6 months

$48

Amazon.com

$100 per month

* 5percent for six months

* 2.2% for six months

$42

Streaming media

$50 / month

6%

$36

Travel

$1,000 / year

5%

$50

Everything else

$1,000 / month

2%

$240

TOTAL

$785

See how the rewards are earned

Groceries

The Blue Cash Preferred(r) Card from American Express earns 6% cash back up to $6,000 a year in spending in U.S. supermarkets, then at 1% (terms are applicable -- check ).

Restaurants

For three months: It(r) Cash Back program for three months: it(r) Cash Back earns cash back of 5% on up to $1,500 per quarter of spending on categories you can activate and 1% on all other purchases. In 2020, restaurants were an area that earned 5% for a single quarter.

For nine months, the Chase Freedom Flex(sm) earns 3% cash back at restaurants.

Gas

for three months. Chase Freedom Flex(sm) earns 5 percent cash back up to $1500 of spending in categories for quarterly that you can activate. The year 2020 was the last time Chase had gas stations as a category that earned 5% for three months.

In three consecutive months In 2020, it(r) Cash Back was a part of the It(r) Cash Back program was introduced. it(r) Back Cash Back included gas stations in an 5% category for three months.

For six months: The Blue Cash Preferred(r) Card from American Express earns 3% cash back at U.S. gas stations (terms apply).

Amazon.com

For six months in the year 2020 Chase and Discover had Amazon.com as an 5% category for three months apiece.

The card is valid for six months. Citi(r) Double Cash Card earns you 2% cash back on all purchases . You earn 1cent when you purchase and 1% when you pay it back.

Media that stream

The Blue Cash Preferred(r) Card offered by American Express earns 6% cash back on selected U.S streaming and streaming service subscriptions (terms apply).

Travel

Chase Freedom Flex Chase Flex Flex(sm) gives you 5% cash back on travel booked through Chase.

Everything else

Use the Citi(r) Double Cash Card and earn 2% cashback.

A word of caution however: Don't overspend more than you would just to get additional rewards. The little cash reward will not make up for the additional $100 at the supermarket shop or that additional $250 worth of clothing. And if you carry a balance from month to each month and pay interest, it will more than take the value of your rewards and you should pay it all in full whenever you can.

>> MORE:

Credit cards allow you to track your spending

Maintaining a budget can be difficult no matter how you make use of your cash. However, determining where your cash went is particularly difficult. It's easy to lose receipts and then there's no record of how much you spent or the location the money went. Checks? You've missed registering one in your check register and you'll have be patient for your person who received it to cash it before you can track it (and certain people are known for storing checks for months).

Credit cards are a great way to ensure that everything is reflected on your account online in near real-time. Additionally, many issuers automatically classify purchases by merchant

Purchases made with a Chase credit card are categorized by categories.

Many major issuers will offer reports that allow you to see how much you've spent in various categories during the month you're in, for the year to date, or for a period that you choose:

Report on spending for an Chase credit card.

If you use a budgeting application like Mint or You Need a Budget, you can import information from your credit card and bank accounts. It's easy to put each purchase into a budget category and see where you're overspending and the best places to splurge a little.

>> MORE:

Credit cards can help build credit

There is no requirement to use an account with a credit card in order to have good credit and you certainly don't have to carry a balance. However, judicious use of a credit card is the most effective way to improve your credit scores and a good credit score opens many opportunities. It makes it easier to find homes, whether a prospective landlord is checking your credit before giving you the keys or you're seeking a loan to purchase a house. Cell phone providers, insurance agents and utility companies also may use your credit score in determining your suitability, and even your rates. It could even increase your chances of landing an employment opportunity, since many employers run credit checks on prospective employees.

If you do own a credit card, making regular small purchases, keeping your balances low and paying your bill promptly will increase your credit score over time.

>> MORE:

It is not advisable to make use of a credit or debit card

When you'll have to pay an extra fee The merchant pays processing fees every time you use a credit card. Most of the time, those fees are rolled into the price of the merchant, just like other costs associated with doing business. But sometimes a merchant might charge the customer directly, by adding an upfront charge or "convenience fee" to use cards with credit. In these instances, you'll probably want to pay in another way in the event that your credit card rewards are sufficient to be able to offset the charge.

If you don't want to force the merchant to pay fees: Similarly, you may prefer not to use credit cards for smaller merchants you especially want to support. They might appreciate it if you pay in cash or via cheque, since they don't have to pay the processing costs. Even debit cards are better than credit cards issued by merchants' standpoint, because processing fees for debit cards can be less than what you'd have to pay for a credit card transaction.

When you don't want overspend: Some people are unable to keep their spending under control when they use credit cards. A credit card limit of five figures might make it hard to remember the reason you shouldn't spend your money on the latest gadget. If you're nearing your credit limit, or worried about racking up an excessive credit card balance You might want to reach for your debit card or use cash.

There are many positive benefits for credit card users. Do your research to find the best one for you. Just make sure you're able to budget your money wisely, whichever method of payment you choose.

>> MORE:

To see rates and fees of the Blue Cash Preferred(r) Card from American Express , see .

The authors' bios: Virginia C. McGuire is a former credit cards author for NerdWallet.

Paul Soucy is the lead credit cards editor of NerdWallet. He's worked for USA Today and the Des Moines Register and holds an MBA.

In a similar vein...

Find the right credit card for you.

Whether you want to save money on interest charges or earn higher rewards, the right card's out there. Just answer a few questions and we'll narrow your selection for you.

Why are you looking for an alternative credit card? Travel rewards & perks Cash back on purchases Pay off the balance of your debt Build Credit

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(image: http://www.imageafter.com/image.php?image=b19nature_elements058.jpg&dl=1)What Credit Card Rewards can be used for Apple Purchases?

Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make financial decisions with confidence. While our website doesn't include every business or financial product on the market We're pleased that the guidance we offer, the information we provide and the tools we develop are objective, independent simple, and cost-free. So how do we make money? Our partners pay us. This could influence the types of products we review and write about (and the places they are featured on our site) However, it in no way affects our suggestions or recommendations that are based on thousands of hours of research. Our partners cannot be paid to ensure positive reviews of their products or services. .

Which Rewards Credit Cards Can be used for Apple Purchases?

Many issuers allow you to redeem points for Apple gifts and merchandise. While it might not provide the most price, points can aid in saving money.

Written by Craig Joseph Lead Writer | Credit cards, Travel rewards Personal financial Craig Joseph is a NerdWallet chief writer and credit card expert. He holds master's degrees in geoology from West Virginia University and oceanography from Oregon State University and has published in journals, newspapers and academic blogs. Craig is passionate about personal finance and wants to improve the financial literacy of every person whom he comes across. He'll probably also try to convince you of why rocks are cool.

Updated Dec 19, 2022 9:08AM PST

Edited by Erin Hurd Assistant Assigning Editor Credit cards, rewards, personal financial Erin is a credit card and travel rewards expert at NerdWallet. She has spent more than two decades teaching readers innovative methods to increase their investment and personal finances. Prior to being a part of NerdWallet, Erin worked on dozens of newsletters and magazines that dealt with business, investing, health and travel with Agora Publishing. Her love of travel led to a passion for loyalty and credit card rewards to subsidize trips, and she thrives on teaching others how to make use of the potential of rewards from credit cards. When she's not editing or writing, Erin is planning her next trip for her family of four , using miles and points. She's based in Baltimore, Maryland.

The majority or all of the products featured here are from our partners who compensate us. This impacts the types of products we write about as well as the place and way the product is featured on the page. However, this does not influence our opinions. Our opinions are entirely our own. Here's a list and .

Table of Contents: Huge marketplace filled with cell phone dealers A wide selection of used phones with Prime shipping : An excellent marketplace for those looking to buy or sell one of the first reliable cell phone resellers and Show More

If you're looking for an Apple product and have a pile of points collecting dust, applying those points toward your purchase might be a great option to put some money in your pocket. But, you should be aware that the points might have greater value when redeemed for travel.

A list of rewards programs that permit redemptions of Apple gifts and merchandise are listed below.

If it is possible to exchange points for gift cards at the same time as money back, or even a statement credit it's best to purchase the Apple product in full and then use these points in order to repay yourself back. That way, you can get rewards for the purchase, and you may receive benefits the benefits you don't receive if you pay with a gift card.

>> MORE:

Credit reward card program

Merchandise point value, in cents

Gift cards point value in cents

Chase Ultimate Rewards(r)

1.

1.

U.S. Bank(r) Reward

0.85.

1.

Pentagon Federal Credit Union (PenFed) Rewards

0.6-0.8.

0.85.

Barclays Rewards

0.3-0.5.

0.5.

American Express Membership Rewards

N/A.

0.85.

Capital One Rewards

N/A.

1.

Citi ThankYou Points

N/A.

1.

The Bank of America Reward

N/A.

1.

Nerdy Tip

The earns Apple Cash which can be used to purchase items at any retailer, not just Apple or for a cash deposit to your bank account. This is a cash-back credit card, which is why it's not included on our list.

>> MORE:

1. Chase Ultimate Rewards(r)

The program has the best value of any reward system for redemption toward Apple products. Points cost 1 cent for each item, which includes merchandise and gift cards. This means that 10,000 points are worth $100.

However, frequent purchases can raise the redemption rate for merchandise by 10%, 25 percent or even 50 percent, depending on which card you're using. If you are able to hold off on your redemption till one of the deals becomes accessible, you'll get more value from your points than you would for a statement credit or Apple gift cards.

If you don't have enough points to make a payment through Chase's Ultimate Rewards(r) portal, Chase will let you apply any points you've got (as long as they are able to pay for a minimum of 20% of the total amount) and charge the remainder of the cash balance to your card.

However, keep in mind that these options are below the NerdWallet offers on Chase Ultimate Rewards(r) when transferred to travel partners rather than.

>> MORE:

2. U.S. Bank rewards

U.S. Bank rewards earned on the Altitude and FlexPerks range of cards can be redeemed for both Apple gift cards and merchandise.

Merchandise redemptions can be made by visiting the Apple Rewards Store located in the U.S. Bank Rewards Center which is where points are worth around 0.85 cents each according to the prices of retail at the Apple store. This means that 11,764 points are worth $100 when redeemed for goods.

However, when they are redeemed for gift cards, the points are worth 1 cent each. Cards are offered in increments of $10, $25, $50 and $100. It means that 10,000 points will be worth $100 when used to purchase gift cards. Occasional limited-time offers will provide more favorable rates for redemption than this.

U.S. Bank rewards are worth 1 cent when redeemed for the purpose of a statement credit or a bank transfer. Therefore, unless you have a special offer for using points prior to the redemption, you'll be better off buying your Apple equipment using your credit card to earn rewards for the purchase and then using your stockpile of points to offset the charge through a statement credit. This offers the advantage of being able to shop at any store -- not just through Apple.

>> SEE:

3. Pentagon Federal Credit Union (PenFed) Rewards

PenFed offers two credit cards that earn points which can be exchanged to purchase Apple products and gift cards.

As of October 20, 2022, redemptions for merchandise can be done by going to the store and clicking on the Apple Rewards banner. Based on the prices of retail in Apple's Apple store, the redemptions for merchandise yield a value of points between 0.6 cent to 0.8 cent apiece.

Points are worth 0.85 cent apiece when redeemed to purchase gift cards. Gift cards are available in denominations of $25, $50, $100 and $250. So, 11,764 points will be worth $100 when you redeem them in gift card denominations.

There's no method to convert the PenFed Rewards to cash, but they can be redeemed for travel purchases at a rate of 1 cent each.

If you're planning to spend your rewards on a new MacBook or AirPods, you'll benefit the most by using gift cards to redeem them, and then using them for your purchase.

>> MORE:

4. Barclays rewards

Applications are currently unavailable for new cardholders looking for Barclays rewards. But legacy cardholders of any Barclays Arrival cards or Barclays Arrival cards and those who were relocated into a new product, such as the Barclays View Mastercard are still in a position to earn and redeem rewards.

If you own such a card, the rewards can be converted into Apple gift cards at an exchange rate of 0.5 cents per cent. That means 10,000 points are worth $50 when they are exchanged for gift cards. These cards are available in denominations such as $100, $25, $100, and $250.

You can also redeem your points directly for Apple merchandise, but a gift card is generally greater value. Based on the retail price direct from Apple the rate of redemption for merchandise will range between 0.3 cent and 0.5 cents per point.

They are far below the minimum value of one cent per point that cardholders earn when they use Barclays rewards to get a statement credit against purchases made on travel. If you're in need of cash, you'd probably be better off trying to cover the cost of an airline ticket or hotel room with rewards and purchasing Apple gear outright.

5. American Express Membership Rewards

American Express Membership Rewards can be used to purchase Apple gift cards with the rate of 0.85 cents per cent. Gift cards are offered with denominations of 10 dollars or $25, $50, $100 and $500. The points earned are worth $100 when you redeem them for gift cards. As with other issuers AmEx also offers limited-time deals that increase the value of points redemptions for gift cards.

Although this rate is higher than the 0.6 cent per point cardholders receive when they redeem their Membership Rewards to get the purpose of a statement credit, it is still below the baseline value of 1 cent per point available by using points to book travel through AmEx. AmEx traveling portal. And if you're an optimizer, both of those rates are well below the value that NerdWallet assigns to Membership Reward points when transferring on to partners for travel.

>> LEARN:

6. One Rewards and Capital One Rewards

Points earned on Capital One cards (called miles) can be exchanged to purchase Apple gift cards with an amount of 1 cent each. This means that 10,000 miles are worth $100 when used to purchase gift cards. Gift cards are available with denominations starting at $25, $50, $100 and $200. Like many other issuers, occasional limited-time promotions may provide an enhanced redemption rate.

But Capital One miles can also be used towards money back, or as a statement credit at 1 cent each. If you're searching for Apple products, you'll probably be better off charging the purchase to your credit card and earning rewards from your credit card and then paying the price using cash-back or statement credit redemption. Additionally, this has the advantage of being able buy from virtually any retailer and not only through Apple.

>> MORE:

7. Citi ThankYou Points

You can redeem them to purchase Apple gift cards at a value of 1 cent per point. Gift cards are available in denominations of $50, $25, and $100. That's 10,000 points worth $100 when they are exchanged for gift cards. This redemption value is equal in cashback to ThankYou points when redeemed directly into a bank account or for a credit on a statement.

Instead of using points to purchase gift cards it's better to consider purchasing a brand new Mac Mini with your credit card and earning ThankYou points with every purchase; then redeeming your ThankYou points for an account credit to offset the purchase.

>> MORE:

8. Bank of America(r) rewards

Points earned on Bank of America(r) credit cards can be exchanged for Apple gift cards with the rate of 1 cent for each point. That's 10,000 points worth $100 when redeemed for gift cards, which can be purchased in denominations of $25 50, $100, $150 as well as $200, $250, and $500.

Bank of America(r) points can be exchanged for a statement credit or as an cash transfer to an account for deposit at one cent apiece. So if you have an accumulation of Bank of America(r) rewards which you'd like to exchange to purchase a brand new iPhone, you'd be better to make the purchase using your rewards-earning credit card and then recouping the cost with a statement credit. In this way, you can look around for the best deal and not have to purchase the item via Apple.

>> SEE:

Author bios: Craig Joseph is a NerdWallet authority on credit cards. The work of his has been highlighted in The Associated Press, Washington Post and San Francisco Chronicle.

Methodology

The values presented in this article are calculated in cents per spot (cpp) using the dollar cost of an item by 100 and dividing by the number of points required.

Valuations presented herein are based on daily point redemption rates . They do not include limited-time promotions.

All product valuations are basing on prices straight from the Apple Store.

In a similar vein...

Find the best credit card to suit your needs. If you're looking to pay less interest or earn rewards, the right card's out there. Simply answer a few inquiries and let us narrow your selection for you.

Dive even deeper in Credit Cards

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Debt Relief: Learn your options and the consequences

Advertiser disclosure You're our first priority. Every time. We believe everyone should be able to make sound financial decisions with confidence. And while our site doesn't feature every company or financial product on the market We're pleased of the advice we provide as well as the advice we provide as well as the tools we design are impartial, independent, straightforward -- and free. So how do we make money? Our partners compensate us. This can influence the products we write about (and the way they appear on our website) however it doesn't affect our suggestions or recommendations that are based on hundreds of hours of research. Our partners are not able to be paid to ensure positive review of their services or products. .

Debt Relief: Learn your options and the consequences

Debt relief can ease the burden of a massive debt However, it's not the best option for everyone. There are options for you to consider.

By Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She holds a bachelor's degree in journalism from Auburn University and a master's in education from Georgia State University. Prior to joining NerdWallet, she worked for the daily papers, MSN Money and Credit.com. Her work has been featured on The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and many other places. Twitter: @BeverlyOShea.

Updated January 7, 2023 at 1:32 PM PST.

Written by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Prior experience includes copy and news editing for several Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in journalism and mass communications from The University of Iowa.

The majority or all of the items featured on this page come from our partners who compensate us. This affects the products we write about and the location and manner in which the product is featured on a page. However, this does not affect our assessments. Our views are our own. Here is a list of and .

Table of Contents Show More

Table of Contents

Are you finding yourself not making progress on your debt regardless of how hard you try? If so you could be dealing with an overwhelming amount of debt.

To get rid of debt, consider the options for debt relief. These tools can change the terms or amount of so you can recover faster.

But debt-relief programs are not the best solution for everyone, and it is important to know the potential consequences.

Debt relief can involve slicing the debt completely out through bankruptcy, obtaining adjustments to your interest rate and payment schedule to lower your payments; or persuading creditors to agree to accept less than entire amount owed.

When should you seek debt relief

Consider bankruptcy, debt management , or debt settlement when one of these is true:

You're not likely to succeed in repaying unsecured debt (credit cards, medical bills and personal loans) within five year, even though implement drastic measures to cut expenditure.

The total of your unpaid unsecured debt equals half or more of your total income.

On the other hand If you are able to repay your debt within five years, consider a self-help strategy. That could include a combination of debt consolidation and appeals to creditors, as well as more strict budgeting.

Return to the top

Beware of scams, the negatives of debt relief

The debt relief industry includes scammers who are eager to grab whatever little cash you have. Many who sign up for the debt reduction programs do not finish their obligations. You could end up with debts that are more than you were when you began.

The debt relief program could offer you a fresh start or the breathing space you need to finally achieve real progress.

Be sure you understand -and verify these points before entering any agreement:

What you need to qualify.

What are the fees you'll have to pay.

Which creditors are receiving payments and what is the amount? If your debt is placed in collections, be sure you understand who owns the debt and that the payments go to the right agency.

The tax consequences.

From top to bottom

Relieving debts through bankruptcy

There's little point in entering an agreement to settle your debt or entering into a debt management plan when you're not likely to be able pay the amount you've agreed to. It is recommended to speak with someone first prior to pursuing any strategy to reduce debt. Consultations are generally free, and if you don't qualify then you are able to move on to other alternatives.

The most common form of , Chapter 7 liquidation, can erase most credit card debts, unsecured personal loans and medical debt. It can be done in three or four months, depending on whether you qualify. What you should know:

It will not erase support obligations for children, and students loan debt is highly unlikely to be forgiven.

It will hurt and stay on your credit report for as long as 10 years even as you work to restore your credit rating. But, if your credit score is already poor bankruptcy could allow you to rebuild your credit faster than continuing to try to pay back. (Learn more about when .)

If you've made use of a , your bankruptcy filing makes the co-signer accountable for the amount owed.

If the debts keep piling up, you can't apply for a new loan for the next eight years.

It might not be the right option in the event that you must sell the property you would like to keep. The rules vary by state. Typically, certain kinds of property are not subject to bankruptcy, for example, vehicles that exceed a certain value as well as a part of the equity of your home.

It may not be necessary if you're "judgment proof," which means you do not have any income or property that a creditor could go after. However, creditors are still able to pursue you and obtain a judgement, but they won't be legally able to get their money back.

Additionally, not every person who has a lot of debt is eligible for. If your income is higher than the median of your state and the size of your family, or you have a home you want to keep from being a foreclosure target You may have to apply for Chapter 13 bankruptcy.

It is a three- or five-year repayment plan that is approved by the court that is based on your income and other debts. If you're able stay on the plan for its full duration, the rest of your unsecured debt is discharged. It'll take longer than the Chapter 7 bankruptcy, but if you are in a position to make payments (a most people can't) you are eligible to keep your property. Chapter 13 bankruptcy Chapter 13 bankruptcy stays on your credit report for seven years following the filing date.

From top to bottom

Assistance through debt management strategies

A lets you pay off your debts that are not secured -- typically credit cards -fully, but typically at a lower cost or fees that are waived. It is a one-time payment each month to a credit counseling agency, which distributes it among your creditors. Credit counselors and credit card firms have agreements that are long-standing in place to assist debt management clients.

Your credit card accounts will be closed and, typically, you'll have to be with no credit card until you complete the plan. (Many people don't complete their plan.)

Debt management plans themselves do not affect your credit scores But closing accounts may hurt your scores. After you've completed the program it is possible to make a new application for credit.

Insufficient payments could take you out of the plan but. It is important to choose an agency that's accredited by the or the . Even then, make sure you are aware of the costs and what alternatives you may have for dealing with the debt.

Return to the top

Assistance through debt settlement

is a last resort option for those who face overwhelming debt, but aren't eligible for bankruptcy, or don't want to declare bankruptcy.

The companies that negotiate debt typically request you to stop paying your creditors and instead place the money into an account called an escrow. Each creditor is approached as the money accumulates in your account, and you get further behind on your payments. A fear of not getting anything at all may motivate the creditor to take a smaller lump-sum offer and then agree to not take the remainder.

Paying your bills late could result in collection calls, penalty charges and even legal action against you. The debt settlement process stops all of that while you're still negotiating. It could take months for settlement offers to begin. Depending on how much your debt is, this process could take years , and the continual payment lateness can further harm your credit score.

You could also be faced with tax bills on forgiven amounts (which the IRS counts as income). Legal actions can result in the garnishment of wages and property liens.

You can attempt to do it yourself, or employ a professional. The debt settlement business is rife with scammers however, the Consumer Financial Protection Bureau, the National Consumer Law Center and the Federal Trade Commission caution consumers in the most stern phrases.

Some of them also declare themselves to be . They're not. Consolidating debt is something you can do yourself and will not affect your credit.

Back to top

Do-it-yourself debt relief

There's nothing to say that you shouldn't take advantage of any of the debt relief options , and make your own personal plan.

You can take the steps that credit counselors use in debt management plans: Contact your creditors, explain why you're in debt and what concessions you'll need in order to make in order to catch up. Many credit card companies offer special programs for those in need, and they may be willing to lower your interest rates and waive charges.

You can also educate yourself about debt settlement and reach an agreement with creditors by calling them yourself. (Learn how to .)

If your debt isn't unsurmountable alternative debt-payoff strategies might be possible. For example, if your credit score remains good, you may be able to apply for credit cards that offers a zero-interest balance transfer program that will give you some breathing room. Also, you could find a card one with a lower rate of interest.

Those options won't hurt your credit score as long as you make the monthly payments and your credit score will be able to recover.

If you decide to go down this route but you're in debt, it's crucial to plan a strategy to prevent getting into a cycle of debt. It also can be hard to be eligible for a new credit card or loan when you are deeply in debt. That frequently leads to late payments or high balances and those hurt your credit standing.

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What is not to do

Sometimes, debts become overwhelming and come with devastating swiftness like a health crisis, unemployment or an natural catastrophe. Perhaps it happened slowly, and the collection agencies and creditors are pressing you to pay but you can't.

If you're experiencing financial stress There are some tips NOT to be doing:

Don't neglect a secured debt (like the car loan) to settle an unsecure one (like hospital bills (or credit card). It is possible to lose the collateral that secures that credit, in this case your vehicle.

Don't take out loans against the equity in your home. You're putting your home at risk of foreclosure and you may be turning unsecure debt that can be eliminated in bankruptcy into secured debt that isn't.

Do not take money out of your account . This will reduce the chance of a financially secure retirement.

Think twice about borrowing money from retirement accounts at work as well. If you lose your job, the loans could be withdrawn in error and result in the tax penalty that is not the best thing you'll need.

Don't make decisions based on the collectors who are threatening on you most. Instead, take time to research your options and choose the one that is best for your needs.

Ready to conquer your debt?

Track your balances and spending all in one place to track your way out of credit.

Author bio Bev O'Shea worked as a writer for credit at NerdWallet. Her work has been featured in the New York Times, Washington Post, MarketWatch and elsewhere.

On a similar note...

Dive even deeper in Personal Finance

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Auto loan debt reaches $1.52 trillion Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by providing you with interactive financial calculators and tools as well as publishing quality and impartial content. We also allow you to conduct your own research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this website are provided by companies who pay us. This compensation could affect how and where products appear on this website, for example for instance, the order in which they may be listed within the categories of listing, except where prohibited by law. Our loan products, such as mortgages and home equity and other products for home loans. This compensation, however, does have no impact on the information we provide, or the reviews that you read on this site. We do not include the vast array of companies or financial deals that might be open to you. Jackal Pan/Getty Images

3 minutes read. Published December 19, 2022

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances by providing concise, well-researched and well-written information that breaks down complicated subjects into digestible pieces. The Bankrate promises

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At Bankrate we aim to help you make better financial choices. While we adhere to strict editorial integrity ,

This article may include some references to products offered by our partners. Here's a brief explanation of how we earn money . The Bankrate promise

In 1976, Bankrate was founded. Bankrate has a long record of helping people make smart financial choices.

We've maintained this reputation for over four decades by making financial decisions easy to understand

process and giving people confidence in which actions to do next. Bankrate follows a strict ,

so you can trust that we'll put your interests first. Our content is authored with and edited ,

They ensure that what we write ensures that everything we publish is accurate, objective and trustworthy. Our loans reporter and editor are focused on the things that consumers care about the most -- different types of lending options and the most competitive rates, the best lenders, how to pay off debt and many more. This means you'll be able to feel secure when investing your money. Integrity of the editing

Bankrate adheres to a strict code of conduct , so you can trust that we put your interests first. Our award-winning editors and journalists produce honest and reliable content that will help you make the right financial choices. Our main principles are that we respect your confidence. Our mission is to provide readers with accurate and unbiased information. We have established editorial standards to ensure that this happens. Our reporters and editors thoroughly fact-check editorial content to ensure that the information you're reading is accurate. We keep a barrier between our advertisers and our editorial team. The editorial team of Editorial Independence Bankrate does not receive compensation directly from our advertisers. Editorial Independence Bankrate's editorial team writes on behalf of YOU the reader. Our goal is to give you the best advice that will assist you in making smart personal finance decisions. We adhere to strict guidelines for ensuring that editorial content is not affected by advertisements. Our editorial staff receives no directly from advertisers, and all of our content is verified to guarantee its accuracy. Therefore when you read an article or reviewing you can be sure that you're receiving reliable and dependable information. How we earn money

If you have questions about money. Bankrate has answers. Our experts have helped you understand your finances for more than four decades. We strive to continuously provide consumers with the expert advice and tools needed to be successful throughout their financial journey. Bankrate follows a strict , so you can trust that our content is truthful and reliable. Our award-winning editors and journalists produce honest and reliable information to assist you in making the right financial decisions. The content created by our editorial staff is factual, objective and is not influenced through our sponsors. We're open about how we are in a position to provide quality content, competitive rates and useful tools for you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and services or by you clicking on specific links on our website. Therefore, this compensation may impact how, where and when products appear in listing categories, except where prohibited by law. This is the case for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own website rules and whether a product is available in your area or at your self-selected credit score range may also influence the manner in which products appear on this site. While we strive to provide an array of offers, Bankrate does not include details about every financial or credit product or service. Third quarter 2022 saw an ongoing examination into what is known as the "new normal" following the pandemic, fear of the looming and an increase in debt for households. The most notable is that automobile loan debt reached $1.52 billion, which is more than 9 percent of household debt. On top of that, to levels that are close to pre-pandemic according to third quarter report, 60-day delinquencies for new vehicle loans being 0.48 percent, and used car loans at 1.17 percent. An unfortunate mixture of factors have led to this rise in auto loan debt. One of them is supply chain issues leaving record-high prices for vehicles. The other is that there are a variety of issues for those who borrow. This is particularly true for those with who hold a higher likelihood of being in debt or failing to make payments. Debt and delinquency statistics All-around loan balances grew 7.6 percent in the quarter that ended in the middle of the year 2022. The total across the United States total is $5,210. Since the beginning of 2022 the rate has increased in the year 2022, it has increased 1.77 percentage point for a 60-month new automobile loan as well as 1.78 percent points on a used 48-month car loan. A loan that is 30 days late increased up to 2.19 percentage in the 3rd quarter of 2022 as compared to 1.66 percentage in 2021. A loan that is 60 days past due have increased to 0.81 per cent in the 3rd quarter of 2022, compared with 0.55 percent in 2021. Men have 16.3 percent than women. Total auto loan and lease value was 1.43 trillion by 2021, compared the 1.6 trillion for student loans.

A shortage of vehicles has driven prices up. One reason for the growth in auto loan debt in recent years has been fewer cars that are available, according to Bankrate's chief financial analyst Greg McBride, CFA. "The lack of new cars resulted in a shortage, which pushed prices up and led to the sale of used cars since more buyers moved towards this the direction of buying," McBride says. As this trend is gaining momentum, "there was an explosion in prices paid and loan balances that were financed when the pandemic struck." McBride furthers this argument by saying that there is no better spot to see families living paycheck-to-paycheck than the driveway. Drivers have been confronted with high vehicle prices due to supply chain issues that is causing budget-busting payments. What affects the economy on debt The state of the economy directly affects drivers' ability to finance, purchase and repay new or used vehicles in terms of cost and available interest rates. With the majority of economic experts forecasting that the recession will continue to expand over the next 12 to 18 months, it's just one expense that will cost more. Even if drivers are able afford to purchase a car upfront however, the high interest rates make debt and delinquency a possible reality for a lot of customers. Simplyput, as the country grapples with steep inflation rates The government has been working to quell the issue by raising the benchmark rate. The benchmark rate is set to 4.25-4.5 percent for December. This rate determines the amount banks can charge to lend cash to different banks. This will affect the interest rates of consumer goods like automobile loans. Even as relief came through the form of lower vehicle prices decreasing, high rates may increase the number of people falling behind on repayments and slipping into debt. There's a tense distinction between vehicles that are less expensive . As optimistically stated in , serious automobile loan default rates are predicted to moderately decrease to 1.9 percent by 2023, from 1.95 percent in 2022. Averagely, drivers pay about $700 monthly for a new car as well as $525 monthly in the third quarter of 2022. The consumer price index sits at 298.1 in mid-December, up from 278.9 one year ago. The average loan term for subprime lenders financing new vehicles is 74.25 during the 3rd quarter in 2022. The average interest rate for new vehicles during the 3rd quarter in 2022 was 5.16 percent, and 9.34 percent for used vehicles. There is an 85% chance of a recession by mid-2024 according to a .

How to get out of the debt. While debt that has been incurred may appear impossible, there's still ways to dig yourself out of the gap that late or missed payments have created. Americans have an average debt of $96,371 in 2021 -If you've been in deep debt there's no reason to feel alone. Consider the following tips in your quest to overcome debt. Think about debt consolidation. A credit consolidation loan is a form of your debt. With it, you can lower your interest costs and assist to pay off debt at a faster rate. To locate the most effective debt consolidation loan there are a few options. Like with every loan one should seek preapproval in order to secure the best rate possible. Check your budget. If you owe more than what's to pay in the bank account it might be an ideal time to . In order to adjust your spending first, take an inventory of how much you're spending and the things you're spending it on. Try and eliminate common cost items that you can eliminate or reduce. Any extra cash that comes up could be used to pay off your credit card. Make a request for loan modification If you are in danger of being late on your auto loan It is a means to modify your current loan to suit your financial circumstances. This process is different from the other one. It is handled with your present lender and will change your loan terms. Be aware that not every lender is willing to modify the terms of a loan and you might need to provide proof of your hardship.

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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of borrowing money to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with concise, well-researched and well-researched content that breaks down otherwise complicated subjects into bite-sized pieces.

Auto loans editor

Other Articles Related to Auto Loans 3 minutes read in Mar 02 2023 auto Loans Read 3 minutes February 01, 2023 auto Loans 8 minutes read January 12, 2023 Auto Dec 15, 2011

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A Reason Nearly All Purchases Should be made with a credit Card

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Why Nearly Every Purchase Should be made with a credit Card

Credit cards are safe and convenient, they help build credit, they make budgeting easier and can earn rewards. No, you aren't required to take on the debt trap, and you do not have to pay interest.

Written by Virginia C. McGuire Virginia was formerly a credit card author for NerdWallet. She is an experienced journalist, who has covered personal financial as well as real estate, business as well as architecture and design. Her work has been published in The Philadelphia Inquirer, The New York Times, The Awl and Mental Floss.

as well as Paul Soucy Lead Assigning Editor Credit cards, credit scoring Personal financial Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also developed a highly successful freelance editing and writing business that focuses on personal and business finances. He was editor of USA Today Weekly International Edition for six years, and was awarded the most prestigious distinction by ACES: The Society for Editing. He has a bachelor's degree in journalism as well as a master of Business Administration. He lives in Des Moines, Iowa, with his wife, two sons and a dog named Sam.

Updated Nov 3, 2022

Editor: Paul Soucy Lead Assigning Editor Credit scoring, credit cards, personal financial planning Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance writing and editing practice with a focus on personal and business finance. He was editor of the USA Today Weekly International Edition for six years and received the highest award of the year from ACES: The Society for Editing. He holds a bachelor's degree in journalism and a Master of Business Administration. He lives in Des Moines, Iowa, with his fiancee, his two sons, and the dog Sam.

The majority or all of the products we feature come from our partners, who pay us. This affects the products we review and where and how the product is displayed on a page. But, it doesn't affect our assessments. Our opinions are our own. Here's a list of and .

More Like This

Cash was the most popular option. People would pay for purchases using cash or checks (which are in essence equivalent to cash) They also stored credit cards for huge frequent purchases -- if they even had credit cards. Today the credit cards can be used virtually everywhere, and a few people do not carry cash at all.

The general rule is that NerdWallet recommends whenever it is possible:

Credit cards are more secure to carry than cash , and are more secure against fraud than debit cards.

You can earn significant rewards without changing how you budget.

It's much easier to keep track of your spending .

Responsible credit card use is among the easiest and fastest ways to build credit .

Using credit cards . You can spend money the way you normally would, pay the balance in full each month, and you'll reap the many benefits of credit cards, without being in debt or paying an interest fee.

The top credit cards for 2023

Cash back and 0% APR balance transfer -- check out our Best-Of Awards to find the year's top credit cards.

>> MORE:

Credit cards are safer to carry and use

When you loose your wallet, or are stolen, any money that you had in your wallet is almost certainly gone for ever. If thieves go on a spending spree with your credit cards it is unlikely that you will be held accountable for fraudulent purchases. It could take some time to sort out the resulting mess, but you won't lose any cash.

Debit cards, too, pose a risk. If your credit card gets misused in a fraudulent manner and the card issuer is the one that loses money. If your debit card is misused, . Assuming you notify the fraudster promptly you'll be able to get your money backeventually. It could be a while until the issue is resolved. During this time the checks could bounce, automated payments may be refused due to insufficient funds, and you could have a hard time covering your bills.

>> MORE:

Credit cards can earn rewards easily

Credit card rewards are designed to encourage you to use your credit card and are extremely persuasive. With a basic flat-rate card that offers the same amount for each purchase, you'll get back 1.5 percent or even 2 percent of each dollar you spend, either in cash, points or miles to redeem for travel or other things. Spend $1,000 a month and you can make between $180 and $240 each year with no effort.

Other cards pay higher rewards in specific spending categories, like gasoline, groceries or restaurants. Combine a handful of cards and you'll be able to amplify your rewards considerably.

For instance, let's say that a family has four top cash back credit cards -- the , the , the and the . Utilizing them in a strategic manner, that family could earn hundreds of dollars a year in cash back:

Spending

Rewards rate

Reward points for each year

Groceries

$400 per month

6%

$288

Restaurants

$150 / month

*5% over three months

* 3.3% for nine months

$81

Gas

$100 per month

* 5% for six months

* 3% for six months

$48

Amazon.com

$100 / month

* 5 % for six months

* 2.2% for six months

$42

Media streaming

$50 per month

6%

$36

Travel

$1,000 per year

5%

$50

Everything else

$1,000 / month

2%

$240

TOTAL

$785

Learn how rewards are earned

Groceries

The Blue Cash Preferred(r) Card from American Express earns 6% cash back up to $6,000 in annual spending at U.S. supermarkets, then 1percent (terms are applicable -- see ).

Restaurants

For three months: The Discover it(r) Cash Back program earns 5% cash back on up to $1,500 per quarter in spending in categories you choose to activate, and 1% on all other purchases. In 2020, restaurants were an area that earned 5% for a quarter.

For nine months: The Flex(sm) from Chase Flex(sm) earns 3percent cash back in restaurants.

Gas

for three months. Chase Freedom Flex(sm) earns you 5 percent cash back the amount of $1,500 spent in categories for quarterly that you activate. In 2020, Chase offered gas station as a category with 5% for three months.

In three consecutive months In 2020, The it(r) it(r) cash Back had gas stations as a 5% category for three months.

In the course of six months The Blue Cash Preferred(r) Card from American Express earns 3% cash back at U.S. gas stations (terms apply).

Amazon.com

For six months: 2020, Chase and Discover had Amazon.com as an 5% category for three months each.

In the course of six months, The Citi(r) Double Cash Card earns you 2% cash back on every purchase -- at 1% when you purchase and 1 percent when you pay it back.

Media that stream

The Blue Cash Preferred(r) Card from American Express earns 6% cash back on select U.S streaming subscriptions (terms apply).

Travel

The Chase Freedom Flex(sm) earns 5% cash back on travel that is booked through Chase.

Everything else

Utilize the Citi(r) Double Cash Card and earn 2% cashback.

One word of advice be sure to not overspend more than you would to gain extra rewards. The little cash reward will not make up for the additional $100 at the supermarket store , or the extra $250 worth of clothing. And if you carry an unpaid balance from month to months, the interest you pay can more than eat up the value of your reward So, pay the full amount whenever possible.

>> MORE:

Credit cards can help you monitor your spending

Monitoring your budget can be a challenge regardless of the method you use to spend your money. But figuring out where cash went is especially difficult. Misplace a receipt, and then there's no record of how much you spent and where your money was spent. Checks? Forget to enter one in your account for checks, and you'll need be patient for your person who received it to cash it before you can trace it (and certain people are known for holding on to the checks over a period of months).

With credit cards, everything shows up on your online account in real time. Further the majority of issuers automatically categorize purchases according to the merchant:

The purchases made on the Chase credit card identified by categories.

The majority of major issuers let you generate reports to track how much you've invested in different categories in one month, for the year to date or over a certain time you specify:

Report on spending for a Chase credit card.

If you're using a budgeting app like Mint and You Need a Budget, you can import data from your credit card and bank accounts. It's easy to fit each purchase into a budget category and determine where you're spending too much, and areas where you could stand to spend a bit.

>> MORE:

Credit cards help build credit

It is not necessary to have credit cards to enjoy good credit and certainly you don't need to keep a balance. But careful usage of a credit card is the best method to boost your credit score and a good credit score opens many possibilities. It can make it easy to get homes, whether a prospective landlord is checking your credit prior to giving you keys or seeking a loan to buy a home. Cell phone providers, insurance agents, and utility companies could use your credit history for determining eligibility, and even the rates you pay. It could even increase your chances of getting an interview, as numerous employers conduct credit checks on job applicants.

If you do own credit card, you can use it to make regular purchases of small amounts making sure your balances are low and paying your bills punctually will boost your credit score over time.

>> MORE:

It is not advisable to use a credit card

You'll be required to pay an additional cost: Merchants pay processing fees every time you make use of credit cards. Most of the time, those fees are rolled into the price of the merchant, just like any other expense associated with running a business. However, sometimes, a business may charge the customer directly, by adding an upfront surcharge (or "convenience fee" for using cards with credit. In such cases you'll likely need to pay in another way except if your rewards from your credit card are high enough that they'd eliminate the cost of the surcharge.

When you don't want the merchant to be charged a fee Additionally, you may prefer not to use credit cards for smaller merchants you especially want to support. They might appreciate it if you pay in cash or with a check, because then they don't have to pay the processing fees. Even debit cards are better than credit cards from merchants' standpoint, because processing fees for debit cards tend to be lower than the fees they'd be charged for a credit-card transaction.

When you don't want overspend: Some people struggle to keep their spending under control when they utilize credit cards. The five-figure limit on credit cards could make it difficult to remember the reason you shouldn't spend your money on that shiny object. If you're getting close to your credit limit or concerned about building up a high credit card balance it's possible to grab your debit card, or even cash.

There are a lot of wonderful benefits to customers of credit cards. Make sure you research the best one for you. Make sure that you're able to make wise spending decisions, regardless of the method you select for payment.

>> MORE:

To see rates and fees for the Blue Cash Preferred(r) Card offered by American Express , see .

About the authors: Virginia C. McGuire is a former credit card writer for NerdWallet.

Paul Soucy is the lead credit cards editor of NerdWallet. He has previously worked for USA Today and the Des Moines Register and holds an MBA.

Similar to...

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How steep interest rates have negated steadying car prices Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by offering interactive financial calculators and tools as well as publishing independent and objective content. We also allow users to conduct studies and compare information for free and help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies who pay us. This compensation may impact how and when products are featured on this site, including, for example, the order in which they appear within the listing categories in the event that they are not permitted by law. Our loan products, such as mortgages and home equity and other products that lend money to homeowners. This compensation, however, does affect the information we provide, or the reviews you see on this site. We do not contain the vast array of companies or financial offerings that could be open to you.

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5 minutes read. Published March 22, 2023

Writen by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of using loans to buy an automobile.

Editor: Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances with clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.

The Bankrate promise

More details

At Bankrate we are committed to helping you make smarter financial decisions. We adhere to the highest standards of editorial integrity ,

This article may include references to products from our partners. Here's how we make money .

The Bankrate promise

In 1976, Bankrate was founded. Bankrate has a long track record of helping people make smart financial choices.

We've maintained our reputation for over four decades by simplifying the process of financial decision-making

process and giving people confidence in which actions to take next. Bankrate follows a strict ,

so you can trust you can trust us to put your needs first. All of our content was written with and edited

We make sure that everything we publish will ensure that our content is reliable, honest and reliable. We have a team of loans reporters and editors focus on the points consumers care about the most -- different types of lending options, the best rates, the best lenders, the best ways to pay off debt and more -- so you'll be able to feel secure when investing your money.

Integrity of the editorial process

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The past two years of prices for vehicles have been an up and down for both sellers and drivers. This summer saw record-high transaction prices and an MSRP of $48,000 according to Kelley Blue Book (KBB) and then followed. Fortunately, car prices are on the rise in the last few weeks, following the peak price of in the summer. But , at the same time -the interest rates are rising. The synchronized increase in rates and decrease in price has undermined any real gains for consumers. Rates of interest for new cars were up in October from 4.2 percent just a year ago, as per Edmunds information. This has created an unsettling situation for those who are finally feeling some relief from sticker price. If the recession is looming in the near future, it is essential to be aware of how this could ripple down and impact the monthly cost to own an automobile. The monthly payments have increased by 3.3%. The monthly payments are based on many elements, such as the car as well as the loan period. However, it is also dependent on the benchmark rate, which is set by the Federal Reserve, which auto lenders utilize to . Since as the Fed rate has risen -- currently set at 4.75-5 percent in the last year the cost of borrowing money has also increased. That means that lenders have increased their costs to finance. The more it costs for financing, the more the interest rates and thus the more expensive the monthly expense is. October set a record in the monthly average of new car payments costing $748 according to KBB. Although prices have dropped by almost 5 percent, monthly payments are up 3.3 percent, as per a CoPilot study. While this percent increase may appear small, it adds up to more than 1,000 dollars in the . This created an unfortunate outcome for those who were experiencing relief from the decline in vehicle prices. Any savings could end up being offset by the rising interest rates. Even if vehicle transaction prices are lower, the will still be much higher -- which makes it difficult for motorists to afford it in the first place. Lower wholesale prices haven't been translated into retail prices. Logic says that when wholesale prices are lower, then the price that consumers pay should be lower as well however, that is not the scenario. Since the beginning of the year wholesale prices have decreased by over 15 percent. But the average transaction price for vehicles remains more expensive. This is mostly due to the continued demand for new cars. October saw the highest volume of inventory of new vehicles since the month of May 2021. However, just because these vehicles are available more readily does not mean that people can afford them. For many drivers it is clear that the price to purchase today isn't worth the cost. As mentioned, October set records for monthly payments, which topped $750 according to KBB. So, even though vehicles inventory increased but it's still low by norms of the past. This shortage of inventory means continued high prices for the retail market. A rise in credit union auto loans Another reaction to rising interest rates has driven some borrowers to borrow with . The distinction between financing through a credit union is based on the cash available. Credit unions are owned by members and are not for profit which means they typically have low fees and less loan interest rates. The second quarter ended 2022 Experian discovered that credit unions had been growing in market share in the last five years, while falling in accordance with the Fed increasing interest rates. Credit unions are a great source of financing. is just one way that drivers are finding relief in this . The Fed's fight to quell inflation will not end anytime soon The Federal Reserve walks a thin line between regulating inflation and maintaining accessible prices for consumers. The auto market is a prime illustration of which inflation isn't yet under control. And, unfortunately the higher rates are not expected to go away anytime soon. "Affordability is going to be a challenge for the foreseeable future in both new and used markets," explains Cox Automotive Chief Economist Jonathan Smoke. "It's not the fault of the Fed however, it could impact the access of consumers to transportation." KBB found an average earner would need to work over 40 weeks to repay an automobile. Statistics like these, Smoke notes, are making the financing of vehicles particularly difficult for people with lower earnings. "Higher rates are already shifting access to cars and financing to more wealthy consumers," he says. Limited access to vehicles also creates a challenge for consumers to respond as they might have had to in similar difficult economic times. In the aftermath of the 2008 recession, people were able to benefit from vehicle incentives and the rush of dealers wanting to sell. However, with fewer inventory options and no relief provided to motorists. Two of the main reasons for the possibility of inflation increasing are overall debt growing --- reflected in rising delinquency rates as well as drivers experiencing faster the rate at which they are depreciating. The amount of auto loan debt continues to grow. In total loan balances have grown 8 percent from quarter one from 2021 to 2022 according Experian. This feeds into the massive . Alongside the overall growth in debt, the number of increased. The second quarter in 2022, TransUnion found that 3.34 percentage of car loans were more than 30 days late. This is one of the highest numbers of delinquency over the last couple of years. While it's true part of the reason is due to accounts that have been logged after the pandemic, this growth is still noteworthy particularly for subprime borrowers who are the most affected. "Delinquencies are in line with the historical average for the majority of credit products. However, levels have been rising over the past year, especially among subprime consumer segments" notes Michele Raneri, vice president of U.S. research and consulting at TransUnion. The forecast also predicts that auto loan balances will exceed all remaining student loans within the first quarter of 2023, according to the Consumer Financial Protection Bureau. This is a further confirmation of the effect of domino effects that decisions from central banks Central Bank have on vehicle affordability. Therefore, when delinquencies are returning to pre-pandemic levels, it is crucial to know how rising rates of interest will make expensive -- increasing the risk of delinquency. Drivers are confronted by a faster than normal depreciation of their vehicles On top of high vehicle cost and interest rates, motorists are likely to lose money over the months ahead due to the faster depreciation rate of vehicles, says Henry Hoenig, data journalist for Jerry. The biggest influence in this situation comes from the timing of when drivers purchase their vehicles. "People who bought used vehicles in the past year or two were charged exorbitant price," Hoenig explains. As the used car market is cooling, these motorists are the most at risk of rapid depreciation. However, it's not all bad news for car owners. "For at least the next year or so, the value of used vehicles are unlikely to fall back to what they were prior to the big runup over the last two years" Hoenig says. This is due mainly because the supply won't return to normal levels within the next few months. Now may not be the ideal time to purchase an automobile. The high costs of car ownership aren't the only cost that Americans are currently faced with. "Consumers are being pressured in a variety of ways, first by this environment of high inflation, and secondarily by the higher rates of interest that is the Federal Reserve is implementing to reduce it," Raneri explains. Buying a vehicle can be one of the most expensive purchases many consumers make. And with steep interest rates being a factor, patience could be a successful strategy. The reality of expensive prices is somewhat unavoidable but waiting for a big purchase like a vehicle can mean money saved. If you don't have the privilege of waiting for a car, be prepared to spend more money and think about ways to save when buying a car in a .

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Authored by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ins and outs of securely taking out loans to purchase the car they want.

The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers gain the confidence to manage their finances by providing clear, well-researched facts that break down complicated subjects into digestible pieces.

Auto loans editor

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3 Credit Myths Common to Everyone that could hurt your score

A NerdWallet survey finds that Americans have misconceptions about credit, which could affect your credit ratings.

By Erin El Issa Senior Writer | Data analysis, personal finance, credit card Erin El Issa writes data-driven studies on personal finances, credit cards investments, travel, and student loans. She loves numbers and aims to make data sets understandable to help consumers improve the quality of their lives financially. Before becoming a Nerd during 2014, she worked as a tax accountant and freelance personal finance writer. Erin's work has been cited by The New York Times, CNBC, The "Today" show, Forbes and elsewhere. In her spare moments, Erin reads voraciously and struggles to keep up with her two children. Her home is in Ypsilanti, Michigan.

Published Oct 4 2022 at 6:00AM PDT

Editor: Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes news and copy editing for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in mass communications and journalism in The University of Iowa.

Many or all of the products featured here are provided by our partners who pay us. This influences which products we review as well as the place and way the product is featured on a page. However, this doesn't affect our assessments. Our opinions are entirely our own. Here is a list of and .

Financial misinformation is rampant and is hurting your credit score. Finds that Americans are prone to misconceptions regarding their credit, some of which could seriously damage their credit scores. These are three credit score myths and how to avoid them.

Myth 1. A open balance with your credit card good for your credit score

It's a common credit myth The majority of Americans (46 percent) believe that carrying a account balance is better for their scores than having it paid complete, according to the survey. The truth is that carrying a balance does not improve your credit score and could, in fact, be detrimental when the balance represents more than your available credit limit. That's because it increases your credit utilization (the amount of your credit limit you use) and can negatively impact your credit score.

Another disadvantage of having the credit card is the expense of interest. Credit card debt -- which is incurred when you have the card in a state of balance regardless of whether you intend to do sois among the most expensive forms of debt due to double-digit interest rates. Although you may think leaving a small balance on your card wouldn't be expensive, it could be due to .

If you don't pay off your entire balance before the due date, the interest is charged, but not just on the balance remaining. In fact, interest is calculated based on your average balance per day on the credit card. For instance, if you have an account with a balance of $10 for your credit card, however, the average daily balance of your card for the month was $1000 the interest will be charged on the $1,000 balance.

You can combat this by paying off the balance before or on the due date. This may lower the amount of credit you use and your the monthly cost.

Myth 2. Closing a credit line you don't use is good for your credit

The survey revealed that almost fifty percent of Americans (46%) think closing a credit card they do not use will help the credit rating. The idea of keeping a financial product you're not using is a bit counterintuitive, but closing your credit card could affect your score.

Closing a credit card can hurt your credit score due to the credit utilization. And while there are reasons to , generally use credit, it's not enough of a reason to be a victim of the credit crunch.

Even if you do not cancel your card on credit, company will eventually shut down any account that isn't being used for a specified period. To combat this, you can charge small, recurring expensessuch as an annual subscription to the card and setup autopay to clear off the balance of your credit card each month.

Myth 3. A credit report won't affect your credit score

A majority of Americans (28%) do not realize that the lender running a credit check can cause their credit score decrease, as per the survey. There are two kinds of credit inquiries, a hard inquiry and a soft inquiry. When you look up your credit, it's a soft inquiry and doesn't affect your score. But when a lender assesses your score to determine creditworthiness for a loan this is a , and your score can be lowered.

There are exceptions. For example, for specific financial services, like a mortgage or auto loan the number of inquiries that are made in a short time period count as one hard inquiry. The length of time for each inquiry varies according to the credit scoring model It is generally safe to make all requests within a period of two weeks. This is referred to by the term "rate shopping" and lets you look around to get the best loan terms.

However, applying for multiple credit cards in a short period doesn't fall under rate shopping, and can cause an inquiry that is hard for each application. Therefore, limiting the number of card applications you submit is a great idea. Hard inquiries could remain at the top of your credit score for two years, so before applying for a new credit card, be sure it's accessible to people within your credit score range.

About the author: Erin El Issa is an expert in credit cards and a writer for studies at NerdWallet. Her work has been highlighted by USA Today, U.S. News and MarketWatch.

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How to Spot Debt Collection Scams

Advertiser disclosure You're our first priority. Everytime. We believe that everyone should be able make financial decisions with confidence. And while our site doesn't contain every company or financial product on the market however, we're confident of the advice we provide as well as the advice we provide and the tools we develop are impartial, independent, straightforward -- and free. How do we earn money? Our partners compensate us. This may influence which products we review and write about (and the way they appear on the site), but it in no way affects our recommendations or advice that are based on thousands of hours of study. Our partners are not able to pay us to guarantee favorable reviews of their products or services. .

How to spot Scams in Debt Collection

Learn to recognize scams, safeguard your information and alert authorities if you encounter frauds to collect debt.

by Sean Pyles Senior Writer | Personal finances and financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet's "Smart Money" podcast. In "Smart Money," Sean talks with Nerds on NerdWallet's NerdWallet Content team to answer listeners' personal finance questions. With a focus on thoughtful and practical money tips, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners' money questions on "Smart Money," Sean also interviews guests who are not part of NerdWallet and produces special segments that explore subjects like the racial wealth gap, how to start investing and the history of student loans.

Before Sean took over podcasting at NerdWallet, he covered topics concerning consumer debt. His writings have appeared throughout the media including USA Today, The New York Times and other publications. When when he's not writing about personal finance, Sean can be found playing in his garden, going on runs and taking his dog for long walks. Sean is located in Ocean Shores, Washington.

Last updated Aug 5, 2021 2:48PM PDT

Edited by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Her previous experience includes writing copy as well as news editing at several Southern California newspapers, including the Los Angeles Times. She earned a bachelor's degree in mass communications and journalism at Iowa's University of Iowa.

Many or all of the products we feature come from our partners, who pay us. This affects the products we write about and the location and manner in which the product is featured on the page. But, it doesn't influence our evaluations. Our opinions are entirely our own. Here's a list of and .

If you're getting threatening phone calls concerning the payment of a debt, even if it's one that you know about, you could be the victim of a scam to collect debts.

Here are some key steps to recognize and protect yourself from illegitimate .

The red flags for frauds in debt collection

It's possible to receive an unwanted call from a debt collector if you do not recognize the debt you supposedly have to pay or if the person calling you:

Can't or won't provide detailed information regarding the debt or the original creditor.

We won't provide you with information about the agency the person claims to represent, including the name or address as well as phone number.

Employs aggressive tactics to press you into immediate payment.

Makes a request for payment over the phone.

Requests sensitive information like the information about the details of your bank account, your Social Security number, or your credit or debit card number.

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Common scams

It's not difficult to identify fraud when an individual attempts to collect an unpaid debt you don't recognize or know you don't have. False debt collectors have a variety of methods to get your details and hope to convince you into a fast payment via a cold-call.

Some are more difficult to identify, for instance, a scammer who tries to recover a debt you due. Scammers may look into your credit report to see the people you owe money to such as, for instance, and then call pretending to represent the creditors.

Afraid of being arrested and aggressive language are indications of a fraudster In accordance with the . It's not illegal to arrest someone for a debt, and it's against the to mislead people regarding what happens if you don't pay a debt. Debt collectors who are legitimate tend to be very careful in this regard.

Another red flag is someone claiming to represent an official of the Internal Revenue Service and seeking immediate payment. The government's tax collection agency does not require you to make a payment immediately over the phone or ask for a debit or credit card number. Both are indicators of . Be aware, however, that the IRS in 2017 is a bit different.

For any credit card, request an official confirmation letter -- a document that outlines the details of the debt prior to taking any action.

What do I do?

Think before you act when . However, you should take these specific steps if you think the person calling you is trying to scam you.

Get information

Start by gathering information about the debt collector and the debt. Get a validation letter. The legitimate debt collectors must be able to provide you with this information promptly without delay. Any hesitation might be the sign of a scammer.

Ask the caller for his or her name and address, along with the name of their employer, and its phone number and street address. If the caller won't give you these details, it's an indication of a red flag.

Protect your personal information

However the debt collector you are considering asking, don't give away or verify you bank account, credit or debit card numbers, or Social Security number. Doing so could put you at risk for identity theft or let a scammer pull money from your accounts.

Contact the creditor who originally made the offer.

If you think a scam debt collector has reached you regarding payment for an outstanding debt and you believe it is a scam, contact the creditor to confirm whether it sold the debt, as well as the contact details of the collection agency that manages it.

Do not answer the phone.

Ignoring repeated phone calls is among the most effective ways to keep an unscrupulous person off your side. Do not hesitate to call back when you're faced with harassment or threats or calls, and avoid answering callbacks. Since scammers are looking to make a quick buck off an easy subject, they're likely to pursue you for many hours before moving to the next target.

If you're dealing with a legitimate debt collector You'll have to come up with a plan for .

File a complaint

Do not hesitate to file a complaint with your state if a scam debt collector has contacted you. Gather all information you can , and then include the information as a formal complaint.

The author's bio: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.

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