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How Debt Consolidation Can Go Wrong

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The Debt Consolidation Process Can Go Wrong

Written by Liz Weston, CFP(r) Senior Writer | Personal Finance economics, credit scores, Liz Weston, CFP(r) is a personal financial columnist co-host of the "Smart money" podcast, award-winning journalist and creator of 5 novels on financial matters, among them the bestseller "Your credit score." Liz has been featured on a variety of national television and radio programs, including the "Today" talk show "NBC Nightly News," the "Dr. Phil" show and "All Things Considered." Her columns are published in the media by The Associated Press and appear in hundreds of media outlets every week. Prior to NerdWallet, she was a writer columns for MSN, Reuters, AARP The Magazine and the Los Angeles Times. She lives located in Los Angeles with a husband as well as a daughter, and a golden retriever that is co-dependent.

Updated July 20th, 2017 at 2:07 PM PDT.

Written by Des Toups Lead Assigning Editor | Student loans, repaying college debt, and paying tuition for colleges Des Toups is a former director of assigning editors who worked on both the auto loans and auto loans teams. He has years of experience in personal finance journalism, exploring everything from auto insurance to bankruptcy, couponing and side hustles.

The majority or all of the products we feature are from our partners who compensate us. This impacts the types of products we write about and where and how the product is featured on a page. However, this does not affect our assessments. Our views are our own. Here's a list and .

Daniel Montville knew a debt consolidation loan wouldn't solve his financial problems however, the hospice worker believed it could give him some breathing space. He'd already declared bankruptcy once in 2005 and was determined not to make the same mistake again.

Montville was able to take out the loan in 2015, but within a year, he was been in debt on the loan as well as his payday loans he got to assist his daughter, who was a single mom with four children. The payday lenders all but eliminated his bank account each time a paycheck landed and left him with only a small amount of money to pay for the essentials. His daughter was fired from her job, and the $5,000 tax refund she had promised to him in exchange for repayment was instead devoted to supporting her kids.

"That's the moment I woke up and realized that this was a no-win situation," says Montville, 49, of Parma, Ohio. Montville is currently paying back his creditors under a 5-year Chapter 13 bankruptcy repayment plan.

can feel like the answer to a borrower's need however it does not always solve the issue of overspending that led to the debt in the first place. Within a short time, borrowers often find themselves being buried in debt.

"It's simple to fix it," says Danielle Garcia an expert in credit counseling at American Financial Solutions in Bremerton, Washington. "They don't address the root cause of the issue."

From the skillet

The five-year $17,000 loan Montville obtained at his credit union, for example, paid off 10 high-rate credit card debts, cut the rate of interest on the debt from double digits to around 8% and offered a fixed monthly payment of $375, less than the amount he was currently paying in total on the cards.

What the loan didn't do but change Montville's habits of spending. The repayment of credit card debt only gave him room to make charges.

Some of the debt came from unexpected expenses such as repair work to your car. But Montville estimates that 60% of it of the debt was a result of "foolish expenses."

"I wanted to own a television. I was in need of clothes. I'd like to go to a cinema," Montville says. When he purchased a brand new laptop, he noticed only the small monthly payment of $35 but not the 25% interest rate he was being charged. When his daughter was in financial difficulties, he resorted to payday loans because his cards were at their maximum.

Now that he is unable to longer make loans -- his credit card accounts are shut and he'll require the permission of the bankruptcy court in order to buy a new car-- Montville finally is thinking about what he really wants to purchase versus what he'd like to buy. He contemplates whether he could go without a purchase, or delay it. If he truly wants something, he saves for it.

"My feeling now is, cash only," Montville says. "Once I make a payment in cash, nobody will be able to steal it."

Consolidation is a method but not an answer

Montville's attorney, Blake Brewer, says many of his clients don't have any idea how their expenses stack up against their earnings. They think that their forthcoming tax rebate or stretch of overtime will allow them to get ahead, but don't realize they're consistently spending more than they earn.

"These people are shocked when I sit down with them and take out a calculator," Brewer says.

A few of his clients have consolidated their debts using a 401(k) loan or a home equity line of credit. They pride themselves on saving money by lowering their interest rates, however they're not aware of the fact that they're spending assets -- home equity and retirement accounts -- that generally would be safe against creditors when they file bankruptcy the court.

The people who seek debt consolidation might end up with a debt settlement agreements that promise to convince lenders to pay less than what they're owed. The process of settling debts typically results in a major hit to credit scores, however success isn't guaranteed and some businesses simply go under with the hundreds of dollars they cost.

-- through a credit union or a reputable online lender It doesn't have to be a disaster when the borrowers:

Stop using credit cards

Commit to an annual budget

Save for emergencies so they don't have to take out loans to pay for unexpected expenses

The most important thing is that their debt must have the ability to be repaid within the three- to five-year duration of the standard debt consolidation loan. If it will take more than five years to pay off the debt on their own, the borrowers must consult with a .

"By the time most people seek help they're already too far," says Garcia, the credit counselor.

Liz Weston is a certified financial planner and columnist at NerdWallet the personal finance website. She is also the author of "Your Credit Score." Email: Twitter: @lizweston.

This article was written by NerdWallet and first printed in The Associated Press.

About the author: Liz Weston is a columnist for NerdWallet. She is certified as a financial planner and author of five money books which include "Your credit score."

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Credit One credit cards: Confusing for consumers

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Credit One Credit Cards: Confusing for Consumers

Are you suffering from bad credit and confused by Credit One credit cards? This isn't you.

Written by Ellen Cannon Ellen was an ex-credit card writer at NerdWallet. She was a writer for personal finance for more than two decades at Bloomberg as well as Bankrate.com.

Updated November 20 2020

Editor: Paul Soucy Lead Assigning Editor Credit cards, credit scoring, personal financial matters 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 more than 20 years. He also established a profitable 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 was awarded the top distinction of the year from 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 fiancée, his two sons, and a dog named Sam.

A majority of the products we feature are from our partners, who pay us. This impacts the types of products we feature and the location and manner in which the product is displayed on the page. However, it does not affect our opinions. Our opinions are entirely our own. Here is a list of and .

This page is not up to the date

Credit One has significantly overhauled its credit card offerings as well as its policies since the article was published. We're currently working on an update.

The best word for describing the cards offered through Credit One is confusing .

When you begin the process of applying, you don't know which type of card you're eventually going to get which includes crucial details such as rates, fees and rewards, or even if you get a .

When you send in an order on time, you don't know whether it will be credited to your account soon enough to avoid paying a late fee. The card issuer typically takes one week to process transactions, while many cardholders encounter problems paying online, as indicated by the report Credit One made to the Consumer Financial Protection Bureau and state regulators.

The credit card posted on the website of the issueran important source of information regarding any card -is a general statement designed "for informational purposes only" for Credit One. It isn't possible to read the exact terms of your credit card until you qualify for the card you want.

The issuer's name and logo are similar to those of better-known issues Capital One, which has made some people believe they were applying for a credit card issued by the latter.

Credit One markets credit cards for people with less-than-great credit. In its defense, the issuer says that in order to provide credit cards to as many of these subprime customers as they can, it has to do things in a different way than what you will find on cards for higher-credit consumers. It's fair enough however, the confusion is real so be warned and be careful when applying for.

Credit One offers three types of credit cards:

Credit One Bank(r) Cash Back Rewards Credit Card

Credit One Bank(r) Platinum Visa(r) for Building Credit

Applications: It's all about prequal

Some credit card issuers will allow users to . Prequalification is when you submit certain information and then the issuer conducts an instant check to determine whether you're likely to get accepted for a credit card. Prequalification does not affect your credit scores. Only a real credit application will trigger the "hard inquiry" which can reduce your score by a few points. But prequalifying also does not ensure that you'll be granted credit. It's like a "soft affirmative."

Prequalification is an option with the majority of issuers, but it's a crucial component of an Credit One application process. You must prequalify in order to learn the exact costs, rates, and reward structure of the card you'll be applying for. Once you see those terms, you decide whether to apply or not and then undergo the hard inquiry. The application review is more extensive than an "prequal" review, which means you may still be denied or accepted for a different terms that you did not see after prequalification.

>> MORE:

What is the reason they behave in this manner?

Credit One says this prequalification process protects subprime consumers, who are least able losing points from their credit scores.

In this case, let's say that an issuer provides three cards with annual fees that range from $99 to $45 and zero. A person with bad credit might qualify for the $99 card, but not the other two- but they would probably opt for the card with a zero fee first, followed by the $45 card, and then the $99 card as the last resort. Their credit score would suffer the impact of three applications instead of one.

Credit One however it could offer a single card with several possible combinations of rewards as well as fees and rates. The application process is one-time and the issuer then accepts the terms you want to use based the creditworthiness of your applicant. So there is a benefit, but there's also an additional hurdle to leap through. You don't know the terms you're receiving (or likely to get) until you've begun the application process, at which point you may be less likely to fail.

Rewards: Wait to see

Terms and Conditions stipulate that, based upon your creditworthiness you may be eligible for one of 6 cash-back reward programs. Here are the possibilities:

Credit One Bank(r) Cash Back Rewards Credit Card and Credit One Bank(r) Platinum Visa(r) for Building Credit

Cashback of 1% on food, gas and mobile phone service. internet service and cable and satellite TV.

1% cash back on groceries, gas and dining out, mobile phone service, internet service, cable and satellite TV service.

1% cash back on all eligible purchases.

Cashback of 5% for the first $5,000 a year for combined food, gas and mobile phone service. internet service, satellite and cable TV services as well as 1% cash back rewards on any other purchase.

NASCAR(r) Credit Card issued by the Credit One Bank(r)

1% cash back on car and gas purchases, and double cash back on NASCAR.com purchases.

Cashback of 1% on all purchases. Double money back when you make NASCAR.com purchases.

The truth is it's impossible to know what you'll earn in cash back until you get your card.

Rewards are automatically converted into an account credit every month, which means this part is pretty straightforward.

Rates of interest: They're okay

The interest rates cited in the "for informational purposes only" disclosure ranged from 19.74 percent to 25.74 percent as of August 2018. If you're a person with bad or limited credit, the interest rates you pay for any card or loan will be on the high side. The rates offered by Credit One are in line with those on typical credit cards that are designed for bad credit.

Annual fees: Make your guess

Like other features of Credit One cards, the annual cost you pay remains a mystery until the issuer qualifies you for a credit card. Your annual fee the beginning of the year would be "between $0 to $75." For the second year and beyond, the range increases to $0 and $99. In the following year after the beginning, your annual cost may be paid by monthly instalments. It could also be billed in one lump sum.

Certain Credit One credit card agreements -that are "real" the terms and conditions which will ultimately be applicable to cardholders are contained in . As of August 2019, the agreement outlined 21 various combinations of APRs, annual fees, and other card features. Again, the one that applies to you will be revealed only after you have been approved for a card.

Nerdy Tip

For certain Credit One cardholders, the annual fee is billed in monthly installments rather than all at once. That means they are required to pay the bill every month, even if they're not making use of the card. That, in turn, increases the chances of missing payments or making late payments due to the issues that many cardholders have with getting their payments promptly credited, discussed below.

Here are a few other fees you might pay (we use the word "might" because the "for informational only" conditions could differ from the terms on the credit card you're ultimately approved for):

Authorized user: $19 per year The authorized user must be 15 years old

Foreign transaction fee: 3% (minimum $1)

Cash advance: 5 (or 8%) of every money advance, which is higher or $10 or 3% of each cash advance, whichever is higher.

Late payment fee: up to $37

Returned payment fee: up to $35

Credit limit increase fee from $0 to $49

Fee for duplicate monthly statements: $10

Receipts for sales receipts: $6

Replacement card: $25

Fee for balance transfer: $5 or 8 percent of the balance transferred whichever is greater (if the card allows transfers at all)

Grace period: Who is sure?

For most credit cards, if you pay your account in full each month, you immediately receive an -- that's, you won't be charged any interest on purchases until the pay-day. Complete your monthly payments in full and then you'll never pay interest.

With the Credit One cards, however, you can't tell upfront what grace period. In the "for informational only" terms there's a section devoted to "paying an interest." It starts with "If your Account is subject to an Grace Period ..." That's an enormous "if." It continues to state that when your account is not subject to a grace period, you will be charged interest on each purchase from the time it is posted onto your credit card. Like most important information regarding Credit One cards, you will not know if you have any grace periods until you apply. Of 31 card agreements spelled out by Credit One as of August 2018, about half had a grace period.

Making payments: Confusion reigns

A NerdWallet investigation released in October 2018 found numerous complaints regarding Credit One that, because of an unintended loophole in the law of the United States was not apparent to consumers. The issue of payment is frequently mentioned in those complaints, as well as in posts posted in other forums.

Consumers describe sending in a payment before the due date but then having Credit One fail to process the payment until it was "late." In other instances, customers could not pay on credit card on the Credit One website and were forced pay via mail or phone, resulting in additional charges.

Credit One declined to comment on the findings of the investigation, however, its policies regarding processing payments seem to confirm the claims. The majority of credit card companies will make a payment available to a cardholder's account instantly. Credit One says it will keep your money for several days -- unless you chip in the equivalent of $10 to get it processed within a day.

When will your payment be credited?

Like any credit card, the balance on credit cards is based on the balance of your Credit One card is made from your purchases as well as cash advances (if they are available), interest as well as any fees added. The minimum amount you pay on Credit One cards is 5% of the amount. For most credit cards the minimum payment is 1% to 33% on the amount.

After one billing cycle, Credit One cardholders may contact Customer Service and choose their due date, as in the six days before or after the initial date. Cardholders may choose a different due date once every six months.

It appears that Credit One cardholders have to be extra cautious the way they pay their monthly payments. The "FAQs" section of the website says there are two options to pay your bill: "Standard Payment" and "Express Payment." From there, it gets difficult:

If you choose Standard Payment, according to the FAQ "your funds will become available within 5 (5) business days, and you will only be able to pay using your Bank Account." Five business days can be a challenge. Say your due date falls on the 15th day of the month and for a particular month, that 15th day falls on a Saturday. To avoid a late charge you'll need to make your payment on the 7th day of the month (a Friday) to be sure your payment will be processed in the "about five (5) business days" period. If you didn't pay 8 days earlier, in other words you might become "late."

If you opt for Express Payment When you make an Express Payment, your "funds will become available sooner (usually within the next business day)." However, the cost for Express Payment will be $9.95.

Even the terminology Credit One uses is peculiar. We've never come across a credit card agreement with wording about when "funds will become available." This kind of language typically applies to bank account deposits, so we don't know what it refers to in this instance. But we assume it indicates that the money will be posted to your account.

When does your available credit refresh?

But wait, there's more! Every one of the 21 card agreements contained in"the "real Terms and Conditions" document contain this paragraph:

In the event that an amount of payment is less than the principal amount outstanding on your Card Account, new credit will be available (subject to your credit limit) however, only 12 calendar days following our receipt of the payment.

This could mean that regardless of when you make your payment whether on time in the past, late, Standard or Express, or Standard -- you won't be able to access your total available credit line until two weeks following the payment. Say your credit line is $500, and you're maxed out. You've paid off your balance, but you're not able to use your card for 12 more days.

To get clarification to clarify the issue, we attempted to call to the "Application information" number provided by Credit One however, we could not make it past the first branch of the phone tree. It's because, to inquire regarding applying for a Credit One card, you need to input the 16-digit number of the Credit One card.

Consumer complaints

The Credit One cards are issued by Credit One Bank of Las Vegas which is a subsidiary of Sherman Financial Group, a private firm based within Charleston, South Carolina.

In addition to the complaints to government agencies uncovered by NerdWallet Payment problems are commonplace in complaints about Credit One credit cards on the website. Many reviewers say they tried to pay the bill online however, the Credit One website was not functioning. If they did make the payment, but it was not crediting the account in a timely fashion and resulted in a late charge. There are more than 1,000 complaints regarding the company as well as its service to customers on Consumer Affairs.

Complaints about Credit One on also touch the customer service, billing and payment issues. Of the 129 reviews on Yelp as of the month of February, 110 of them gave Credit One one of five stars.

The Better Business Bureau has not awarded Credit One a rating. From 112 reviews posted in February 2017 , on the website of the southern Nevada BBB Three reviews were classified as positive (although there was one review that review was distinctly negative) Three were classified as neutral and the rest as negative. Of 783 complaints logged on the site, 574 were identified as issues with billing or collection including payment problems.

Credit protection: Expensive

Another benefit that is touted by Credit One is its "Credit Protection Program." This is an optional program that waives the minimum payment due for six months in the event that the cardholder "involuntarily" goes out of work or becomes disabled. The cost of this service is 96 cents for each 100 of the balance to be paid. The cost is paid monthly following the time you have enrolled. If, for instance, you have a balance of $500 in one month and you're enrolled in the program, it costs you $4.80 in that month. If your balance for the following month is $400 then you'll be charged $3.84 the following month, and so on.

Once you enroll in the program, you'll have to go through an initial 30-day period of waiting before you can activate the coverage. After activation, your account is closed and you are unable to use the card. Additionally, the minimum payment is not charged, but interest will continue to accrue.

Also, Credit One has the option to terminate your enrollment in the event that your account is more than 60 days overdue or if your balance is 20% or more over your maximum credit amount, Credit One "no longer has control of the account," you've been guilty of fraud or are in any or more of Credit One Bank's debt management programs.

Other characteristics: Good

Since they are cards, cardholders are covered by Visa insurance for travel accidents and collision damage waiver for car rentals insurance. Additionally, the cards come with Visa zero fraud liability as well as the conditions and terms inform cardholders to notify any unauthorized charges within a few hours. The law in the United States sets the maximum liability for cardholders at $50 in the event of unauthorized charges however, Visa zero fraud liability is a guarantee that Visa zero-risk liability ensures that you are not responsible for charges that are fraudulent.

The cards provide free credit scores, however you can get your credit score for free almost everywhere nowadays -- . Some credit card issuers offer you a score for free even when you're not a cardholder.

You can select from an array of designs (23 for the rewards card, 20 for the rebuilding credit card) to "personalize" your credit card, however, you will have to pay a fee for this option. The fee isn't disclosed on the Terms and Conditions that are available on the site.

Alternatives to better alternatives: Many

Considering the opaque terms and other disadvantages associated with Credit One cards, you might wonder why so many people sign up for the cards. One answer might be that people think that they're applying to a credit card issued by Capital One. That logo, which is swooshy, from Credit One actually predates CapitalOne's, but there's still confusion in the marketplace. Customers who have complained on the Consumer Affairs website mentioned this issue frequently.

Credit One cards are marketed to those with poor credit scores, however, better alternatives are available to those with or . Major issuers provide secured credit cards with better terms, lower fees and guaranteed grace periods. Secured cards require an initial security deposit of at least $200-$300. The process of putting that money together may be a problem in some cases, but bear in mind that you get the money back when you shut down the account or switch to a regular unsecured card. The charges that are charged to you by Credit One are not refunded.

For instance, the pays cash back of 2% up to $1,000 in spending on restaurants and gas every quarter. It also gives 1% cash back on all other purchases. Additionally, after having maintained your credit card in a responsible manner for seven months, Discover might review the card with an eye toward making it an unsecure card. Additionally the annual fee, it's zero dollars .

You may also be eligible for a genuine Capital One card, the . It is possible to get a 200 credit line with a deposit of $49, $99 or 200, and you can make the deposit in installments prior to opening your account. You may be able to access a larger credit line, without having to put more money down if you make payments on the timeframe of six months. And there's no annual fee.

If your credit is good or average and you have a good credit score, you may be eligible for the . This card is unsecured and offers unlimited 1.5 percent cash back on purchases, with a affordable annual cost.

If credit is not available the consumer may make poor choices, such as applying for credit with a Credit One credit card without researching their options. Look around, and you'll discover better options -- with terms and conditions that are clear and clearly stated.

About the author: Ellen Cannon is a former NerdWallet writer covering credit cards. She has been a writer also editor with Bloomberg as well as Time Inc.

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Paying down the principal on your car loan can be a good option to rapidly build equity in your car. Often you need to specify that to your lender that the money is to be made only to the principal, whether through the internet or over the phone. Each lender has their own procedure, though, and some do not allow principal-only payments. What is a principal-only car payment? A principal-only car loan is a type of payment that goes only towards the balance principal of the car loan and is separate from the regular monthly installment. It is the principal amount you borrowed initially, but without any interest added. The purpose of this additional payment is to help speed up payment of the debt. Every payment that goes exclusively to the principal amount builds equity in your vehicle. When you accumulate equity in your car you are closer to owning it for the first time. Also, it reduces the possibility of having to repay more than your car is worth. It is also called having to pay for the loan. How do you pay off the principal on a car loan The principal-only option on your car is a great way to pay off your loan faster. Although it's not available for all lenders, you'll likely have to notify the lender that this payment is made for the principal balance only, not an earlier payment for the following installment. Contact your lender to determine whether they allow this kind of payment, and then make one. If you lender does not offer the option to pay in principal only however, you might be able to pay down your loan quicker. How do you pay off your car loan quicker If you aren't able to pay in principal-only installments however, you might be able to still get rid of your auto loan . Make sure your lender doesn't charge before making additional payments. Make biweekly installments: You may not have enough money to pay a full amount every month, but an equal amount every week can cut down on the amount of interest that is paid based the method of calculation. This only works out in the case of a , as precomputed interest will be applied the same regardless of the date when the payment is made. Make a bit more than the minimum each month: Check with your lender to find out whether it is able to accept this kind of payment and how to do it. Every little bit helps when it comes to paying down the loan faster. Make extra lump-sum payments: If you get an extra bonus or tax refund, you can put it towards your car loan when it's better spent in another place. What happens when you pay down the principal of the car loan affects your credit Paying down a car loan might seem like a good idea initially. But paying down your loan earlier, particularly in the short-term, can . In the short run, your score may decrease by a few points, but in the long run it may improve if you have an excessive debt-to-income ratio. Other factors, such as your credit mix and payment history, can also affect your score. To determine if the idea of paying the car loan early is right for you, think about your credit mix: Paying your auto loan off earlier shows lenders you are able to manage your debt well. But your credit score -the various credit accounts you have, such as a car loan as well as credit cards and more -- may suffer in the event that your car loan is the only installment loan. Your payment history If you're able to pay off your car loan early reduces the number of regular payments, but it's not as significant of an impact on your credit score as revolving debt. Your debt-to-income ratio: Your debt to income ratio is another crucial aspect that determines the amount of you owe in comparison to your earnings. Making a payment on the balance of your car loan can boost the DTI ratio and increase your credit score in the long run. How can you lower your monthly car payments If your goal is to get a principal-only loan, it won't help, since it does not reduce your minimum monthly payment. There are however a few ways to lower your monthly car payment. Refinance If your credit has improved or you have an interest rate that is better, can and potentially help you pay it off more quickly. If you decide to refinance your car loan, you take out an entirely new loan with an alternative lender to pay off your existing loan off. This is why it's crucial to look around for the best deal possible to reduce the total amount of your loan and your monthly payments. Modify your loan You may also speak to your current lender about . Your lender may be willing to modify the conditions of your loan so that you can make your monthly payments affordable. One way to do this is by extending your loan duration. But doing so will mean paying more interest in the long run. Trade or sell your car Another option to reduce the cost of your loan is to move into a less expensive car. Trade in your current car or selling it privately could get you the funds for a down payment. You can then find an automobile that is more suitable for your budget and search for the most affordable automobile loan available. The main thing to consider is paying down the principal amount on your car loan could be a smart way to build equity. If your lender accepts additional principal payments, you may make them at any time you'd like. Find out more

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Varo and. Chime: Which Is Better for You?

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Varo Vs. Chime: Which Is More Suitable for You?

Varo Chime and Varo Chime both have high rates of interest on savings accounts, but their services and products have a few distinctions.

By Chanelle Bessette Lead Writer/Spokesperson Banking, checking and Cash Manager Accounts Chanelle Bessette is a private finance writer at NerdWallet covering banking. She has previously worked for Fortune, Forbes and the Reno Gazette-Journal. She is also an ambassador for the banking team. Her expertise has been published on The New York Times, Vox and Apartment Therapy.

Updated May 6, 2022

Edited by Sara Clarke Assistant Assigning Editor | Banking Sara Clarke is a Banking editor at NerdWallet. She was editor and project manager in newsrooms for two decades, most recently in U.S. News & World Report. She was in charge of projects like U.S. News's U.S. News education rankings as well as rankings for the Best States rankings. Sara has been featured in SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been mentioned in The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other media outlets. Sara is located close to Washington, D.C.

A majority of the products featured here come from our partners who pay us. This influences which products we review and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are entirely our own. Here's a list and .

Varo and Chime have comparable offerings with a few key differences. Varo has a function as a bank as is Chime. Chime is a Neobankwhich is an online-only financial service firm that works with a bank in order to offer account insurance.

Here's how the two companies compare with each other.

Snapshot Comparison

Checking your account

No monthly maintenance fees or minimum balance requirement for Chime or Varo. Varo and Chime.

Varo and Chime both have deposits direct that are made early (up to two days early).

The cash deposits offered at Varo and Chime can be costly However, cash deposits at Walgreens are free when you use Chime.

Savings account

With Varo customers, they are able to earn 5.00% per year on the balances up to $5,000 if certain conditions are fulfilled. Alternately, customers can earn 3.00% APY without having to meet these conditions, and for balances of more than $5,000.

Chime offers 2.00% APR for their high Yield Savings account.

Overdrafts, ATMs and customer service

Chime's SpotMe(r) overdraft service allows customers to overdraft up to $200 with no charge if they meet account requirements.

Varo doesn't permit overdrafts however, it does have a cash advance program.

Varo customers have access to more than 55,000 fee-free Allpoint ATMs.

Chime customers have access to more than 60,000 fee-free MoneyPass, Allpoint and Visa Plus Alliance ATMs.

Varo Chime and Varo Chime are both online-only , and don't have branches.

Varo and Chime both have strong mobile app ratings.

Choose Varo if:

You want a stellar rate of interest on savings and you can meet the criteria to reach that goal.

Choose Chime if:

You're looking for a high rate of interest on savings, and a flexible overdraft service.

Checking

The ratings of NerdWallet are formulated through our team of editors. The scoring formulas are based on multiple data points for every financial product or service.

at Varo Bank, Member FDIC

Varo Bank Account. It is a Varo Bank Account has no monthly fees or minimum requirement for balance. Additionally, customers are able to use the Allpoint ATM network, with more than 55,000 free ATMs which allow customers to withdraw cash. However, depositing cash is more difficult; Varo customers must visit a Green Dot retailer such as Walgreens or Safeway and may be charged a fee that can be as high as $5.95. Customers can also get their paychecks up to two days earlier by direct transfer.

NerdWallet's ratings are determined through our team of editors. The scoring formulas take into account many data points for each financial product and service.

Chime Savings Account. Chime doesn't charge monthly charges or require a minimum balance on its Spending Account. Chime also has a savings program where customers can round up your purchases up to the closest dollar and pay the difference. In addition, Chime customers can make fee-free withdrawals from more than 60,000 ATMs across the country. Chime can also be found in the Green Dot network, so customers can make cash deposits at certain retailers for a fee or at Walgreens for free.

Find out more details from Chime

Chime claims: "The retailer that receives the cash is accountable for the transfer of funds to your Chime Account. Account. Deposit fees for cash may be charged for retailers other that Walgreens."

"Round Ups automatically round-up debit card transactions to the nearest dollar. Then, transfer the round-up from your Chime Savings Account into your checking account."

"Early accessibility to funds from direct deposits will depend on the time of receipt of the payment file from the payer. The funds are generally made available the day that when the file for payment is submitted which may be up to two days prior to the date for the scheduled payment."

"Out-of-network ATM withdrawal charges may be applicable, but not at MoneyPass ATMs at 7-Eleven or any Allpoint and Visa Plus Alliance ATM."

Savings

Varo Savings Account. Customers begin with a base of 3.00% APY, but they can earn 5.00 percent up to $5,000 if they deposit at least $1,000 in direct deposit per month and maintain the positive balance of their account balance in their checking (Varo Bank Account) and savings balance at the end every month. Varo offers two automatic savings programs: the first lets customers withdraw an amount of direct deposits into their checking account and transfer funds in savings. The other program enables customers to earn savings upon making an purchase. Varo will round your purchase up by the closest dollar and put the difference into the savings account.

Chime High Yield Savings. Chime's savings account is free and offers a 2.00% APY as it has at the minimum of $0.01. Chime also offers two automated savings programs: a roundup programme that allows purchases using the debit card of a checking account and a program that saves 10% of direct deposits of $500 or greater from your checking account into your savings account. Note that a Chime Checking Account is required for eligibility to a Savings Account.

Find out more details from Chime

Chime declares: " The Annual Percentage Yield ("APY") for Chime Savings Account Chime Savings Account is variable and can change at any time. The disclosed APY is effective on October 25 2022. There is no minimum balance requirement. You must have $0.01 of savings in order to get interest. "

"There's no fee for Chime Savings Account." Chime Savings Account. Cash withdrawal and Third-party fees may be applicable for Chime Checking Accounts. You must have an account with a Chime Account with a Checking Account to create a Chime Savings Account."

Banking experience

Varo Chime and Varo Chime are both online only, which means that you're not able to use them if you prefer in-person service. But, Varo offers extended weekend and weekday phone support hours and ways to contact customer support via email or Twitter as well as Chime is accessible via email, chat and phone 24/7 as well as on Twitter.

Varo and Chime also have high scores for mobile apps on both the Google Play and App Store marketplaces.

Overdrafts

Varo. Varo will not let overdrafts occur When a customer wants to conduct a transaction that could result in an imbalance in their account, then Varo refuses the transaction. If you're in need of extra time between paydays then you can take advantage of this Varo Advance program, which lets you get a cash advance of up to $100 for an amount of $5.

Chime. Chime doesn't charge overdraft fees. Instead, it offers an overdraft service called SpotMe(r) that allows customers can borrow up to $200 as long as they deposit at 200 direct deposits per month.

Find out more details from Chime

Chime says: "Chime is a financial technology company that is not a bank. Banking services provided through The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC."

"Chime SpotMe is an optional service that requires only a one-time deposit of $200 or more in eligible direct deposits to Chime Checking Account. Chime Checking Account each month. Members who qualify will be allowed to overdraw their account to the amount of $20 for debit card purchases as well as cash withdrawals at first, but may be later qualified for a greater limit of up to $200 or more, based on the member's Chime Account track record Direct deposit frequency, spending habits as well as other risk-related variables. Your limit will be displayed in the Chime mobile application. You will be notified of any modifications in your limits. Limits can change at any time, subject to Chime's discretion. While there aren't any fees for overdrafts, there could be out-of network or third-party charges associated in ATM transactions. SpotMe won't cover non-debit card transactions, such as ACH transfers and Pay Anyone transfers or Chime Checkbook transactions. Please refer to the terms and conditions."

About the author: Chanelle Bessette is a personal finance writer at NerdWallet writing about banking. She is a specialist in cash management and checking accounts.

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Credit Card vs. Credit Card: What Is More Secure Online?

Advertiser disclosure You're our first priority. Each time. We believe that everyone should be able to make financial decisions with confidence. While our website doesn't contain every company or financial product available on the market We're pleased of the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward -- and completely free. How do we earn money? Our partners compensate us. This may influence which products we write about (and the places they are featured on the website) however it in no way affects our suggestions or recommendations, which are grounded in thousands of hours of study. Our partners cannot promise us favorable review of their services or products. .

Credit Card vs. debit card: which is Safer On the Web?

With credit card fraud the credit card issuer's cash is at stake. With debit card fraud the money you have paid for is stolen.

By Kevin Cash

Updated Nov 9th, 2022 at 1:13PM PST

A majority of the items featured on this page are provided by our partners, who pay us. This influences which products we feature as well as the place and way the product appears on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here's a list of and .

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If you typically use a debit card for online purchases, you may be thinking about reconsidering. If your card information is stolen and transactions are conducted without your consent, you'll quickly find out that debit and credit cards are treated in a different way.

The difference is the fact that with a credit card the issuer has to fight to get its money back. If you have a debit card, you have to fight for your money back.

>> MORE:

How do you handle fraud

If card information has been stolen and fraudulent transactions were made Protect your rights. In the case of credit cards, the main law is The Fair Credit Billing Act, or FCBA. For debit card transactions it is the Electronic Funds Transfer Act (EFTA) is in effect. Although these laws provide similar protections, understanding the differences is key to understand why it's more secure to use one type of plastic than the other.

>> MORE:

Fraud on debit cards

As per the EFTA guidelines, the liability you could face for debit card fraud is practically infinite. You are allowed up to 60 days to report a stolen or stolen card under the EFTA. After that, you simply lose whatever money was taken, even funds siphoned out of linked accounts. The exact liability limits under the EFTA are:

Lost or stolen card reported prior to transactions that were not authorized: no liability.

Lost or stolen card reported within two days The liability limit is $50.

Lost or stolen card filed within 60 days of the incident The liability limit is $500.

After 60 days: no protection.

It's important to note that if your card is not physically lost or stolen, you're entitled to sixty days in which to file a report of suspicious transactions without risk. If only your card number is stolen, 60 days begin on the date on the statement on which a fraudulent transaction appears.

>> MORE:

Fraud with credit cards

Under the FCBA the maximum liability for fraudulent credit card transactions is $50. If you notify your card lost or stolen before any fraud occurs the liability is zero. Credit cards typically offer no responsibility for any fraudulent transactions.

"I've been the victim of having my credit card information stolen and used fraudulently a numerous times," says Tucker Spillane an experienced credit analyst of 24 years old located in New York. "Fortunately, my issuer almost always picks up on the fraud immediately ... generally because the transaction is different from my normal spending practices. And they provide their own fraud coverage anyway. I've never ever had to pay a penny."

The primary distinction between a debit card and a credit card when it comes to fraud lies in the way you get your money back. When a fraudulent transaction occurs on your credit card, you have lost no cash. You can report the fraud and receive a credit on your statement, and the problem will never be a problem for your bank account.

With a debit card, you bank account balance is affected from the moment the transaction is fraudulent. If the transactions are significant, you could experience a domino effect of financial problems. Fraudulent charges could bind funds to the point that legitimate charges are declined or cause overdrafts.

>> MORE:

If you do not have a credit card...

Although credit cards are the best option to make purchases online, it's possible that you do not possess one. In this situation you can still take steps to safeguard yourself against fraud.

The ability to keep a low balance on the account linked to your debit card that you use for online purchases can help limit the extent of fraudulent withdrawals should they occur. This won't necessarily prevent someone from accessing your account, but it could limit the damage done.

It is also possible to disable any form of (should you have you have it) your account that is used for purchase. Many banks offer this service (usually for an account that is a checking one) that automatically takes money from savings accounts should the checking account be overdrawn. In the case of fraud it is essentially that the crook is able to access two accounts instead of one. If you do have overdraft protection in place, be certain to speak with your bank on what and when it's applicable.

Another way to minimize your risk is to make use of a pre-paid debit card. If someone does gain access to the account, they'll have access only to the amount you've loaded on the card.

The most important thing is the bottom line

From a legal perspective Credit cards typically offer greater protection against fraud. However, there are ways to imitate the protections of the use of a debit card or prepaid card. Deciding which is best for you will help protect your cash, whether you're shopping online or swiping in store.

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Credit Access and Disability What are the importance of score in a Crisis

Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make sound financial decisions without hesitation. And while our site doesn't include every business or financial product available in the marketplace however, we're confident that the advice we provide and the information we offer and the tools we develop are objective, independent simple, and completely free. How do we earn money? Our partners compensate us. This could influence the types of products we review and write about (and the places they are featured on our website) However, it does not affect our suggestions or recommendations that are based on many hours of research. Our partners are not able to be paid to ensure positive reviews of their products or services. .

Disability and Access to Credit The importance of scores in a Financial Crisis

Having good credit will allow you to obtain low-interest loans or credit cards to help you pay for your expenses in times of emergency. Here's how to get started.

Written by Caitlin Mims Content management specialist Credit score, credit cards Caitlin Mims works as a content management specialist in the credit cards team at NerdWallet. Prior to joining NerdWallet, she was an editor at CreditCards.com as well as Bankrate. Caitlin wrote about personal finance for seven years and has written about credit cards, financial scores and credit, as well as retirement planning and the financial struggles women confront. She lives in Denver, Colorado.

Updated Aug 15, 2022 7:33PM PDT

Edited by Kenley Young Assigning Editor Credit score, credit cards Kenley Young directs daily credit card coverage for NerdWallet. Prior to that, he worked as a homepage editor and digital content producer for Fox Sports, and before being a front-page editor for Yahoo. He has a wealth of experience in both digital and print media, including times as an editor at the copy desk as well as a wire editor as well as metro editor at The McClatchy Newspaper chain.

A majority of the products featured here are from our partners who pay us. This affects the products we review and where and how the product appears on the page. However, this does not influence our opinions. Our opinions are entirely our own. Here's a list of and .

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Since Erin Noon Kay was little Her mom taught her to handle money. This is an important idea for parents everywhere to learn but for Noon Kay it was crucial. She was born with cerebral palsy. Along with regular budgeting she had to know how to navigate the confusing government benefits system.

Noon Kay the person who started Claiming Disability, a company that helps people with disabilities via outreach and media representation -- explained that a lot of disabled people don't manage their finances themselves. Instead their finances are handled by a non-profit or by their family members, which means they can't acquire the necessary skills themselves.

"I do not think we're doing disabled people a service by trying to protect [them] from the reality of their own life," says Noon Kay, 33. "Like the way my mother would have sheltered me from all of these realities that would have been a huge shock."

One area that is often overlooked in financial management is the credit. Having good credit ( minimum 690) is having access to options in the event of an emergency should, for example, you lose your job or are in a position where you are unable to work.

However, those who are disabled are less likely to work full time and tend to earn less on average than people without disabilities, according to Tom Foley, executive director of the National Disability Institute, or NDI. And he speculates that the disabled community is one of the most groups, making emergency situations more difficult to manage.

For some, getting into in debt may be the sole choice

The answer isn't always as simple as spending less money when you suffer from disabilities, certain expenses which are often viewed as luxuries are absolute necessities.

Foley gave the example of an air conditioner going out during summer. If you suffer from a disability and live in Georgia fixing it is not a luxury; it's likely to be essential for your survival. If you have poor credit (FICO scores of 629 or lower) the options for covering such aren't as good.

"It's all these things kind of conspiring to put people in a fragile economic position, which makes it more difficult to manage any debt," says Foley.

In 2017, an NDI analysis of survey data from the Financial Industry Regulatory Authority, or FINRA discovered that those who have disabilities are significantly less likely to use credit card than general population and are far more likely to be struggling with financial burdens and also to utilize "alternative credit options" like pawnshops and payday loans. Payday loans are often accompanied by APRs of up to 300%..

If you are a person with bad credit, or no credit at all, chances are many options to pay off. But those with good credit have even better options, such as low-interest loans and low-interest credit cards.

>> MORE:

How do you begin building your credit

The process of building credit can be a challenge if you're in financial trouble. But it's not difficult. Most importantly, it boils down to knowing how to handle any debt you accumulate. In actual fact, Noon Kay credits her mother's financial education for the credit she enjoys today.

Here's how you can begin:

Open an account that gets reported to the credit bureaus

The majority of credit scoring models don't keep track of rent or utility payments, however credit cards and loans are usually disclosed to . Getting a credit card is one of the best ways to be certain that the account you choose to use will improve your credit score There are other options for those with weak or no credit. (More about that below.)

>> MORE:

Pay on time

Once you have an account that is reported to the credit bureaus make every payment promptly because it's one of the most important elements in your credit scores. If you've got a credit card and you're not required to pay off your whole balance. As long as you pay your minimum payment, you'll be able to secure your credit.

But remember: Merely paying the minimum amount . The interest on credit cards is likely to be much less than a payday loan however, the APR will still typically be in the double digits.

If you're having trouble making your minimum payment take the initiative to contact your credit card issuer first. The issuer may have a plan solution to lower your monthly payments and keep your account in good standing.

>> MORE:

Credit cards can aid

If your credit score is less than ideal, you might have some trouble getting approved for many credit cards, including most reward cards. However, there are some options

Secured credit cards

Unlike other credit cards, they require a cash advance upfront. After you've closed the account in good standing -- or are able to convert it into a traditional credit card that is secured by responsible usage over time -- you'll be eligible to receive the money back. Major issuers like Capital One and Discover offer secured credit cards.

Because the deposit lowers card issuers' risk and risk, it's much easier for applicants who have poor credit or no credit score to get accepted. In fact, it's possible to get secured cards which , or even a bank account -- although these products could have additional drawbacks, like annual fees or no upgrade paths to higher-tier cards.

'Alternative' credit cards

Based on your credit score depending on your credit score, you may be able to get an unsecured credit card that uses nontraditional underwriting standards in order to decide on approval. These cards might be able to take a look at your credit score, but they'll also consider other factors such as earnings, employment, and banking information.

It's not the ideal solution for everyone. If you're a high risk , you might have some trouble getting approved. But it's an option to consider in the event that your credit history isn't as strong as the other financial histories of your.

Become an authorized user

You can also build credit by becoming an on someone else's credit card account. You'll need to find someone with good financial habits and who makes every payment on time, since you're building your credit by piggybacking off their credit card account.

If you are an authorized user, you can get your own physical card and purchase with it, although that's not required. Your credit could be accruing benefits without ever having to use the card.

But authorized users generally don't have the power to make changes to the account or be accountable for making payments on it. That liability falls to the account's owner so it's a good idea for you two to set rules and expectations in advance. If you accrue fees that you can't pay, each of you may suffer negative impacts to your credit.

About the writer: Caitlin Mims is a content management specialist at NerdWallet which covers credit cards. Previously, she was an editor at CreditCards.com.

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Auto equity loans: What they are and who they're best for Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering financial calculators and interactive tools that provide original and impartial content, by enabling users to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The products that are featured on this site come from companies that pay us. This compensation can affect the way and where products appear on the site, such as, for example, the order in which they appear in the listing categories, except where prohibited by law. This applies to our mortgage or home equity products, as well as other home loan products. However, this compensation will have no impact on the content we publish or the reviews that you read on this site. We do not cover the entire universe of businesses or financial deals that could be open to you. Xavier Lorenzo/Getty Images

3 minutes read. Published November 15, 2022

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Written by Bankrate Written by The article was created by using automated technology. It was then thoroughly edited and fact-checked by an editor from our editorial staff. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the beginning of 2021. They are dedicated to helping readers gain the confidence to control their finances by providing precise, well-studied and well-researched data that dissects complicated topics into digestible pieces. Reviewed by Mark Kantrowtiz Reviewed by Nationally well-known student financial aid expert Mark Kantrowitz is an expert on student financial aid as well as the FAFSA and 529 plans, scholarships education tax benefits and student loans. The Bankrate guarantee

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Bankrate adheres to a strict code of conduct , so you can trust that we put your interests first. Our award-winning editors and reporters provide honest and trustworthy content to help you make the right financial decisions. Our main principles are that we value your trust. Our goal is to provide our readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly verify the truthfulness of content in order to make sure the information you're reading is true. We keep a barrier with our advertising partners and the editorial team. The editorial team of Editorial Independence Bankrate does not receive direct compensation by our advertising partners. Editorial Independence Bankrate's editorial team writes on behalf of YOU the reader. Our goal is to give you the best advice to aid you in making informed personal finance decisions. We follow rigorous guidelines that ensure our content is not in any way influenced by advertising. Our editorial team is not paid directly from advertisers, and all of our content is verified to guarantee its accuracy. So when you read an article or reviewing you can be sure that you're getting reliable and reliable information. How we earn money

If you have questions about money. Bankrate can help. Our experts have been helping you manage your finances for more than four years. We are constantly striving to give our customers the right advice and tools required to make it through life's financial journey. Bankrate adheres to strict standards , so you can trust that our content is truthful and accurate. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial choices. Our content produced by our editorial team is objective, factual and is not influenced through our sponsors. We're open about how we are capable of bringing high-quality content, competitive rates, and useful tools to our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods andservices or through you clicking specific links on our site. So, this compensation can influence the manner, place and in what order items appear within listing categories and categories, unless it is prohibited by law. We also offer mortgage, home equity and other home loan products. Other factors, such as our own rules for our website and whether a product is available within the area you reside in or is within your own personal credit score could also affect the manner in which products are featured on this website. We strive to offer a wide range offers, Bankrate does not include details about every credit or financial products or services. A allows you to borrow money without any security -- but with the auto equity loan it is possible to borrow money against the value of your car. While having an auto equity loan may result in a lower interest rate but you should think about the advantages and the dangers associated with having an auto equity loan prior to taking one. What exactly is an automobile equity loan is an Auto equity loan is a variation of a . You can use the funds for any purpose, provided you have an equity in your car. Auto equity loans let you take out loans against the value of your vehicle. If your car's worth $25,000 and you have a loan balance of $10,000, then you've got $15,000 worth of equity that you could borrow against. Through the auto equity loan you are able to borrow up to 100 percent of the equity you have in your car, to a specified limit. Since the loan can be secured through your vehicle so you'll likely be able to get an interest rate lower than the typical personal loan. But, since your vehicle will be used as collateral, it is at risk of being taken away if you don't keep your payments in time. Bankrate tip

If you're interested in getting an auto equity loan, check with your credit union or bank first. They may be able to provide the option, or might have a partner they're able to connect you with.

Auto equity loan compares to. the car title loan A car title loan is an instant loan that relies on your vehicle as collateral. In most cases it is the case that cars title loans are much more expensive as compared to auto equity loans. In comparison, auto equity loans typically have longer terms and lower interest rates. The advantages of Auto equity loan A car equity loan can come with numerous benefits. Faster approvals. For those who have bad credit, an auto equity loan can result in quick approval. Since you can utilize the equity you have in your vehicle to secure the loan, the lender will be able to ensure it gets its cash back. Larger loans. Like any equity loan, the amount you are able to borrow is partly determined by the amount of equity you own in your car. A car worth $10,000 with equity of $5,000 can get a $5,000 loan as an example however, someone who has a less desirable car may not be able to obtain a loan in the first place. Low interest rates. The you receive on an auto equity loan is directly connected to your credit score and the value of your vehicle. If your car is valued at a high value, you may be able to secure a favorable rate even if you have less than perfect credit. The drawbacks of an auto equity loan There are also disadvantages of taking out one of these loan. Your vehicle is the collateral. A car equity loan uses your car as collateral. If you stop making payments the lender could take over your car in order to recover the loss. It is difficult to locate. Auto equity loans are not common. If you're looking to get an auto equity loan make sure to contact your credit union or bank first. They may offer the service, or they may have a partner to connect you with. Who an auto equity loan is best for A cash-back loan may be right for you if you fulfill the following criteria: You have an equity in your vehicle. The most crucial aspect of being a good applicant to get an auto equity loan is having enough equity to take an loan against. It is possible to pay the monthly to make payments. Because your car is in the hands of the government so it's crucial to ensure that you'll be able to make payments every month. If you don't make payments, your vehicle may be taken back. This could be a issue if you require the car on a daily basis. Interest rates may be lower than the rates you're currently getting. If the interest rates of an automobile equity loan are lower than conventional personal loans and different credit choices, it could be a good idea to choose this unusual loan kind rather than something that is that's more accessible. Alternatives to car equity loan If you're unable to obtain an auto equity loan or if the application process isn't going as smoothly you'd like, you may want to think about loan alternatives that don't require the use of your vehicle. Home equity Like an auto equity loan, a relies on the equity you have in your home. It is typical to be able to take out loans up to a certain percentage of the equity you own or a predetermined cap. If you own your own home you could consider this an option. Personal loan Personal loans are a viable alternative to an equity loan However, the rates are likely to be a little higher as they aren't secured. The process for taking out the personal loan is similar to the process of obtaining an auto loan and can be made in person or via the internet with a variety of lenders. Credit cards While they are an option, they are typically far more costly than the personal loan or secured loan. However, they are also easier to qualify for and can provide instant access to the credit once you have acceptance. The next steps A car equity loan could be a good idea if you are in seeking a loan at a lower cost. But it's important to plan your budget in advance, since your vehicle will be at risk if you cannot pay the loan. Learn more

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The article was written by generated using automation technology and thoroughly edited and fact-checked by an editor from our editorial team. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances with precise, well-researched and well-written facts that break down otherwise complex topics into manageable bites.

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Reviewed by Mark Kantrowtiz Reviewed by Nationally acknowledged student financial aid expert Mark Kantrowitz is an expert on student financial aid, the FAFSA as well as 529 plans, scholarships, education tax benefits as well as student loans.

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Other Articles Related to Automotive Loans Read 6 minutes in Mar 02, 2023 Auto 5 min read on Oct 19, 2022. Automobile Loans 3.30 min to read Oct 11 2022. Auto Loans 3 min read Sep 15, 2022

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3 Ways Minority-Owned Banks Make a Difference in America

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3 Ways Minority-Owned Banks Make a Difference in America

by Spencer Tierney Senior Writer | Certificates of deposit, ethical banking, banking deposits Spencer Tierney is a consumer banking writer at NerdWallet. He has been writing about the personal financial sector since with a particular focus on certificates of deposit as well as other banking-related subjects. He has had his work highlighted in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is located in Berkeley, California.

Updated Dec 11, 2020

Edited by Carolyn Kimball Assigned Editor - Banking Los Angeles Times, San Jose Mercury News Carolyn has worked in newsrooms around the country as a reporter and editor. Her interests include personal finance, sci-fi fiction novels and groovy Broadway musicals.

The majority or all of the items featured on this page are provided by our partners, who pay us. This impacts the types of products we feature and where and how the product is featured on a page. However, this does not influence our evaluations. Our views are entirely ours. Here is a list of and .

A particular type of bank has an an outsized role in creating greater economic opportunities for people of ethnicity.

From the Black perspective of leadership the banking institution is much more than "a place where someone can deposit a check or get an loan," says Kevin Cohee the president and CEO of OneUnited Bank, one of the biggest black-owned institutions within the U.S. "That's only one aspect of what banks can be."

OneUnited Bank's very first loan under the Paycheck Protection Program, part of the federal response to the COVID-19 pandemic, "was to a single mother of seven, who drove for Uber," Cohee says.

Minority-owned banks, also known as government agencies refer to as minority depository institutions, must have either most stockholders or the members of their boards of directors comprise persons of ethnicity. This is in contrast to the predominantly white boards of directors of the largest U.S. banks.

Minority-owned banks open doors to economic opportunity. Let's look at three ways that they can make a difference, and what is your role to assist.

>> WHERE DO I find one?

1. The gap is closing for the unbanked

Checking and savings accounts are the two most common entry points for building an association with a bank however, around 7 million Americans do not have these accounts, and there's a trend across racial and ethnic boundaries.

A little more than 16% from Native American households, 14 percent of Black households and 12% of white Hispanic households do not have bank accounts, as compared to 2.5% for white families, according to an annual Federal Deposit Insurance Corp. survey of the unbanked.

Minority banks can help bridge this gap by serving greater numbers of people with low- or moderate-income regions than other banks, according to the 2019 FDIC review of minority-owned depository institutions, or MDIs. For example, most of the people that the typical Black-owned bank serves at 62% is African American, compared to 6percent for metro-area banks that do not qualify as MDIs in the report.

Additionally, deserts in banking, or areas in the United States where you has to travel miles to locate a bank, have historically been a source of concern for certain races and ethnic groups, such as Native Americans living on reservations.

"We deal with customers who are usually out of bank systems], and they become loyal customers," states T.W. Shannon the chief executive officer of Chickasaw Community Bank, one of 17 Native American-owned banks.

2. Growing wealth through home loans

The home is among the most significant sources of wealth for many, but it primarily benefits white Americans. Asian or Black borrowers made around 6% and 7% of U.S. home purchases, as opposed to 60% made by white non-Hispanic borrowers in a mortgage market report from the Consumer Finance Protection Bureau. Native Americans accounted for less than 0.8% of home purchases.

Minority-owned banks offer more home mortgages and small business loans to people of color than other banks do, according to the FDIC report.

In the case of Chickasaw Community Bank, that involves tailoring home loans specifically for Native Americans. The bank has lease-to-own plans like lease-to-own, for instance, in which the tribe acts as the lender and borrows money from the bank while a tribal member follows a reasonable payment plan and improves their credit. Then, they own their home.

"For our tribe, which is the Chickasaw Nation, these are houses for people who faced credit issues in the past, but have a good stable income [yet still] might not qualify to be eligible for any different loan programmes," Shannon says. "That's a niche market that the big-to-fail national banks do not spend too much time on."

3. Responding to the needs of business communities in times of crisis

Small-business loans are another area of focus for banks of minority status, and their funding situation has become more difficult in the course of the COVID-19 pandemic. Minority banks have made more than 123,000 Paycheck Protection Program loans for an aggregate of $10.3 billion through August 2020, according to data from the Small Business Administration.

"We took on the small, hard loans, not the easy loans [to major corporations] We did it not to make money , but to aid the people in need," Cohee says.

Many minority banks are community banks, which are what the FDIC defines as banks that are focused exclusively on conventional loans and bank accounts that are core and have a limited geographical scope according to their location. Community banks have more than stepped up their capacity this year. Although they only account for 15% of all bank loans they outperformed other banks when it came to providing 30 percent of PPP loans in the context of a 2021 FDIC quarterly report that ended in June. These loans aid in protecting jobs.

"We saved over a thousand Oklahoma jobs through that program," Shannon says of Chickasaw Community Bank. "One thousand jobs might not sound like much, but in Oklahoma this is a huge deal."

He continues, "We were oftentimes calling the borrower to verify that they knew these programs and deferment assistance options were available. We were there for them even though they didn't know they could count on us."

What can you do to help minority banks

Minority-owned banks affect the lives of many in communities with limited access to banking services, but they account for less than 150, or about 3%, of the 5,100 banks that operate in the U.S. Plus, they aren't enough to address the systemic problems in the U.S. such as the disparity in wealth between races which means that the typical white family has eight times the amount of wealth as the average Black family, according to a 2019 Federal Reserve survey.

In order to help support banks that are minority to help minority banks, you can deposit a small portion of your savings into one. ( ) One aspect of banks' business model is using the money that sits in savings and checking accounts to make loans to small businesses and home buyers. Some companies, such as Netflix, for example has begun to support Black banks.

Beyond banking, think about investing in companies focused on making a social impact and other .

Paraphrasing Eleanor Roosevelt, Cohee says, "We're all better off when we're all happier."

Author bio Spencer Tierney is a writer, and NerdWallet's expert for certificates of deposit. The work of Spencer Tierney has been featured in USA Today and the Los Angeles Times.

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Average Net Worth by Age How do you compare?

Advertiser disclosure You're our first priority. Every time. We believe that every person should be able to make sound financial decisions without hesitation. Although our site doesn't include every business or financial product that is available on the market, we're proud that the advice we provide and the information we offer as well as the tools we design are impartial, independent easy to use and free. How do we make money? Our partners pay us. This can influence the products we review and write about (and where those products appear on our website) however it does not affect our suggestions or recommendations, which are grounded in many hours of research. Our partners do not pay us to guarantee favorable reviews of their products or services. .

The Average Net Worth for Age How Can You Compare?

The average net worth of U.S. families is $748,800. The median -- an accurate measure- is $121,700.

by Lauren Schwahn Lead Writer | Personal finance and debt Lauren Schwahn is a writer at NerdWallet who covers budgeting, debt, and other money-saving strategies. She contributes to the "Millennial Money" column for The Associated Press. The work she has contributed to was highlighted in USA Today, MarketWatch and more. Lauren has a bachelor's degree in the field of history at her home at the University of California, Santa Cruz. She is located in San Francisco.

Updated Dec 2 2022, 2022 2:31PM PST

Written by Courtney Neidel Assigning Editor | Personal finance, budgeting, spending Courtney Neidel is an assigning editor for the core personal finance team at NerdWallet. The editor joined NerdWallet at the beginning of 2014, and spent over six years of writing on shopping, budgeting and money-saving strategies before she was promoted to editor. Courtney was interviewed as a retail authority by "Good Morning America"," Cheddar, and CBSN. Her prior experience includes freelance writing in California newspapers.

A majority of the items featured on this page are provided by our partners who compensate us. This influences which products we review and where and how the product appears on the page. But this doesn't influence our evaluations. Our opinions are our own. Here's a list of and .

We're all aware that our net worth isn't even close to that of celebrity billionaires like Oprah Winfrey ($2.5 billion) or Jay-Z ($1.3 billion). It's been reported that Elon Musk's wealth decreased in 2022 by more than the worth of Oprah and Jay-Z together 100 billion. However, his net worth is more than $200 billion.

Have you ever wondered what your net worth is compared to the other people in your circle? We analyzed the average net worth figures from the Federal Reserve Board's Survey of Consumer Finances report to help you find out.

What is the net worth?

Net worth is the amount you own less what you have to pay. Using a , you can calculate your net worth by subtracting the value of all your obligations (such as credit card debt and loans for students) loans) and subtracting the worth of your entire assets (including your home and the funds in savings accounts for retirement).

>> RELATED:

How much is the typical American net worth?

So how do we determine the amount of net worth for Americans? According to the Federal Reserve Board issues the Survey of Consumer Finances every three years to provide information about family incomes, net worth , and more. According to the most recent reportwhich was released in September of 2020 and based on data collected in the year 2019 -- the overall average or mean wealth for U.S. households is $748,800 [0] Federal Reserve Bulletin . . Accessed on Apr 11, 2022.

. It seems like a lot, doesn't it? It's because wealthy households drive the average higher.

Looking at the median, or the midpoint value, is an accurate depiction of the everyday person. The average value of U.S. households is $121,700. That might help you breathe a bit easier.

Average net worth by age

Net worth estimates vary according to the level of education, age, and other factors. We'll focus on the median and the average figures for different age groups:

Age of head of family

Median net worth

Average net worth

Less than 35

$13,900

$76,300

35-44

$91,300

$436,200

45-54

$168,600

$833,200

55-64

$212,500

$1,175,900

65-74

$266,400

$1,217,700

75+

$254,800

$977,600

How to calculate your net worth

Not sure what your number is? Make use of our calculator for net worth to figure it out.

Net worth calculator

Enter the amount of both your debts and your assets to calculate your net worth.

Assets

Checking account balances

Savings accounts

Accounts for retirement and investments

Real estate

Cars

Other assets Include any other accounts or valuables (e.g. jewlery, art, etc. ).

Liabilities

Mortgages

Personal loans

Car loans

Credit card credit card debt

Student loans

Other debts include payday loans and any other loans that aren't listed here.

Net worth

$0 Really get to know the value of money.

NerdWallet offers you a comprehensive overview of your spending debts, bills, debts, and spending all in one place.

What is the significance of net worth?

Net worth is a way to gauge your financial health and spot the strengths as well as weaknesses. However, it isn't an exact representation. The fact that someone is wealthy does not mean that they live a high quality of life. For instance, a homeowner's house could boost the net worth of their home however, they could be cash poor even if they do not plan to sell it and has no savings.

The curiosity about other people's net worth can motivate us to establish and follow financial goals. However, it can cause us to feel inferior. It's crucial to realize that net worth isn't a fixed amount. It's able to fluctuate -- positively or negatively over the passage of time.

How can you increase your net worth?

Still, wanting to boost your net worth is not a negative thing. There are a variety of strategies you can implement to build wealth. Start with a few basic steps:

Select a strategy for debt repayment. Plan out a way to eliminate the burdensome debts. We recommend that you pay off debts that have the highest rates first. This is that is known as the . Another option to consider is to combine multiple debts into one installment.

Make money. Automate savings and benefit from competitive account interest rates, and look into other options .

Be patient. The trend for most people is that net worth increases as they get older. Make sure you are on the right track and allow time to be repaid.

Track your money with NerdWallet

Skip the bank apps and keep all your accounts in one place.

About the author: Lauren Schwahn covers consumer credit and loans at NerdWallet. The work she has written for NerdWallet was highlighted in USA Today and The Associated Press.

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