TIME Saving & Spending

This Will Change the Way You Use Your Visa Card Forever

American Express, Discover, MasterCard and Visa credit cards are displayed for a photograph in New York, U.S., on Tuesday, May 18, 2010. Credit-card firms caught off-guard by U.S. Senate passage of curbs on debit fees are facing what one executive sees as a "volcanic" eruption of legislation, including possible limits on interest rates. Photographer: Daniel Acker/Bloomberg via Getty Images
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It could majorly cut down on theft and fraud

This is one of those tech advances that are simultaneously cool and disturbing. Visa is adding a feature to the smartphone apps of member banks that lets banks know when a customer is traveling.

Convenient! This way, your card won’t be automatically declined just because you happen to be 50 miles or more away from home—a situation that can trigger an alert to a bank’s fraud department. Your bank, thanks to your phone’s location feature, will already know exactly where you are. Scary! Well, maybe.

It’s hard to decide. Fewer hassles are always good, of course. Nobody wants to be that poor sap standing hapless and red-faced at the checkout counter with a declined card. But do we really want our banks tracking our movements? (The financial crisis gave Americans plenty of reasons to think twice.)

Thankfully, the feature, Visa Mobile Location Confirmation, coming in April, will be entirely opt-in. Customers have to knowingly turn it on for it to work. Big Brother isn’t really so terrifying when you’re inviting him to watch you.

It’s entirely understandable that banks would want as many as people as possible to use the feature—they lose billions to debit- and credit-card fraud every year, and those numbers are on the rise. But the feature is not a panacea, of course. For instance, it won’t help if someone’s phone and bank card are stolen at the same time.

On balance, though, it seems like a net win for both banks and consumers.

TIME Saving & Spending

If You’re Going to Buy a Car, Do It Now

A General Motors Co. Car Dealership Ahead Of Earnings Figures
Daniel Acker—Bloomberg/Getty Images General Motors Co. Chevy Malibu vehicles sit on the lot at JP Chevrolet dealership in Peru, Illinois, U.S., on Wednesday, July 23, 2014.

If you need a car loan, this is your year

Financing a car — especially if you have good credit — has never been this cheap. Don’t wait too long to take advantage of this, though. By this time next year, if not sooner, borrowing costs will be ticking up again.

Personal finance site WalletHub.com surveyed 157 lenders and consulted with experts in a new report about car loans. The average car on the road today is about 11 and a half years old, so maintenance and repair costs are likely to be mounting. More than half of the experts consulted for this study say interest rates are likely to rise within 12 months.

Right now, though, financing is dirt cheap. Among all financing sources, the average APR on a new car loan for someone with good credit is right around 3% for new cars and just over 3% for used cars. The picture is brightest for people with credit scores above 720. On average, these buyers can get away with paying less than $1,600 in financing charges over the life of a 5-year, $20,000 new car loan.

For a new car, if you go through the manufacturer, the average best rate is right around 2% for a new car and just under 5% for a used car. Nissan, Toyota and Chrysler offer the lowest rates for customers with high credit.

The average at credit unions is also under 3% for new car loans. (One note: While the study looks at each manufacturer’s APR for a 36-month loan term, most car buyers opt for 60-month loan terms, which tend to have slightly higher rates. These averages also assume the buyer has good credit.)

The best deals can often be found by financing directly through the dealerships, the study finds. On average, dealers are offering rates 35% below average.

The study also suggests credit unions as a good place to look for a car loan, with rates 25% below average). National banks offer average rates, while regional banks tend to be more expensive, with rates 40% above average. Still, your milage may vary, as the saying goes, so it’s a good idea to check out all your options.

It also pays to shop around if you plan to lease. Although the report finds that Nissan, Volvo and Infiniti offer the best lease rates, many car companies’ financing arms are still lacking in transparency when it comes to the actual APR you’re getting, so you don’t actually know if you’re getting the best rate unless you do some legwork before you get to the dealership.

Even people with fair credit can benefit from today’s super-low rates. The study finds that people with credit scores between 620 and 659 will pay an average of just over $7,000 over the life of the loan, a drop of nearly $500 over the past three months. Across all lending sources, the average APR for someone in this credit bracket is about 12.5% for a new car and just over 13% for a used car.

Since that’s a pretty sizable gap, if you’re thinking of buying a car this year, it might benefit you to take some steps to raise your credit score before you go shopping — you could effectively be saving more than $5,000 over the life of the loan.

 

TIME Money

Americans Are Optimistic About the Economy Again

Money
David M. Elmore—Getty Images/Flickr RF George Washington

Middle-income America hasn't been this upbeat in years

The days might still be short and gray in much of the country, but when it comes to money and finances, Americans today have a sunnier outlook than we have in a long time.

A new Gallup survey on how Americans feel about our standard of living hit the study’s highest-ever level since the organization began tracking the metric seven years ago.

Every month, Gallup asks Americans if they’re satisfied with their standard of living and if they think that standard is going up or down, then calculates the answers into a single-number index. In December, that number was at 50 — an all-time high. By comparison, the index was at 14 back in October and November of 2008 when the Great Recession was at its worst.

In another all-time high, 81% of respondents say they’re satisfied with their current standard of living, a jump of 12 points since hitting a recession-era low in late 2008.

And we’re even more optimistic about the future. Today, Gallup finds more than six in 10 Americans say it’s “getting better” when asked about their standard of living — the highest-ever recorded in response to this question, and almost double the one-third of Americans who selected this answer back in October 2008, a record low.

“People’s outlook for their standard of living going forward has improved much more than their current satisfaction with it,” Gallup says.

In a second recent survey, the America Saves campaign finds that our collective willingness and ability to save is significantly higher than it was last year immediately after the holidays.

“[This] suggests that Americans are now feeling better about their financial condition,” Stephen Brobeck, a founder of America Saves and executive director of the Consumer Federation of America (the nonprofit behind America Saves), said in a statement.

The America Saves data show this greater interest in and ability to save is driven primarily by households with an annual income of less than $75,000.

“Our new data suggest that low- and middle-class Americans are feeling more optimistic about their financial situation now than a year ago,” Brobeck says.

In its analysis, Gallup suggests that freer spending, perhaps helped along by low gas prices, could be contributing to our collective optimism. The America Saves data offers clues that this could be the case: Compared to a year ago, the income bracket reporting the biggest jump in how effectively they’re able to save money is households earning less than $25,000.

“Instead of being distracted by heavy holiday spending and debts, they are . . . interested and active saving today,” Brobeck says.

TIME Money

Why You Should Never Buy Stuff When You’re Sad

TIME.com stock photos Money Dollar Bills
Elizabeth Renstrom for TIME

When retail therapy backfires

If you lose out on a plum assignment or get passed over for a promotion, your first tendency might be to head to the mall or click over to Amazon for a pick-me-up in the form of some discretionary splurging. It’s a common response, but a new study says it’s not the best one.

In fact, researchers warn that those purchases could leave you feeling worse about yourself, not to mention leaving a hole in your wallet as well as make you less resistant to future temptation.

A new study in the Journal of Consumer Research uncovers some interesting findings about how we cope with failures. A big personal or professional disappointment disrupts how we see ourselves, and we often respond unconsciously. Say you get passed over for a big promotion. You might go out and buy the luxury watch or designer handbag you were going to reward yourself with anyway, as if to say, “See? I don’t need them to look successful,” in an attempt to bolster your bruised ego.

But there’s a catch: The researchers suggest that, instead of cheering you up, anything you buy that’s associated with whatever you’re trying to forget actually just serves to remind you of that flub or failure. Instead of being a consolation prize, it acts as a trigger that makes you feel even worse, chips away at your self-control and even impairs your ability to focus on completing difficult tasks.

In experiments, subjects were asked to think about a past intellectual failure, then choose a copy of brainy-sounding Scientific American magazine. Afterwards, they reported that selecting the magazine made them dwell on that past incident when they felt dumb. When researchers offered these subjects chocolate candy, they found that those negative feelings led to lower self-control, with subjects less able to resist the offer of junk food.

“After experiencing a setback in one area of their life, consumers might be better off boosting their sense of self in a different area of their life,” the researchers say. For instance (if you must indulge in retail therapy) they suggest following up an experience that makes you feel dumb with a purchase intended to make you feel better about your social standing rather than one aimed at make you feel better about your intellect.

TIME Budgeting

The 1 Task Americans Just Can’t Accomplish

Stack of money
Getty Images

And, worse, it's a serious oversight

When it comes to budgeting, we have good intentions—really, we do. It’s just that somewhere between the idea of keeping track of our money and spending within our means and the execution of that pretty important task, we fall short.

According to a new survey from Bankrate.com, 82% of Americans say they keep a budget. That’s up from just 60% in 2012. Sounds great, but we really shouldn’t pat ourselves on the back just yet.

When Bankrate asks exactly how people keep their budgets, it finds that about a third just scrawl it out on paper—and almost 20% say they budget just by keeping track in their heads. “Mental accounting is really unreliable and prone to mathematical mistakes and rationalizations,” says Claes Bell, Bankrate.com’s banking analyst. ” In survey after survey, Americans show a lack of basic knowledge about some critical issues.”

Bankrate’s survey finds that fewer than 40% of Americans have money for a $500 or $1,000 emergency like a medical bill or car repair. To pay for an unexpected expense, about a quarter say they’d cut back on their spending, 16% would hit up family or friends for a loan and 12% would load up their credit card.

“In part this is a reflection of the economic struggles many Americans have gone through since the Great Recession,” Bell says. “Many households simply haven’t had the ability to set aside an emergency fund.” But now that the economy is on the upswing again, he says we really ought to stop making excuses and trying to keep track of our spending by memory alone, in order to sock away a rainy-day fund.

“I do think people really underrate the importance of having a cash reserve on hand to cover emergencies,” Bell says. “For many, a financial downward spiral is just one emergency-room visit away.”

Bell says people should take advantage of websites or apps that help you make and stick to a budget. Not big into technology? Even a basic spreadsheet is a step up from pencil and paper (or relying on your memory). Using a computer lets you track your spending over time and save that information so you can go back to it later — because are you really going to save and file all those pieces of paper you’d be using instead?

Keeping track of your budget electronically also means you’re less likely to make a mistake in the math, Bell points out. “Also, some budgeting tools and apps allow you to connect their services to your checking accounts and credit cards so you actually see how your spending compares to what you budgeted, automatically and in real time,” he says.

TIME

America’s Most Outrageously Expensive Places to Live

Courtesy: City of Palo Alto

Think your town is pricey? Think again

If you’re trying to pinch pennies, you might want to stay away from New York City, Bellevue, Wash., Scottsdale, Ariz., and, oh, just about anywhere in California. According to a new analysis of Americans’ spending patterns by Mint.com, the 10 cities in the country where people spend the most are much, much bigger drains on your wallet than the national average.

In the Golden State, it helps to be made of money: the Silicon Valley area is especially spend, with Palo Alto, Mountain View and Sunnyvale all on the top 10 (Palo Alto is number one), along with Fremont, Irvine and San Francisco and San Jose.

Mint’s analysis looks at the average transaction amounts rather than the volume, so bigger cities don’t necessarily take a bigger hit (that doesn’t seem to help the Big Apple, though). While the average transaction for Mint users nationwide is $171, that number soars to more than $345 in Palo Alto, almost $240 in New York City and more than $235 in San Francisco.

Perhaps unsurprisingly, housing and auto expenses are highest in New York City, and healthcare costs are highest on the West Coast, in the San Francisco-Oakland and San Jose areas, two cities that have the second-highest home and auto spending, as well.

Nationwide, the top merchant frequented by Mint users is Amazon.com, followed by Wal-Mart, McDonald’s, Target and Starbucks, respectively. And for anybody who thinks it’s literally impossible to walk into one of those big box stores for one thing and not spend a bundle, you’ve got plenty of company: The average Wal-Mart transaction is more than $53 and the average Target ticket is more than $55.

And we make a lot — a lot — of food purchases: The top three spending categories by the number of transactions were all food-related: groceries, fast food and restaurants, respectively.

If saving the most money possible is your top priority, don’t despair, though: Mint also dug up the cities where Americans spend the least. You might want to check out a handful of cities in the middle of the United States: Columbus, Ohio, Indianapolis, Ind. and two cities in Texas — Fort Worth and San Antonio — were among the five places where Mint users spent the least, along with Orlando.

 

TIME Saving & Spending

The Disastrous Black Friday Mistake You Must Avoid

Money in jeans pocket
Image Source—Getty Images

Shop smarter—or else pay for the consequences

Going into the holiday season with a budget is a good start, but it might not be good enough. A new study shows that misestimating how much of a deal they’ll get on Black Friday and underestimating how long it will take them to pay off their holiday splurges will cost American shoppers.

According to the National Retail Federation, the average holiday shopper spent a little less than $770 last year. It predicts a total increase in Americans’ holiday spending of just over 4% for this year.

But shoppers could find themselves with sticker shock, a new study from NerdWallet.com warns. And middle-class shoppers could bear the brunt of it. According to a survey conducted by Harris Poll for NerdWallet, families in the $50,000 to $75,000 income bracket won’t pay off their debts for an average of nearly three months. Poorer families will pay off their debts a little more quickly, in an average of two months.

Odds are, even these estimations are optimistic. Other studies show that people tend to take longer to pay off their holiday bills than they anticipate. And, odds are, many of these shoppers aren’t starting from scratch but adding onto an existing balance — one that averages nearly $16,000, based on NerdWallet’s look at household credit card debt.

And the cost of servicing that debt keeps going up. The average APR on a general-use credit card is a tick under 16%, according to Bankrate.com. For store cards — you know, the kind many of us open over the holidays to get the one-day discount on purchases — it’s even higher. They have an average APR of over 23%, higher if you have marginal credit.

New data from Experian shows that more of us are signing up for those store cards and the higher rates they charge; both the amount we borrow and the number of cards we have has risen over the past year.

“Middle-class households can fall into a costly situation this holiday season, where they’ve been extended ample credit but have incomes too thin to comfortably pay the bills later,” warns NerdWallet senior retail analyst Matthew Ong. “Many are still struggling to reconcile a typically middle-class standard of living with stagnant incomes,” he says.

Adding insult to injury, NerdWallet also finds that those Black Friday deals many of us think we’re going to score might not be so hot after all.

In an analysis of 27 major retailers’ ads, more than 90% of them listed “sale” prices identical to last year’s Black Friday prices. This isn’t always apparent at a quick glance; the site found that retailers use tricks like misleading original prices and make shoppers jump through hoops like requiring mail-in rebates.

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TIME Saving & Spending

The Problem With Millennials, In One Staggering Statistic

137470615
KC Photography—Getty Images/Flickr RF

It's almost unbelievably bad

New data about how much debt today’s students are graduating college with just came out. The results are ugly, but that’s not the worst of it.

The Project on Student Debt conducted by The Institute for College Access & Success says the average debt load carried by last year’s crop of four-year nonprofit college grads is $28,400. That number is several hundred dollars higher than last year and roughly ten grand more than the average a decade ago. Roughly seven in 10 students today graduate with debt, a figure that has ticked up in that time period, as well.

This number would likely be even higher if for-profit colleges, which were included in previous tallies but left out this year because many failed to provide data, were included, since their students tend to leave school burdened with debt at a higher rate — 88% indebted with at average of nearly $40,000 in 2012.

That’s bad — but that’s not the problem. You might think these young adults would be worried about paying off a new car’s worth of debt they’d accrued before getting their first full-time job.

Nope.

A new study from Junior Achievement USA and PwC US conducted by Ypulse finds that 24% of millennials think their student loans will be forgiven.

“It’s a scary statistic,” Junior Achievement president Jack Kosakowski tells CNBC. The survey doesn’t explore why roughly a quarter of young people have such an optimistic — and for the majority, unrealistic — expectation.

In many cases, the payments they expect to be forgiven are significant. “Loan payments are also rising, taking a significant chunk out of Millennials’ pay checks when it comes time to pay up post-graduation,” the report accompanying the survey says. “One-third of those with student loans are shelling out over $300 per month and five percent are actually paying more than $1,000 per month.”

Although 60% of respondents to the PwC/JA survey say financial aid is a consideration in their school choice, the survey also finds that today’s high school seniors are relying on an average of just over $8,200 in contributions from their parents and more than $6,600 in student loans to help fund their first year’s tuition. Their average contribution from savings or earnings: less than $1,400. (These students also spent almost $200 of their own money, on average, on back-to-school shopping. School supplies, followed by clothes, were the most common purchases.)

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TIME Saving & Spending

5 Ways Money Can Buy Happiness, Backed by Science

Money
Getty Images

You have to be a spend wisely, though

The old saying that money can’t buy happiness? Not true, it turns out. But you have to spend strategically if you expect the Benjamins to put a smile on your face.

Buy moments, not stuff. According to Dan Gilbert, Harvard University psychology professor and author of Stumbling on Happiness, the key is to spend your money on experiences rather than material things. Material things, even if they’re expensive or you wanted them badly, tend to lose their luster after a while, literally and figuratively. Memories of people, places and activities, however, never get old. In a survey, Gilbert found that 57% of respondents reported greater happiness from an experiential purchase. Only 34% said the same about a material purchase.

Spend on others. In a study published this year, Harvard University researchers conducted experiments and found out that spending money on others (called “prosocial” spending in academic jargon) boosts people’s emotional and physical well-being.

“The benefits of prosocial spending… extend not only to subjective well-being but objective health,” they write. Despite people’s intuitions and inclinations to the contrary, one of the best ways to get the biggest payoff personally from a windfall of $20 is to spend it prosocially.”

Buy small splurges. Dropping a ton of cash on someting extravagent doesn’t give you the same bang for your buck because, no matter how special it is at first, you get used to having it over time and it becomes just another object. “Giving yourself inexpensive indulgences is a clever way to gather up lots of bursts of happiness,” a recent Business Insider article suggests, citing Gilbert’s research.

Buy what you like. No keeping up with the Joneses — that’s not going to make you happy. “There are a lot of reasons someone might buy something… but if the reason is to maximize happiness, the best thing for that person to do is purchase a life experience that is in line with their personality,” Ryan Howell, an associate psychology professor San Francisco State University, tells Forbes. Howell recently co-authored a study finding that when people spend money just to project or uphold a certain image, it doesn’t bring happiness.

Spend with others. You might think spending money on things or activities you do by yourself will make you happy, but a recent study in Psychological Science says that tactic can backfire. “To be extraordinary is to be different than other people, and social interaction is grounded in similarities,” says Gus Cooney , Harvard University research assistant and lead author of the study.

Doing things with friends or family, even if it’s not as exciting, makes you happy because it fosters a sense of togetherness and connection between you and other people. “The guy who had the extraordinary experience had a harder time fitting in,” Cooney tells The Atlantic.

TIME

This Is the Most Depressing Number in Personal Finance

Money
Getty Images

It's the shocking amount we spend to be in debt

How much do you think you’ll spend servicing the cost of borrowing on credit over the course of your life? A few thousand dollars? Maybe 10 or 20 grand? The real amount will floor you.

How about almost $280,000 ($279,002, to be exact). In many parts of the country, that’s enough to buy you a house and a car. It’s more than the $245,340 the government estimates it will cost to raise a child born in 2013. And this is for people with middle-of-the-road credit scores. If medical bills or a job loss torched your credit, you could be paying much more for the privilege of borrowing money.

A lot of people only think about their debt in monthly terms — how much their mortgage or car payment is, or how much they need to pay to make the minimum payment on their credit cards. But a new tool from Credit.com pulls back the curtain and shows how much we’re really paying over time.

The penalty for having poor credit is steeper than the benefit that comes from having good credit. “If you have really bad credit, you’re at a definite disadvantage,” says Gerri Detweiler, president of consumer education at Credit.com.

According to Credit.com, somebody with top-notch credit would pay $209,590 in interest, while people with bad credit would be on the hook for $369,054, on average. “However, this is over an entire lifetime and everyone has the opportunity for a fresh start,” Detweiler says. Even bankruptcies come off your credit file after 10 years, and most other negative information doesn’t last that long.

Those figures are national averages; the calculator lets you add in where you live, what range your credit score falls in and details about your debts. Playing around with the variables can show you, for instance, how much you might be able to save in interest payments if you hang onto your car for a few more years, put a little extra towards your mortgage principal or credit card balance every month, or take steps to pull your credit into a better tier.

One thing the tool doesn’t do, though, is factor in the enormous amount of student loan debt many Americans today carry. For the more than seven in 10 students who graduated with an average of $29,400 in debt in 2012, according to The Institute for College Access and Success, that amount can inflate quickly if loans are deferred or put into forbearance.

“For some students, their student loan is like their mortgage,” Detweiler says.

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