Forget Balloons: China is Coming for Your Credit Cards
Since the Dodd-Frank financial reform law was passed in 2010, an under-the-radar company called UnionPay has been processing debit card transactions in the U.S. thanks to a provision in the bill referred to as the Durbin Amendment. UnionPay was created by China’s central bank in 2002 and is funded by the government. The 2010 law required banks to include alternative networks, including UnionPay, as options for merchants to process debit card transactions. Now, despite the wave of spy balloons being shot down by the American military, the same people pushing the debit card policy want to do the same thing to the credit card market. Giant corporations including Amazon, Walmart, Home Depot. Target and Kroger have teamed up with some U.S. lawmakers to push legislation that would allow UnionPay to process your credit card transactions. [The Washington Times]
Make Your Credit Cards Less Vulnerable to Fraud
Last year, one of my family’s credit cards was used to rack up hundreds of dollars in bogus charges at Apple.com. Dealing with the aftermath taught me to prize security over convenience, and to change some bad habits that made me an easier target. Sites where you make multiple purchases each month need to be monitored carefully for bogus transactions. Compare what your credit card statement says you’ve charged with your purchase history on the site. And if you find fraud, report it, even if it’s beyond the 60-day deadline. I also learned that I could “lock” my card in the mobile app to prevent unauthorized use. Unlocking it when I want to make a charge just takes a few seconds. I already had two-factor authentication, which requires a code and a password to sign in, on my financial and email accounts. I added it to my most-used retail sites as well. I’ve also started using a mobile payment system wherever possible. These systems—which include Apple Pay, Google Pay and Samsung Pay—create a “token” that’s transmitted to merchants so that your credit card number is never exposed or stored. [Associated Press]
Credit Card Debt Higher Than Savings for Record Percentage of Americans
Month after month of stubbornly high inflation has squeezed Americans’ budgets to the point that many are relying on credit or dipping into their savings in order to make ends meet. Now, the percentage of U.S. adults with more credit card debt than emergency savings has reached a new high. In survey results released by Bankrate, more than one-third, 36%, of U.S. adults reported that their credit card debt outweighs their emergency savings. That is the highest level recorded since the poll launched 12 years ago, and it is a marked increase from 22% in January 2022. Nearly half of respondents, 49%, said they have either less money in emergency savings or none at all compared to a year ago. [Fox Business]
Credit Card Delinquency Rates for New Users Were Higher Than for Those with Established Credit
In the U.S., many new borrowers’ ability to pay off debt was slightly less favorable than that of more established credit-served customers, according to the Empowering Credit Inclusion study by TransUnion. New-to-credit (NTC) consumers who opened credit cards over the last two years reflected higher credit card delinquency rates after the first six months following opening their accounts, compared to people with established credit and similar credit scores who opened new credit cards during the same time period. The credit card delinquency rate for near-prime NTC consumers was 3.4% compared to 2.2% for near-prime consumers with established credit. For prime NTC consumers, the delinquency rate was 1.2% compared to 0.7% for prime users with established credit. [Fox Business]
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Americans Have a Collective $21 Billion in Unspent Gift Cards
Some people love them, some people hate them. Worse, a large number of us who receive them on special occasions are indifferent to them, or even forget about them entirely. Such is the sad fate of gift cards; millions of which go unused each year and have a collective value estimated to be in the billions of dollars. Almost two-thirds of American consumers have at least one unspent gift card tucked away in a drawer, pocket, wallet or purse. And at least half of those consumers lose a gift card before they use it, according to a new report from Credit Summit. The report said there is as much as $21 billion of unspent money tied up in unused and lost gift cards. [CNN]
Senate Panel Targets the Collection of Gun-Sale Data by Credit Card Companies
Credit card companies could face fines up to $10,000 per violation for tracking firearm and ammunition sales in Florida, under a measure approved Tuesday by a Senate committee. The Republican-controlled Senate Banking and Insurance Committee voted 7-3 along party lines to approve a bill that would target yet-to-be-enacted plans by some credit card companies to create a separate “merchant category code” for sales at firearm businesses. Similar four-digit codes are already used to separate purchases and collect data from places such as grocery stores, gas stations, restaurants and bookstores. [WUSF]
Biden Selects Ex-Mastercard CEO Ajay Banga for World Bank President
President Biden will nominate Ajay Banga, the former president and CEO of Mastercard, to serve as president of the World Bank. Banga is currently the vice chairman of General Atlantic, a private equity firm, and would succeed David Malpass as head of the World Bank. Malpass was tapped for the post by former President Donald Trump and announced this month his plan to step down on June 30, four years into a five-year term. The World Bank president has been an American citizen since its founding after World War II, and the U.S. candidate is traditionally chosen to head the bank. The nominee must be confirmed by the World Bank’s executive board. [CBS News]
Citibank is Offering a Bonus of Up to $2,000 for New Checking Account Customers Right Now
Over the past year, the Federal Reserve has worked tirelessly to tame a record-high inflation rate. As a result, the federal funds rate has been raised consistently in 25-to-75 basis-point increments in an effort to get the economy running smoothly once again. The catch: raising rates raises the cost of borrowing. But for savers and checking account holders, it’s not all bad news. Having fewer borrowers means banks look for other ways to reel in new customers, often in the form of higher annual percentage yields or lucrative checking account bonuses. For a limited time, Citibank is offering a cash bonus of $200, $500, $1,000, $1,500, or even $2,000 to new customers who open a Citibank, Citi Priority, Citigold, or Basic Banking checking account between now and April 4, 2023. [Fortune]
ACH Network Sees Same Day Payments Up 15.5% and B2B Rise 11.8% in ’22
Same Day ACH and B2B payments on the ACH Network saw double-digit growth in 2022. These gains came during a year in which, overall, the number of payments processed by the ACH Network grew 3% to 30 billion and the value of those payments rose 5.6% to $76.7 trillion. 2022 marked the 10th consecutive year in which the total value of ACH payments increased by at least $1 trillion. Same Day ACH recorded a 15.5% increase in volume and an 86.3% increase in the value of payments during 2022. [PYMNTS]
Stripe Expands Tap to Pay to Android, Turning NFC-Enabled Android Devices into Payment Terminals
Stripe, the payments and financial services upstart, made waves in the world of mobile commerce last year when it became Apple’s first payment partner for “Tap to Pay,” the iPhone giant’s move to turn any iOS device into a payment-making or payment-taking terminal. Now, Stripe is expanding that business by a factor of googol. From today, businesses that use Stripe Terminal to take in-person payments now will be able to carry out Tap to Pay transactions on NFC-equipped Android devices, too. [Tech Crunch]
Klarna Jumps Back to Y2K with Help from Paris Hilton
Klarna has partnered with Paris Hilton’s 11:11 Media on a global advertising campaign starring the hotel heiress and social influencer. Creative draws on Y2K fashion trends and shows Hilton responding to the fintech marketer’s payment and shopping services with “That’s Smooth,” a spin on the “That’s hot” catchphrase she popularized in the early aughts. Commercials and stills attached to the effort roll out globally on Feb. 27 and will appear throughout March on social, digital, broadcast and out-of-home channels. 11:11 Media is handling aspects of the digital execution, including posts from Hilton’s personal accounts. [Marketing Dive]
Wells Fargo Seeks to Catch Faster-Growing Rivals by Boosting Engagement with Rich Clients
Wells Fargo is unveiling a new platform to boost digital engagement with its 2.6 million wealth management clients. The service, called LifeSync, lets users create and track progress on financial goals, ingest content tied to their plans, and contact their advisors. It will be delivered through a mobile app update in late March. Banks are jockeying to provide their customers with personalized experiences via digital channels, and this tool should enable Wells Fargo to boost satisfaction and loyalty. CEO Charlie Scharf has highlighted wealth management as one source of growth for the company, along with credit cards and investment banking, amid his efforts to overhaul the bank and appease regulators. [CNBC]
Bonds See 2023 Recession, Stocks Aren’t So Sure
The yield curve is one of the most robust recession predictors and has signaled a recession may be coming since mid 2022. In contrast, U.S. stocks as measured by the S&P 500 are up materially from the lows of last October and only just below year-to-date highs, seemingly rejecting recession fears. Yet, fixed income markets see the Fed potentially cutting rates by the summer, perhaps reacting to a U.S. recession.
The Evidence From The Bond Markets
The recessionary evidence, at least from fixed income markets, is mounting. The 10 yield Treasury yield has been below the 2 year yield consistently since last July. That is is called an inverted yield curve and has signaled a recession fairly reliably when compared to other leading indicators.
Building on that, fixed income markets see almost a nine in ten chance that the Federal Reserve cuts rates by September of this year. That’s something the Fed has repeatedly said they won’t do on their current forecasts. Yet, a recession could cause it to happen.
The Stock Market
In contrast, the stock market shows some optimism. The S&P 500 is up 7% year-to-date as the market has shrugged off fears of contagion from recent banking issues. In particular, tech stocks have rallied.
In contrast, more defensive sectors such as healthcare, utilities and consumer goods have lagged in 2023. This suggests that the stock market is taking more of a ‘risk on’ position and is perhaps less worried about the economy.
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That said the stock market is a leading indicator of the business cycle, it may be that stocks see a recession, but are now looking past it to growth ahead and are factoring in the lower discount rates that a recession might bring as interest rates decline. Also, the U.S. stock market is relatively global, so the fate of the U.S. economy is a key factor in driving profits, but not the only one.
Monitoring unemployment data will be key. Though the yield curve is a good long-term forecaster of recessions it is less precise in signaling when a recession starts. Unemployment rates can offer more accurate recession timing. Unemployment edged up in February, suggesting a recession may be near, but we’ve also seen monthly noise unemployment. Two similar monthly unemployment spikes during 2022 both proved false alarms.
However, if we see a sustained move up in unemployment from the low levels of 2022 that may be a relatively clear sign that a recession is here. Economist Claudia Sahm estimates that a sustained 0.5% increase in unemployment rate from 12-month lows is sufficient to trigger a recession. Unemployment rose 0.2% from January to February 2023, so maybe we’re on the way there. Of course, the jobs market performed better than expected in 2022 and it could do so again. Still, fixed income markets do suggest a 2023 recession is coming. Stock markets don’t necessarily share that view.
Which States Have The Highest And Lowest Life Expectancies?
There’s a wide variance of life expectancies among the 50 states in the U.S., according to a recent report prepared by Assurance, an insurance technology platform that helps consumers with decisions related to insurance and financial well-being.
Figure 1 below shows the 10 states with the highest life expectancy, starting with Hawaii, the state with the highest life expectancy.
Figure 2 below shows the 10 states with the lowest life expectancy, starting with Mississippi, the state with the lowest life expectancy.
Assurance scoured life expectancy data prepared in January 2023 by the U.S. Centers for Disease Control and Prevention (CDC). With this data, Assurance created several easy-to-understand graphics that offer information about life expectancies.
Life expectancies are a basic measure of well-being
As measured by the CDC, life expectancies are a basic measurement of well-being in a broad population and not a prediction of how long an individual might live. The CDC measures the expected lifespan for a person born in the year of measurement. This measurement is calculated based on the assumption that the individual will live and die according to the rates of death that are prevalent in the measurement year for each age. There’s no assumed improvement or backsliding in the assumed mortality rates in future years for each age in the life expectancy calculation.
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By contrast, an estimated lifespan for an individual would consider their current age, their gender, and some basic lifestyle information. It might also attempt to project future improvements or backsliding in mortality rates based on key factors.
Significant influences on life expectancy calculations
Leading causes of death in the U.S. are heart disease, cancer, and accidents in that order. These immediate causes are significantly influenced by factors in the population such as poverty rates, educational attainment, rates of obesity and smoking, access to healthcare, prevalence of violent crime, and the support people receive from federal, state, and local governments. All these factors can vary widely among different states, which can be a key reason why life expectancies vary by state.
When you think about it, all these factors also have the potential to influence a person’s quality of life. The measured life expectancy rate rolls up all these factors into one objective measurement of well-being that’s based on population data.
In addition to the factors listed above, mortality rates increased and life expectancies decreased in the past few years due to the Covid-19 pandemic. A recent article titled “Live Free And Die” summarized recent research results that show that life expectancies in most countries around the world rebounded after the Covid-19 pandemic but that they continued to decline in the United States. Many of the reasons cited in the article for the continued decline in U.S. life expectancies are the same or similar to the factors listed above.
Why should retirees care about the life expectancies reported here if these measures don’t predict your own lifespan? Life expectancy calculations indicate the general well-being of the entire population in your area. While the living conditions in your area can influence your own lifespan and quality of life, retirees should focus on their remaining life expectancy given their age. They should also consider how the factors listed above that influence life expectancies in the population might apply to them.
You can obtain customized estimates of your remaining life expectancy at the Actuaries Longevity Illustrator. Part of your planning for retirement is understanding how long you an an individual might live, instead of relying on generalized information about larger populations you see in the media.
IRS Dirty Dozen Campaign Warns Taxpayers To Avoid Offer In Compromise ‘Mills’
Owing taxes can be stressful. Unfortunately, the actions of some companies can make it worse. As part of its “Dirty Dozen” campaign, the IRS has renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar—while the companies collective excessive fees.
The “Dirty Dozen” is an annual list of common scams taxpayers may encounter. Many of these schemes peak during tax filing season as people prepare their returns or hire someone to help with their taxes. The schemes put taxpayers and tax professionals at risk of losing money, personal information, data, and more.
Tax Debt Resolution Schemes
“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel.
“This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”
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Offers In Compromise
Legitimate is a key word. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But, as the IRS notes, these “mills” can aggressively promote Offers in Compromise—OIC—in misleading ways to people who don’t meet the qualifications, frequently costing taxpayers thousands of dollars.
An OIC allows you to resolve your tax obligations for less than the total amount you owe. You generally submit an OIC because you don’t believe you owe the tax, you can’t pay the tax, or exceptional circumstances exist.
Because of the nature of the OIC—and the dollars involved—the process can be time-consuming. It can also be confusing for taxpayers who may not have a complete grasp on their finances.
First, you must complete a detailed application, Form 656, Offer in Compromise. You must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with supporting documentation (generally, bank and brokerage statements and proof of expenses).
You’ll also need to submit a non-refundable fee of $205 and payment made in good faith. The payment is typically 20% of the offer amount for a lump sum cash offer or the first month’s payment for those made over time. Generally, initial payments will not be returned but will be applied to your tax debt if your offer is not accepted. Payments and fees may be waived if the OIC is submitted based solely on the premise that you do not owe the tax or if your total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.
The IRS will examine your application and decide whether to accept it based on many things, including the total amount due and the time remaining to collect under the statute of limitations. The IRS will also review your income—including future earnings and accounts receivables—and your reasonable expenses, as determined by their formula. The IRS will also consider the amount of equity you have in assets that you own—this would include real property, personal property (like automobiles), and bank accounts.
Before your offer can be considered, you must be compliant. That means you must have filed all your tax returns and paid off any liabilities not subject to the OIC. After you submit your offer, you must continue to timely file your tax returns, and pay all required tax, including estimated tax payments. If you don’t, the IRS will return your offer.
Additionally, you cannot currently be in an open bankruptcy proceeding, and you must resolve any open audit or outstanding innocent spouse claim issues before you submit an offer.
You can probably tell—it’s a lot to consider. You may want representation. A tax professional can help marshal you through the process and offer practical guidance, while communicating what fees could look like.
By contrast, according to the IRS, an OIC “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. Also telling: the fees tend to be significant in exchange for very little work.
Those mills also knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing taxpayers money and time. You can check your eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.
“Pennies On A Dollar”
What about those promises that taxpayers can routinely settle for pennies on a dollar? Not true. Generally, the IRS will not accept an offer if they believe you can pay your tax debt in full through an installment agreement or equity in assets, including your home. That’s why the IRS tends to reject a majority of OICs that are submitted. The acceptance rate is less than 1 in 3, according to the 2021 Data Book.
The IRS will generally approve an OIC when the amount offered represents the best opportunity for the IRS to collect the debt. It’s true that there’s a formula that the IRS uses to figure out how much they think they can collect from you. But there is some wiggle room to account for special circumstances, including a loss of income or a medical condition. It’s worth noting those are the exceptions, not the rule.
While submitting an OIC may keep the IRS from calling you, it doesn’t stop all collections activities—don’t believe companies that suggest that submitting an OIC will make your tax debt disappear. Penalties and interest will continue to accrue on your outstanding tax liability. Additionally, the IRS may keep your tax refund, including interest, through the date the IRS accepts your OIC.
You may also be liened. In most cases, the IRS will file a Notice of Federal Tax Lien to protect their interests, and the lien will generally stay in place until your tax obligation is satisfied.
An OIC is a serious effort to resolve tax debt and shouldn’t be taken lightly. Be skeptical—if it sounds too good to be true, it likely is. If you’re considering an OIC, hire a competent tax professional who understands the rules and is willing to level with you about your chances of being successful—including other options. Don’t fall into a trap that can make your situation worse.
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