Latest news with #cardholders
CBS News
6 days ago
- Business
- CBS News
Can I use my 401(k) to pay off credit card debt?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. It could seem like a good idea to use your 401(k) to pay off credit card debt, but there are some things to know credit card interest rates hovering near historic highs — they're averaging north of 21% currently — it's no surprise that many cardholders are struggling to keep up with their payments right now. Not only does the average cardholder owe about $8,000 on their credit cards currently, but the total amount of credit card debt nationwide topped $1.18 trillion earlier this year, indicating how pervasive this issue has become. And, issues with inflation, job instability and rising living costs have only made it harder to keep up. So, if you're carrying a balance month to month, you might be scrambling for solutions — and may even be eyeing the money in your 401(k) as a lifeline. On paper, it seems to make sense: Why keep letting the interest charges compound when you have thousands of dollars sitting in a retirement account? But while tapping into your 401(k) to get out of credit card debt may seem like a good idea, is it even possible to do that? Your 401(k) comes with big borrowing restrictions, after all, so before you start banking on that account to help you get out of debt, there are a few important things to know. Find out what credit card debt relief options you have now. Can I use my 401(k) to pay off credit card debt? Technically, yes — you can use your 401(k) to pay off credit card debt. However, the method you choose matters. You have two primary options: a 401(k) loan or a 401(k) withdrawal. 401(k) loan Some employer-sponsored retirement plans let you borrow from your 401(k) and repay the funds with interest over time. You're typically allowed to borrow up to 50% of your vested balance, or $50,000, whichever is less. This may sound like an appealing option since you're essentially paying yourself back when you borrow with a 401(k) loan, and the interest rate is usually much lower than credit card rates. That said, there are risks. If you leave your job (voluntarily or not), the loan typically becomes due in full. If you can't repay it within a short time frame — usually 60 days — it's treated as a distribution and taxed accordingly. Worse, if you're under 59½, you'll likely owe a 10% early withdrawal penalty on top of regular income tax. Learn how to start tackling your high-rate credit card debt today. 401(k) withdrawal Taking the 401(k) withdrawal route involves pulling the money outright from your retirement savings with no strings attached, meaning you don't have to pay it back. That can make a withdrawal sound appealing compared to a loan, especially if you're struggling financially. However, this option can be far more expensive than a 401(k) loan overall. For starters, early withdrawals from a 401(k) before age 59½ come with that 10% penalty, and you'll also owe income taxes on the amount. So if you withdraw $30,000, you could lose $10,000 or more of that to taxes and penalties, depending on your income bracket. In both scenarios, the real loss is the compound growth you're giving up. Using that money to pay off debt now might solve a short-term problem, but it can drastically reduce your future financial stability. What other options should I consider? Before tapping into your 401(k), it makes sense to explore other debt relief options that won't jeopardize your retirement security, like: The bottom line While you can use your 401(k) to pay off credit card debt, the real question is, should you? More often than not, the long-term financial damage outweighs the short-term relief of taking this route. Between the taxes, penalties and lost growth potential, you could be setting yourself up for major issues in the future, even if it fixes your immediate debt issues. So, before touching your retirement savings, take time to evaluate alternatives like debt consolidation, credit counseling or even debt settlement. When tackling debt, tapping into your 401(k) should be a last resort, not a go-to solution. After all, your future self deserves a shot at financial stability, too.
Entrepreneur
03-06-2025
- Automotive
- Entrepreneur
GM Rewards Mastercard undergoes major improvements
The GM Rewards Mastercard has undergone a significant update, bringing substantial improvements to cardholders. The revamped credit card now features enhanced benefits, most notably a valuable welcome offer and increased... This story originally appeared on Due The GM Rewards Mastercard has undergone a significant update, bringing substantial improvements to cardholders. The revamped credit card now features enhanced benefits, most notably a valuable welcome offer and increased rewards rates, making it more competitive in the credit card market. According to recent information, the new GM Rewards Mastercard offers better value on most fronts compared to its predecessor. This update marks a significant shift in the card's overall proposition to consumers, particularly for those loyal to GM vehicle brands. Enhanced Rewards Structure The updated GM Rewards Mastercard now provides higher rewards rates for cardholders. This improvement allows users to earn more points on their everyday purchases, making the card more lucrative for regular spending. The increased earning potential stands out as one of the primary enhancements in this card revision. While specific details about the exact reward rates weren't provided, the changes appear to position the card more favorably against competing automotive credit cards in the market. For GM customers and enthusiasts, these higher rates could translate to faster accumulation of rewards that can be applied toward vehicle purchases or services. Attractive Welcome Bonus Another major improvement to the GM Rewards Mastercard is the introduction of a 'valuable welcome offer.' New cardholders can now expect a more generous incentive when signing up for the card, adding immediate value to new applicants. Welcome bonuses have become a standard competitive feature in the credit card industry, and GM's decision to enhance this aspect suggests an effort to attract new customers while providing additional value. This initial bonus could help offset costs for GM customers planning vehicle maintenance or looking to accumulate points toward their next vehicle purchase. Comparison to Previous Version The revisions to the GM Rewards Mastercard represent a clear upgrade from its previous iteration. While most changes appear positive, the statement that it's better 'on most counts' suggests there may be some aspects where the card hasn't improved or potentially even taken a step back. Credit card revisions typically involve trade-offs, and consumers should review the complete terms and conditions to understand any potential downsides, such as changes to annual fees, interest rates, or redemption options that might not have been enhanced. For existing cardholders, these changes are likely to result in improved value from their card relationship, although they may need to activate or opt into certain new features to maximize the benefits. Market Position The timing of this card update coincides with many credit card issuers enhancing their offerings to retain customers in an increasingly competitive market. Automotive-branded credit cards face competition not only from other car manufacturers but also from general travel and cashback cards that offer flexible redemption options. By improving the GM Rewards Mastercard, GM and its banking partner appear to be strengthening their position in the co-branded credit card space, particularly appealing to consumers who are loyal to Chevrolet, Buick, GMC, or Cadillac vehicles. The enhanced card now offers more compelling reasons for GM customers to choose this financing option over general-purpose credit cards, potentially increasing brand loyalty and future vehicle sales for the automotive giant. As credit card rewards programs continue to evolve, these improvements to the GM Rewards Mastercard reflect broader industry trends toward offering more value to consumers, especially in categories aligned with their spending habits and brand preferences. The post GM Rewards Mastercard undergoes major improvements appeared first on Due.
Finextra
29-05-2025
- Business
- Finextra
Visa launches Click to Pay in Hong Kong with Za Bank
Visa, a global leader in digital payments, today announced a significant advancement that will transform the eCommerce experience. 0 This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author. Hong Kong's first and largest digital bank[1], ZA Bank, pioneers Click to Pay, enabling cardholders to complete online transactions in seconds without the need for manual card entry. ZA Bank is the first card issuing bank to enable Visa Click to Pay in Hong Kong and across Asia Pacific, with 11 more markets to follow. Click to Pay is the new standard in online shopping; it brings greater convenience to online shopping. When Click to Pay is enabled, consumers can skip guest checkout, bypass form fields and forgo the hassle of remembering passwords after setting up their Visa card on the issuing Bank's app. By eliminating the need to manually enter your Personal Account Number (PAN), or your 16-digit card number, and passwords, reducing checkout time from five minutes to under one minute[2]. Data is also securely stored with Visa, ensuring trust and security without the need for consumers to store their information on third-party sites. With cart abandonment rates as high as 84%2 for eCommerce, Click to Pay seeks to reduce friction by improving authorisation rates by an average of 2.5%[3], improving business for merchants. Without the complexity of card information input, it is like contactless payment, for online shopping. Click to Pay enables consumers to complete online transactions within a few clicks, powering a more seamless and secure checkout experience at scale. Consumers only need their registered email, phone number or Visa Payment Passkey to check-out online. T.R. Ramachandran, Head of Products and Solutions, Asia Pacific, Visa, said, 'eCommerce in Asia Pacific has been accelerated by mobile phone ownership, digital advancements and connectivity in Asia Pacific. Our partnership with ZA Bank is a great example of Visa's ongoing industry collaboration to bring innovative payment solutions that benefit the consumer, merchant and issuer. When Click to Pay is used, and combined with Visa Payment Passkey, consumers can enjoy a seamless checkout experience with just three clicks[4] while merchants will benefit from a quicker checkout time, improved authorisation rates and far lower fraud rates. Visa will continue to uplift the consumer retail and online experience while bringing greater commercial success and more innovations to our bank and merchant partners across the region.' By making Click to Pay a card-level feature that comes ready with Visa cards, cardholders can access the solution without having to sign up separately on third-party eCommerce or merchant sites for Click to Pay. There is no additional setup required by consumers. To provide additional peace of mind with the Click to Pay capability, cardholders can set up their Visa Payment Passkey using their native device's biometric capability or screen lock and use the Passkey for future payment authentication when they check out at participating eCommerce sites. In the Asia Pacific region, major acquirers, including AsiaPay, and a wide range of merchants have geared up with Visa Click to Pay solutions. Consumers can now enjoy enhanced checkout and payment experiences at their favourite shops or merchants. The ZA Bank partnership highlights a growing demand among issuers, acquirers and merchants for prioritising safe, seamless and frictionless checkouts to increase customer satisfaction with a better online shopping experience. It also gives us a glimpse into what next generation eCommerce will look like – safe, seamless, secure and fast.
CBS News
23-05-2025
- Business
- CBS News
When could credit card interest rates become affordable again? Experts weigh in
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you're holding out hope that credit card interest rates will fall soon, experts say you could be waiting a while. Getty Images Carrying any amount of credit card debt is incredibly expensive right now, and that's due, in large part, to how high credit card rates are in today's economic landscape. The average credit card interest rate in the U.S. currently stands at 21.37%, just slightly lower than the all-time high of 22.8% at the end of 2023. Today's high card rates are nearly double the 12.9% average annual rate seen in 2013. Of course, higher credit card rates have consequences for cardholders, namely in the form of higher balances that are harder to fit into already stretched budgets. Credit card debt per household rose 3.5% in the third quarter of 2024, according to Experian data, reaching $6,730 on average. Credit card payment delinquencies over 90 days have also increased recently, rising by 8.5% in the first quarter of 2025 to hit 12.3%, the highest rate since 2011. And, while cardholders are likely hoping that the interest charges on their card debt will get more affordable soon, determining when credit card rates may drop can be a tricky proposition. The Federal Reserve continues to maintain a cautious stance on interest rate cuts, and after pausing the federal funds rate at its May meeting, the Fed didn't offer any firm insight into when rate cuts will happen. The committee seems intent on monitoring key economic indicators before making a move in either direction. Without a clear signal from the Fed, we took the question to the experts: When could credit card interest rates become affordable again? Here's what we found. Find out how to start tackling your credit card debt problems today. When could credit card interest rates become affordable again? The Federal Reserve cutting its benchmark rate could help with lowering credit card rates, experts say. Still, numerous other elements come into play with setting card rates. "Credit card interest rates move at a slower pace than the Fed's benchmark rate. Even if the Fed begins cutting rates, lenders weigh other factors heavily, like the risk of default and their operating margins," Craig Toberman, a partner at Toberman Becker Wealth, says. In other words, even if the federal funds rate comes down later this year or in 2026, it won't automatically bring credit card APRs down. Card issuers will want to see real improvements in delinquency rates and other metrics before lowering APYs on their credit cards. That seems unlikely in the near future, given the recent jump in delinquencies and inflation rates that remain above the Fed's target rate. "Credit card rates track short-term interest rates set by the Fed, but they're also influenced by consumer risk, lender margins and default trends," said Christopher Stroup, certified financial planner and founder of Silicon Beach Financial. "For rates to fall meaningfully, we'd need a sustained drop in the fed funds rate and improved consumer credit metrics that reduce perceived lending risk." Are lower credit card rates coming soon? We likely won't see lower credit card rates, at least not for a while, experts say. Credit card rates APYs could stay elevated well into 2026 instead. "We'd expect only modest relief over the next six to 24 months," Stroup said. "Even if the Fed cuts rates, credit card APRs may hover near record highs due to rising consumer debt levels and tightened lending standards. For now, high rates are the norm, especially for borrowers without excellent credit profiles." And with the strength of the economy still unclear, predicting when rates will truly drop may be a futile exercise. "The only certain prediction is that our economy will remain unpredictable for many more months," said Howard Dvorkin, CPA and chairman of "Until we have clarity about the on-again-off-again tariffs and their impact, I wouldn't count on rates dropping." Explore your credit card debt relief options online now. How to handle your debt while waiting for card rates to drop If you're struggling to make minimum credit card payments, the first thing you should do is to call your card issuer to ask if they offer a hardship rate reduction. "If you've been a good long-time customer, you just might get a slight decrease," says Dvorkin. Also, explore debt repayment strategies like the debt avalanche and debt snowball methods, which can help you prioritize which cards to pay down first. Low-interest debt consolidation loans and 0% interest balance transfer credit cards can also help you reduce your debt rate while cutting borrowing costs. If you're behind on payments or your balances keep growing despite regular efforts to pay them down, it may be time to explore other debt relief options, like credit card debt forgiveness or a debt consolidation program. These can help by either reducing what you owe or combining your balances into a single payment, ideally at a lower interest rate. The bottom line Unfortunately, it doesn't look like credit card rates will fall in the near future. Even if the Fed cuts its benchmark rate, it could be a while before credit card companies follow suit. If you're struggling to get your card debt under control while waiting for lower credit card rates, focus on bringing down your debt by making extra payments when you can — and it may benefit you to look into lower-cost ways to borrow, too.
CBS News
14-05-2025
- Business
- CBS News
Credit card balances are falling. Here's how to reduce yours now.
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you're carrying a high balance on your credit cards, there are a few strategies you can use to try and lower it now. Getty Images After reaching a historic peak in the last quarter of 2024, credit card balances are finally showing signs of improvement across the nation. Credit card balances fell to $1.18 trillion in the first quarter of 2025, according to the latest Household Debt and Credit Report from the Federal Reserve Bank of New York, released this week, down $29 billion (2.4%) from the previous quarter. This marks a welcome reprieve for cardholders who have been grappling with record-high credit card debt since surpassing the $1 trillion milestone in 2023. Despite this quarterly improvement, though, credit card debt remains 6% higher compared to the same period last year. That uptick in the total credit card debt year-over-year reflects, at least in part, the ongoing struggle that many cardholders are facing with carrying debt in today's high-rate environment. With credit card annual percentage rates (APRs) exceeding 21% on average, the compounding nature of credit card interest can cause significant headwinds that make escaping the debt cycle increasingly difficult. As a result, it's crucial for those who are carrying credit card balances to find ways to reduce their debt. Luckily, if you're among those looking to lower your credit card balances, there are several methods to consider. Tackle your high-rate credit card debt today. How to reduce your credit card balance now The strategies outlined below could help you reduce your high-rate credit card balances, making it easier and more affordable to pay off what's owed: Try and settle for less than what's owed Debt settlement (also known as debt forgiveness) may sound extreme, but this strategy can offer big relief to borrowers who are seriously behind on payments. With this approach, the goal is to work with your creditors, typically with the help of a debt relief company, to negotiate a lump-sum payoff amount that's less than what you owe for the balance. If negotiations are successful, the settlement is paid and then the remainder of the balance is forgiven. The tradeoff is, however, that you typically have to stop making payments while negotiations occur (and while you're saving up for a lump-sum settlement), which can damage your credit score in the short term. Forgiven balances over $600 are also often reported as taxable income to the Internal Revenue Service (IRS), so be prepared for a possible tax bill. Still, if your credit card debt is unmanageable and you're facing collection calls or the threat of legal action, debt settlement may be a better path than defaulting or filing for bankruptcy. Find out how to get help from a debt relief expert now. Consolidate multiple debts and lower the interest charges If you're juggling multiple high-rate credit card balances, debt consolidation can be a smart strategy to lower your overall interest burden and make repayment more manageable. When you consolidate your debt, the goal is to roll multiple debts into one loan, lowering the interest and streamlining the payments. There are a few ways to do this, including: Personal loans: You can take out a fixed-rate loan to pay off your cards, replacing multiple payments with one predictable monthly bill. Rates depend on your credit profile but are generally lower than credit card APRs. You can take out a fixed-rate loan to pay off your cards, replacing multiple payments with one predictable monthly bill. Rates depend on your credit profile but are generally lower than credit card APRs. Home equity loans or home equity lines of credit (HELOCs): If you own a home with sufficient equity, you could use that to consolidate your debt Transfer your balances and wipe out interest Balance transfer credit cards are a powerful tool for debt reduction, offering introductory 0% APR periods that typically last up to 21 months. This interest-free window creates a valuable opportunity to make progress on paying down the balance without accruing additional interest. However, be mindful of balance transfer fees, which typically range from 3% to 5% of the transferred amount. If you take this route, it's important to calculate whether the interest savings outweigh the fees and develop a clear repayment plan to eliminate the debt before the promotional period expires. Get help from a credit counselor Working with a credit counselor on a debt management plan can help you pay off your credit cards within three to five years on average. When you enroll in this type of program, the credit counselor will work directly with creditors to try and lower your interest rates, waive late fees and simplify your repayments. These plans can be a great fit if you're still current on payments but are overwhelmed by interest and struggling to make progress. However, they do come with limitations: You can't open new lines of credit while enrolled, and you may be required to close existing credit cards, which could affect your credit utilization and score, initially. Still, for many, the trade-off is worth the potential downsides. The bottom line Falling national credit card balances are a good sign overall, but millions of households are still struggling under the weight of their high-rate debt. If you're dealing with a similar issue, it's important to weigh your options and determine whether it makes the most sense to negotiate a settlement, consolidate your balances or follow a debt management plan. Ultimately, though, the right approach is the one you can stick with, so be sure to choose the strategy that offers the most relief while aligning with your unique circumstances.
