Markus Andrews

After becoming popular on TikTok, more people are trying the so-called envelope method, or “cash stuffing,” to stay on budget and out of debt.
But there are downsides to stashing cash at home rather than in a high-yield savings account, including leaving yourself vulnerable to theft and forfeiting as much as 5% in interest.

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These days, savers can get better returns on their cash than they have in nearly two decades.
After a series of interest rate hikes from the Federal Reserve, top-yielding online savings account rates are now more than 5%, according to Bankrate.com.

“Moving your money to a high-yield savings account is the easiest money you are ever going to make,” said Greg McBride, Bankrate.com’s chief financial analyst.
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And yet, some people are forgoing competitive returns altogether in favor of keeping cash, literally, at home.

How cash stuffing works

After gaining popularity on TikTok, more young adults are trying the so-called envelope method, or “cash stuffing,” to stay on budget and out of debt.
The premise is simple: Spending money is divided up into envelopes representing your monthly expenses, such as groceries and gas. When the cash in one envelope is spent, you’re either done spending in that category for that month, or you need to borrow from another envelope.

“There is this back-to-basics mentality,” said Ted Rossman, senior industry analyst at Bankrate.
Such tools can help impose discipline, he said, which is “a reasonable way to stay on budget.”
However, it’s not “the ideal scenario,” he added.

Some downsides of keeping cash

Stashing cash not only forgoes the protections that come with consumer banking, it may also leave you vulnerable to theft.
Whether you are covered in case of a burglary may depend on your home insurance policy, whereas banks are covered by the FDIC, which insures your money for up to $250,000 per depositor, per account ownership category.
And then there is the additional cost that McBride flagged: a missed opportunity to earn up to 5% on your savings.

“Generally, introducing the idea of budgeting is probably a positive thing but if folks are leaning on cash as opposed to taking advantage of the highest returns we’ve seen in a long time in high-yield savings accounts, then they are leaving money on the table,” said Matt Schulz, chief credit analyst at LendingTree.
For example, if you have $5,000 in a high-yield savings account earning 5%, you’ll make $250 in interest in a year.
“When you are living paycheck to paycheck, every little bit helps,” Schulz said.
Alternatives like Treasury bills, certificates of deposit or money market accounts have also emerged as competitive options for cash, although this may mean tying up your savings for a few months or more.

Vet financial advice from social media

Dvorkin recommends seeking out credible sources such as the National Foundation for Credit Counseling or the Consumer Financial Protection Bureau.
“Stay away from TikTok, stay away from Instagram,” he said.
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The average annual percentage rate for retail credit cards reached 28.93%, a record, up from 26.72% last year, according to Bankrate.
“We’ve seen all types of credit card rates go up in recent years, but store cards have been increasingly notable,” said Ted Rossman, senior industry analyst at Bankrate.
Here are three things to consider when looking into retail credit cards.

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As the average interest rate on retail store credit cards nears 30%, many holiday shoppers could be in for even more financial strain this year if they carry a balance.
The average annual percentage rate for merchant cards reached 28.93%, a new record high, up from 26.72% last year, according to new data from Bankrate.

“We’ve seen all types of credit card rates go up in recent years, but store cards have been increasingly notable,” said Ted Rossman, senior industry analyst at Bankrate.
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In the past, 29.99% interest rates were listed on credit cards of all kinds as so-called penalty rates, or the rate an issuer would charge a consumer who was late with payments, said Matt Schulz, chief credit analyst at LendingTree.
“It’s becoming way more common for many credit cards to have that as a possible standard rate,” Schulz told CNBC in a previous interview.
While retail store credit cards can be easier to qualify for, especially for those with lower credit scores or little credit history, experts say consumers should be careful when deciding to open such a high-rate line of credit.

When to avoid retail credit cards

Retail credit cards can help shoppers save money on purchases and gain early access to sales, which can be valuable benefits as long as you pay the card in full. However, you may want to avoid them if you’re going to carry a balance, experts warn. 
“With such high interest rates, these purchases could cost you more than double what they originally were when you first bought the item, if you carry that debt for a long time,” said Sara Rathner, credit cards expert and writer at NerdWallet.  
Holiday debt does have a way of sticking around. About 52% of Americans incurred credit card debt while holiday shopping last year, and as of mid-August, nearly a third have yet to pay off their balances, according to NerdWallet’s 2023 Holiday Shopping Report.

Yet, about 74% of 2023 holiday shoppers still plan on using credit cards to buy gifts this year, NerdWallet found. 
For holiday shoppers who may consider opening a retail credit card for holiday purchases, it can be smart to do so if a sizable discount is offered or if the purchase is something you or the gift recipient will benefit from in the long term, said Bankrate’s Rossman. 
Otherwise, shoppers may want to question what effects the transaction will have on their financial future, added Rathner.

‘These 0% promos are very dangerous’

Retail credit cards will oftentimes offer a 0% interest promotion described as “deferred interest.” However, if the cardholder misses a payment by mistake or does not pay the balance in full, “these 0% promos could be dangerous,” said Rossman. 
Consumers might see deferred interest offers more commonly in stores where they are more likely to make major purchases, such as appliances or furniture, said Rathner.

With such high interest rates, these purchases could cost you more than double what they originally were.

Sara Rathner
credit cards expert and writer at NerdWallet.  

With a deferred interest deal, cardholders are given a set amount of time to make payments with 0% interest. If they have not paid off the purchase in full by the end of the period, not only will they earn interest on the remaining balance, but they will also retroactively incur interest on the original purchase price, she added.
“If you bought a couch for $2,000 and you still owed $500 by the time the promotion ended, you don’t just owe interest on the $500, you owe interest on the $2,000,” Rathner said.
It’s a “very sneaky” and common tactic on retail cards that’s often buried in the fine print, added Rossman.

Don’t make financial choices at the register

Take your time when deciding whether to open a new line of credit, but don’t make your mind up at the cash register.
“People make bad decisions because they don’t think it through or they don’t realize what’s going on,” said Rossman.

Ask for a brochure you can take home, and then research the credit card and its terms online. See what other offers are available and perhaps weigh competing products against one another to find the best option that suits your needs, Rathner added.
“Don’t make that decision in a crowded store during the holiday season, when everybody behind you is yelling at you to finish,” said Rathner.Don’t miss these CNBC PRO stories: More

Most analysts predict the market for new weight loss drugs such as Wegovy and Mounjaro will be enormous, but estimates vary.
On Monday, Citi raised its estimate for incretin drug sales to $71 billion by 2035, up from its prior estimate of $55 billion.

George Frey | Reuters

Most analysts predict the market for new weight loss drugs such as Wegovy and Mounjaro will be enormous, but estimates vary for its exact size depending on who you ask.
On Monday, Citi raised its estimate for incretin drug sales to $71 billion by 2035, up from its prior estimate of $55 billion. That viewpoint seems really conservative when placed side by side with predictions such as Guggenheim’s. Last month, the firm made a case for there being a $150 billion to $200 billion opportunity for these drugs.

Guggenheim analyst Seamus Fernandez’s conviction comes from his belief that GLP-1-based incretins will become the most prescribed drugs ever by or before 2031. Not only do these drugs work well for managing insulin levels and helping patients lose weight, but studies are also underway to show their benefits for cardiovascular health, sleep apnea and chronic kidney disease, to name a few.
Fernandez expects $50 billion in GLP-1 sales will come from patients with diabetes as incretin medication becomes the standard of care for this condition. Patients with obesity will add another $140 billion in sales, he said.
Citi’s forecast does reflect more modest assumptions. It is assuming the number of patients opting for the weekly injections will be below 10% of the non-Medicare obese patient population.
“Despite the obvious demand and unmet medical need, we continue to struggle with our inability to predict with any accuracy the long-term upside for incretins given the >42% prevalence of obesity,” analyst Andrew Baum wrote in a research note Monday.
The drugs are very pricey, with a list price of as much as $1,350 per month for Wegovy. At the moment, private insurance coverage isn’t a guarantee for those seeking weight loss treatment, and the federal Medicare program doesn’t cover weight loss drugs at all.

Still, the insurance situation is improving, as are supply bottlenecks.
Quite a number of analysts expect these issues will be worked out over time and expect peak sales for these medications to reach around $100 billion by 2030. Goldman Sachs joined this camp last Monday with its latest forecast.
“In 2030, we estimate that ~15mn adults in the US will be treated with AOM [anti-obesity medication] for chronic weight management (excluding patients treated for type 2 diabetes), which represents ~13% penetration into the U.S. adult population,” analyst Chris Shibutani wrote in a research note.
Shibutani said about $52 billion will be captured by Eli Lilly, which sells Mounjaro, or tirzepatide. Eli Lilly expects the U.S. Food and Drug Administration to approve this drug to treat obesity by the end of this year. Its pipeline also includes experimental, next-generation incretins orforglipron and retatrutide.

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Eli Lilly shares have risen nearly 60% since the start of the year.

Novo Nordisk, which is already approved to sell Wegovy (semaglutide) as a weight loss treatment, also has additional anti-obesity drugs in its pipeline such as CagriSema.
Many industry analysts anticipate that Novo Nordisk and Eli Lilly will reign over this market segment in a duopoly for quite a while. There are some other drugmakers looking to enter this segment, but they remain significantly behind. Goldman’s model forecasts the two companies will have an 80% share of the market in 2030.
Both stocks are up significantly on the back of optimism for the anti-obesity drug market. Eli Lilly shares have gained nearly 60%, while Novo Nordisk has climbed more than 40%.
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Year-end Planning

The IRS has announced a special withdrawal process for small businesses that wrongly claimed a pandemic-era tax break.
If you’ve neither received an employee retention credit refund nor cashed your ERC refund check,  there’s still time to withdraw your filing, according to the agency.
Here’s what small businesses need to know about the withdrawal option.

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More from Year-End Planning

Here’s a look at more coverage on what to do finance-wise as the end of the year approaches:

“This is a game-changer,” said Eric Hylton, national director of compliance for Alliantgroup, a firm that has been reviewing ERC claims for other tax professionals.
“I’m actually shocked at some of the horror stories we’ve been seeing,” said Hylton, who is a former IRS commissioner for the agency’s small business and self-employed division.

It’s a ‘mulligan moment’

If you’ve neither received an ERC refund nor cashed your ERC refund check, there’s still time to withdraw your filing, according to the agency. You may qualify if you meet three conditions: you made the claim on an adjusted employment tax return, only changed your filing for the ERC and want to withdraw the entire claim.
You can find the complete details on eligibility and how to withdraw your claim at IRS.gov/withdrawmyERC.

“It’s a mulligan moment,” said Dean Zerbe, national managing director at Alliantgroup. He said the withdrawal option is an opportunity to fix mistakes before the IRS catches them. 

Currently, there’s an IRS backlog of unprocessed ERC filings. As of Oct. 11, the agency estimated a backlog of 849,000 Forms 941-X, which includes ERC claims.   
Small businesses should take the opportunity to “sharpen their pencil” and review their pending ERC filings with a tax professional, Zerbe said, pointing to the strict eligibility requirements. “Business owners can’t just whistle by the graveyard.”
“Think long and hard about what you’re doing here because the IRS is going to be all over this,” he added.

How to handle processed ERC claims

If the IRS already processed your ERC claim and you cashed the refund check, Hylton still recommends reviewing the filing with a tax professional to see if an amendment is necessary.
For example, it’s possible you only qualified to receive the ERC for two quarters but claimed the credit for four or six quarters, he said. Whether you need to make a minor change or major correction, it’s critical to “address the issue as soon as possible,” Hylton said. “You want to be ahead of them.”Don’t miss these CNBC PRO stories: More

The yield on the benchmark 10-year U.S. Treasury note rose above 5% once again on Monday, having passed the milestone on Thursday for the first time since 2007.
Yields move inversely to prices.
The U.S. federal government ended its fiscal year in September with a budget deficit of almost $1.7 trillion, the Treasury Department announced Friday.

Andrew Kelly | Reuters

The bond vigilantes are coming back as investors continue to sell amid the prospect of higher-for-longer interest rates and a growing fiscal deficit, according to Kevin Zhao, head of global sovereign and currency at UBS Asset Management.
The yield on the benchmark 10-year U.S. Treasury note rose above 5% once again on Monday, having passed the milestone on Thursday for the first time since 2007. Yields move inversely to prices.

The further selling came after Federal Reserve Chairman Jerome Powell vowed to remain resolute in keeping monetary policy tight as the central bank looks to return inflation sustainably to its 2% target, while investors are also pricing in surprising economic resilience alongside fiscal slippage.
The U.S. federal government ended its fiscal year in September with a budget deficit of almost $1.7 trillion, the Treasury Department announced Friday, adding to a huge national debt totaling $33.6 trillion. The country’s debt has swelled by more than $10 trillion since the onset of the Covid-19 pandemic in the first quarter of 2020, prompting a deluge of fiscal stimulus to help prop up the economy.

Speaking on CNBC’s “Squawk Box Europe” on Friday, Zhao highlighted the historic bond market sell-off that greeted former British Prime Minister Liz Truss’ disastrous “mini-budget” last September — which included a raft of unfunded tax cuts — as an example of bond investors lashing out against what they deem to be irresponsible fiscal policy.
“The bond vigilante is coming back, so this is very important for asset prices in equity, house prices, fiscal policy, monetary policy, so no longer is this a free ride on bond markets anymore — so the government has to be very careful in terms of the future. You saw that last September, you saw that in Treasurys,” Zhao said.
“A few months ago, most people expected the U.S. government deficit would keep going down with growth slowing — it was 3.9% last year and it’s actually going up with growth slowing — that is quite alarming for bond investors.”

The term “bond vigilantes” refers to bond market investors who protest against monetary or fiscal policy they fear is inflationary by selling bonds, thereby increasing yields.
Meanwhile markets are assessing the potential for interest rates to stay higher for longer as the Fed continues to try to rein in sticky inflation. U.S. inflation has retreated significantly from its June 2022 peak of 9.1% year on year, but still came in above expectations in September at 3.7%.
Before holding off on hiking in September, the U.S. Federal Reserve had lifted its main policy rate from a target range of 0.25%-0.5% in March 2022 to 5.25%-5.5% in July 2023.
Fed fund futures pricing reflects a 98% probability that the central bank keeps its main interest rate unchanged at the current target range of 5.25%-5.5% at its next monetary policy meeting.

Zhao’s comments echo the sentiment voiced by several strategists stateside in recent weeks. Yardeni Research President Ed Yardeni told CNBC earlier this month that bond vigilantes had been “asleep for a long time” because inflation was persistently low from the 2008 financial crisis through to the Covid-19 pandemic, but had now awoken again as inflation soared in the aftermath of the pandemic.
“During the pandemic environment we saw basically an experiment in Modern Monetary Theory, helicopter money, money kind of raining down on people’s deposits and that was accommodated by easy monetary policy — well monetary policy has reversed course and has tightened, meanwhile, fiscal policy has gone the other way and has been way too stimulative, and the bond vigilantes are being vigilant again about fiscal policy,” Yardeni said.
“They’re basically saying ‘cut this deficit substantially or we’re going to raise rates to levels that are going to clobber the economy, and then what are you going to do?'”
The 10-year yield is widely seen as a proxy for mortgage rates and a gauge of investor sentiment about the strength of the economy, since a rising yield implies a fall in demand for traditional “safe haven” Treasury bonds, signaling investors are comfortable opting for higher-risk investments.
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The yield on the benchmark 10-year Treasury note, a key barometer for mortgage rates, auto loans and student debt, rose back above 5% Monday. 
Consumer borrowing costs could head higher as a result. 
Savers may benefit from higher rates.

The yield on the benchmark 10-year Treasury topped 5% again Monday, a key level that could impact mortgage rates, student debt, auto loans and more.
Last week, the 10-year yield crossed the 5% threshold for the first time in 16 years after Federal Reserve Chair Jerome Powell said “inflation is still too high,” raising expectations that another rate hike may not be completely off the table this year.

“That has real impacts on the economy, ultimately affecting every individual in the U.S.,” said Mark Hamrick, Bankrate.com’s senior economic analyst.
Stock futures fell on Monday as yields rose and investors assessed the prospect of higher-for-longer interest rates from the Fed.

The yield on the 10-year note is a barometer for mortgage rates and other types of loans.
“When the 10-year yield goes up, it will have a knock-on effect for almost everything,” according to Columbia Business School economics professor Brett House.
Even though many of these consumer loans are fixed, anyone taking out a new loan will likely pay more in interest, he said.

Why Treasury yields have jumped

A bond’s yield is the total annual return investors get from bond payments. There are many factors driving the recent spike in Treasury yields, economists said.
For one, yields tend to rise and fall according to the Federal Reserve’s interest rate policy and investors’ inflation expectations.
In this case, the central bank has hiked its benchmark rate aggressively since early 2022 to tame historically high inflation, pushing up bond yields. Inflation has fallen significantly since then. However, Fed officials and recent strong U.S. economic data suggest interest rates will likely have to stay higher for a longer time than many expected to finish the job. Higher oil prices have also fed into inflation fears.

But interest rates are just part of the story.
Most of the recent jump in Treasury yields is due to a so-called “term premium,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Basically, investors are demanding a higher return to lend their money to the U.S. government — in this case, for 10 years. One reason: Investors seem skittish about rising U.S. government debt, Hunter said. Generally, investors demand a higher return if they perceive a greater risk of the government’s inability to pay back debt in the future.
The rapid rise in Treasury yields may “accelerate an already weakening economic picture that is masked by higher rates,” said Canaccord Genuity Group chief market strategist Tony Dwyer in a Monday note.

Mortgage rates will stay high

Most Americans’ largest liability is their home mortgage. Currently, the average 30-year fixed rate is up to 8%, according to Freddie Mac.
“For those who are planning to buy a home, this is really bad news,” said Eugenio Aleman, chief economist at Raymond James.
“Mortgage rates will probably continue to go up and that will push affordability farther away.”

Student loans could get pricier

There is also a correlation between Treasury yields and student loans.
A college education is the second-largest expense an individual is likely to face in a lifetime, right after purchasing a home. To cover that cost, more than half of families borrow.

Undergraduate students who take out new direct federal student loans for the 2023-24 academic year are now paying 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.
The government sets the annual rates on those loans once a year, based on the 10-year Treasury.
If the 10-year yield stays above 5%, federal student loan interest rates could increase again when they reset in the spring, costing student borrowers even more in interest.

Car loans are getting more expensive

There is also a loose correlation between Treasury yields and auto loans. The average rate on a five-year new car loan is currently 7.62%, the highest in 16 years, according to Bankrate. Now, more consumers face monthly payments that they likely cannot afford.
“There are only so many people who can carve out an $800 to $1,000 car payment,” Bankrate’s Hamrick said.
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While other types of borrowing, including credit cards, small business loans and home equity lines of credit, are predominantly pegged to the federal funds rate and rise or fall in step with Fed rate moves, those rates could head higher, too, according Aleman.
“Everything from business loans to consumer loans is going to be affected,” he said.

Savers can benefit

One group that does stand to benefit from higher yields is savers.
“For many years, we’ve been bemoaning the plight of savers,” Hamrick said. But because yields tend to be correlated to changes in the target federal funds rate, deposit rates are finally higher. 
High-yield savings accounts, certificates of deposits and money market accounts are now paying over 5%, according to Bankrate, which is the most savers have been able to earn in more than 15 years.
“This is the rare time in recent history when cash looks pretty good,” Hamrick said.
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