More stories

  • in

    Uber driver made just $80 one week: ‘Uncertainty eats away at you’

    In his new book, “Drive: Scraping By in Uber’s America, One Ride at a Time,” Jonathan Rigsby takes the reader into the driver’s seat of ride-sharing work.
    “You’re forced to work long hours at odd times and to rely on bonuses and tips and surge payments to earn a decent hourly wage,” Rigsby told CNBC. “The uncertainty eats away at you.”

    Halbergman | E+ | Getty Images

    Most people know very little about the Uber drivers who take them to work, school and wherever else they need to go.
    In his new book, “Drive: Scraping by in Uber’s America, One Ride at a Time,” Jonathan Rigsby takes the reader into the driver’s seat. Despite Rigsby working as a crime intelligence analyst for the state of Florida, he doesn’t earn enough to pay his bills, take care of his son and save for his family’s future.

    When he and his wife divorced, he was earning less than $25,000 a year after taxes, alimony, child support and other debt payments. In 2016, he decided to turn to ride-sharing to make some extra money.
    He eventually wrote his memoir about all that followed.
    To earn “a decent hourly wage,” Rigsby told CNBC earlier this month, “you’re forced to work long hours at odd times and to rely on bonuses and tips and surge payments.”
    He aimed to make $250 a week on the road, but this wasn’t always possible. After his car expenses, he earned just $80 one week.
    “The uncertainty eats away at you,” he said.

    A spokesperson for Uber said compensation for a driver will vary depending on a variety of factors, such as local demand.
    “The median Uber driver in the U.S. is earning more than $30 per active hour, and the flexibility to work whenever and wherever they want is a core reason why many drivers turn to Uber,” the spokesperson said.
    CNBC interviewed Rigsby this month. The conversation has been edited and condensed for clarity.
    Annie Nova: You eventually decided to drive for Uber, even though you had a job with the Florida government. Can you talk about why you made that decision?
    Jonathan Rigsby: After my divorce, I had to learn to juggle a lot of new expenses with fewer resources. I had alimony and child support on top of rent and student loans. I was very fortunate to have a full-time job that gave me a salary and health insurance, but the burden of all these new expenses was more than a government worker’s salary could bear. A lot of ride-share drivers are living in similar circumstances to what I experienced, without having even that minimal safety net.
     AN: What was the most you made in a single week, and the least, driving for Uber?
    JR: Halloween is without a doubt the most profitable time for Uber drivers in my city. People will come from as far as Miami to party in Tallahassee because it’s cheaper. In 2018, I buckled down and drove a huge number of hours during that week. On top of my day job, I probably drove for 30 hours and made more than $700. But I spent all of the money paying off car repairs that I had been forced to put on a credit card.
    Then there’s a period just after the students graduate and before summer classes start when the town is just empty. I remember panicking because I’d only made about $120 in a week, and that was before factoring in all the gas I’d burned. Once I took out my expenses, I might have made $80 for 15 to 20 hours of work.
    AN: I know the cost for a ride a passenger pays doesn’t reflect what a driver makes. How does it work?
    JR: The split between the driver and the company on any given ride can vary a lot. Sometimes you give someone a ride and find out that the company is taking 50% of the ride’s cost for themselves. Sometimes the driver makes 80% of the ride. Companies have been slowly increasing their average take. First, it was 20%, then 22%, then 24%. Every change has been to decrease driver pay and to push the companies toward profitability.
    Even when drivers are making good hourly rates, you are taking on the cost of fuel, maintenance and wear and tear. It reduces your earnings by roughly $4 to $5 per hour, which is usually the difference between being above or below minimum wage. No one gets rich doing this except Uber’s executives.

    Drive: Scraping by in Uber’s America One Ride at a Time by Jonathan Rigsby.
    Courtesy: Jonathan Rigsby

    AN: I know Uber is not your main source of income, but it is for others.
    JR: I’m fortunate to have the backstop of a salaried job, but there are lots of people out there using ride-share and delivery jobs for their basic necessities. It’s precarious and stressful. You’re forced to work long hours at odd times and to rely on bonuses and tips and surge payments to earn a decent hourly wage. The uncertainty eats away at you.
    AN: Did driving for Uber make it harder to spend time with your son? What was your visitation agreement like after the divorce?
    JR: In the beginning, our agreement was that I would spend Tuesday, Thursday and alternating Saturdays and Sundays with him. Even in the hardest times, I never took away from my time with him to drive. If I gave up time with my son just to work, then what was the point of everything I was doing? All of the hard work was for him. When I wasn’t with him, I was working as the ‘taxi man’ —  the name he gave to it — but I carried a little stuffed bear in my car’s cupholder with me. It was my way of taking him with me everywhere I went.
    AN: During your toughest times, you write about making constant difficult decisions like whether to pay to wash your clothes or to buy food, and finding “every possible way to conceal my situation from the people around me.” Why did you feel you needed to hide your poverty?
    JR: I had a full-time job with health insurance and a retirement fund and all those things they tell you make you middle class. But I was destitute, teetering on the brink of being homeless. There’s a sense that it shouldn’t be so hard to get by. You blame yourself because everything in the American ethos tells you that hard work leads to success, and if you’re struggling, it must be your own fault.
    AN: You write that driving for Uber worsened your drinking problem. How so?
    JR: I was out driving until 2 a.m. some nights, and the only way I could stay awake to do that was to ingest huge amounts of caffeine. When I got back to my little apartment, I’d be so wired, I’d drink myself to sleep — then get up the next morning to do it all over again.
    AN: How else did the work impact your health?
    JR: Sitting for long periods in your car is very taxing. I force myself to take breaks, to get out and stretch, but during really busy nights, rides come one after the other. You look at the clock and realize you’ve been sitting in one place for five hours. You’re hungry. You’re thirsty. You need to use the bathroom, but the only places that are open are fast-food restaurants. You eat cheap junk food so that you can get back on the road quickly and keep working. My blood pressure and cholesterol both suffered from the physical toll. I often worried about blood clots. 
    AN: What was it about the ride-sharing that made you feel so lonely?
    JR: People tap on their phones and summon this single-use servant, a person they don’t even have to talk to. You take them where they’re going and they disappear. Sometimes people are rude or mean to you for no reason, and you have no choice but to put up with it because you need the money. You’re alone when you log on, and when passengers get out, you’re alone again.
    AN: Your situation changed considerably when you met another partner. What does this aspect of your story tell us?
    JR: Modern American life is really precarious. Most Americans live paycheck to paycheck, and surviving on one income is becoming increasingly impossible. Having a partner helps to ease the burden by giving you a backstop, someone who can share the financial costs. Once you get a little bit of breathing room, you regain the ability to think about the future and to take a few risks. 

    Author Jonathan Rigsby: Drive – Scraping by in Uber’s America One Ride At A Time
    Courtesy: Jonathan Rigsby

    AN: Are you done driving for Uber?
    JR: I still drive on Friday nights. My driving hours are vastly reduced from what I used to do, and I’m hopeful that I’ll be able to quit driving soon. But right now, I still need that little bit of extra income. When the day comes that I don’t, I’m going to delete the apps and never do this sort of work again.
    AN: How is your life different now from those days when you were driving for Uber much more?
    JR: The biggest change was the ability to take care of myself and have hobbies. I’ve now learned how to paint by watching old episodes of “The Joy of Painting” on YouTube, and my apartment is full of landscapes that I painted. I’m a healthier, happier version of myself and a better, more present father for my son. There are some scars, but they’re a part of me. More

  • in

    A lack of estate planning contributes to the racial wealth gap in homeownership. How JPMorgan is stepping in to help

    More than $32 billion in U.S. property may be affected by issues that can interfere with transferring homes from one generation to the next, according to estimates.
    A situation known as heirs’ property happens when homeowners die without a will and informally leave property to multiple descendants.
    Those heirs may be more vulnerable to foreclosures, tax sales or investors who try to acquire the homes for below market value.
    A new philanthropic commitment from JPMorgan aims to help tackle this estate planning gap.

    A potential buyer walks in to view a home for sale during an open house in Parkland, Florida, May 25, 2021.
    Carline Jean | Tribune News Service | Getty Images

    Owning a home can provide a way to build wealth that will transfer from one generation to the next.
    But more than $32 billion in assessed values of U.S. property in 44 states and Washington, D.C., may be affected by issues that can interfere with that wealth transfer, according to estimates.

    One such issue, known as heirs’ property, happens when homeowners die without a will and informally leave property to multiple descendants.
    The non-formal ownership may make it difficult to pass on property, access government assistance in the event of a natural disaster and to qualify for property tax relief, according to research from JPMorgan Chase.
    Those homeowners may also be vulnerable to foreclosures, tax sales, or investors who try to acquire the homes for below market value.
    JPMorgan Chase on Tuesday announced it is providing more than $9.6 million in philanthropic commitments to organizations that help preserve homeownership by addressing heirs’ property issues, appraisal bias and the undervaluation of homes.
    “As interest rates and mortgage costs are rising, the path to sustainable homeownership has become increasingly difficult,” Heather Higginbottom, head of research policy and insights for corporate responsibility at JPMorgan Chase, said at a Tuesday event hosted by the firm in Atlanta.

    “For many existing homeowners, including many here in Atlanta, high rates of heirs’ property and appraisal bias have made it challenging to maintain homeownership and benefit from the equity of their property,” Higginbottom said.
    Both heirs’ property and appraisal bias disproportionately affect communities of color.

    Estimates have found that as much as half of the property owned by Black Americans is owned as heirs’ property, according to the National Consumer Law Center.
    “It’s clearly disproportionately a Black and Brown problem,” said Thomas Mitchell, a professor at Boston College and director of the Initiative on Land, Housing & Property Rights. “But it’s not exclusively, by any stretch, just a Black and Brown problem.”
    Meanwhile, persistent undervaluation of homes in communities of color encourages a racial wealth gap.
    Homes in Black neighborhoods are valued at approximately 21% to 23% less than comparable homes in non-Black majority neighborhoods, according to research from the Brookings Institution.
    JPMorgan’s philanthropic commitment will focus on preserving homeownership in targeted locations in Georgia and New York, as well as Jacksonville, Fla., Pittsburgh, and Washington, D.C.
    The money will go toward organizations working to combat heirs’ property and appraisal bias issues through estate planning clinics, legal services, research and market innovations.
    More from Personal Finance:Treasury Department announces new Series I bond rateCash savers still have an opportunity to beat inflationHere’s what’s wrong with TikTok’s viral savings challenges
    That includes:

    $3 million to be granted to Catapult Greater Philadelphia, a community-based nonprofit that is providing a clinic to help people who do not have a legal title to their property in their name;
    $2.3 million to the Brookings Institution and Economic Architecture, two organizations that are partnering to address the devaluation of homes in Black neighborhoods;
    $2 million to the Initiative on Land, Housing & Property Rights at Boston College to produce research and policy recommendations to improve property rights in underserved communities;
    $889,000 for Center for NYC Neighborhoods, a community-based nonprofit that raises awareness among Black homeowners and provides free estate planning services;
    $500,000 for LISC Jacksonville, an organization from the Community Development Financial Institutions Fund, to expand heirs’ property and family wealth creation programs;
    $500,000 to Howard University’s legal clinic, which provides estate planning and heirs’ property legal services;
    $300,000 for the Alcorn State University Foundation, which will conduct research and provide recommendations for the ethical use of public heirs property data;
    and $150,000 to the Federation of Southern Cooperatives/Land Assistance Fund to expand legal assistance to rural homeowners in the Southeast U.S. More

  • in

    American households have seen their purchasing power increase

    Real hourly earnings, or wages after inflation, have been positive since May 2023.
    That means buying power has increased for the average worker, especially those in non-managerial roles.
    Real wages have been negative for two years amid fast-rising consumer prices.

    Rudi_suardi | E+ | Getty Images

    Americans have seen their buying power rise for a year amid falling inflation and a strong job market, which might be welcome news for households struggling to afford everyday purchases.
    The average worker in the private sector saw their real hourly earnings grow 0.8% from May 2023 to May 2024, according to U.S. Bureau of Labor Statistics data.

    “Real” earnings measure the net growth in workers’ wages after inflation. In other words, the average worker in the private sector got a net raise from May 2023 to May 2024, after accounting for price growth in consumer goods and services. Their paycheck today buys more than it did a year ago.

    The trend of growth in annual real earnings has persisted since May 2023, according to BLS data. It’s been especially strong for rank-and-file workers who work in non-managerial roles, data shows.
    That marks a reversal from April 2021 to April 2023, when inflation spiked and eclipsed growth in the average worker’s paycheck.
    More from Personal Finance:How to get a lower credit card interest rateTax strategies after a prolonged job layoffHow to tap your home equity
    “The last year of increases in real wages is a large and important step forward for working families,” said Chris Tilly, a professor and labor economist at the University of California, Los Angeles.

    “It means that they can buy more while putting in the same number of hours of work,” he added. “Or, they can decrease the total number of household work hours — for example, cutting down from two jobs to one, or having one earner reduce to part-time in two-earner families — while buying an equivalent amount.”

    What happened with real earnings

    Real earnings tend to grow at a positive rate during “normal” times, said Maximiliano Dvorkin, an economic policy advisor at the Federal Reserve Bank of St. Louis.
    However, dynamics in the pandemic-era U.S. economy threw that equilibrium out of whack, economists said.
    For one, inflation surged, peaking at a four-decade high in mid-2022.

    Meanwhile, the labor market was white-hot as the U.S. economy reopened from its pandemic-induced lull. Job openings hit a record high, unemployment was near a historical low, and workers quit at record levels amid the ease of finding higher-paying gigs elsewhere.
    For example, job openings peaked at more than 12 million in March 2022, up from roughly 7 million before the pandemic. That month, the average worker saw their pay growth spike to about 6% annually. Before the pandemic, average raises hadn’t exceeded 4%, according to the BLS, which tracks such data back to 2007.
    The average worker got a bigger raise than they had in decades, but the raise wasn’t enough to eclipse inflation, which peaked more than 9% in June 2022. That resulted in two years of falling real wages.

    However, inflation has since eased and the labor market remains strong, though it has broadly cooled since 2022, roughly to its pre-pandemic baseline.
    “What we observe over the last year is a return to more normal economic conditions after the disruptive forces of the Covid pandemic waned,” Dvorkin said.
    “This is good news for consumers,” since it generally equates to an increase in their well-being over time, he added.

    Average “nominal” pay (i.e., before inflation) for all workers is up almost 23% to $34.91 an hour since January 2020. Pay has grown even faster for rank-and-file employees, rising over 25% to $30 an hour.
    The consumer price index, a key inflation measure, is up a smaller 21% in that time.
    While consumer sentiment has been improving, workers are still sour on the U.S. economy. The disconnect between the economy’s overall strength and its perceived weakness among households has come to be known as a “vibe-cession.”

    Don’t miss these exclusives from CNBC PRO More

  • in

    Nvidia to get 20% weighting and billions in investor demand, while Apple demoted in major tech fund

    Microsoft and Nvidia will likely have a weight of around 21% in this tech ETF, while Apple will be down to about 4.5%, according to Matthew Bartolini, head of SPDR Americas Research.
    The rebalance will be in effect for one quarter, even if Apple outperforms Nvidia significantly ahead of the official date.
    The ETF has about $71 billion in assets under management, so a 15-percentage-point change in the fund equates to more than $10 billion.

    The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan, May 30, 2017.
    Tyrone Siu | Reuters

    Nvidia’s blistering rally will force a major technology exchange-traded fund to acquire more than $10 billion worth of shares of the chip giant while cutting dramatically back on Apple.
    The index that the Technology Select Sector SPDR Fund (XLK) follows will soon rebalance, based on an adjusted market cap value from Friday’s close. The new calculations show Microsoft as the top stock in the index, followed by Nvidia and then Apple, according to Matthew Bartolini, head of SPDR Americas Research.

    All three stocks would have a weight above 20% in the index if there were no caps in place. But diversification rules for the index limit how big the cumulative weight of stocks with at least a 5% share of the fund can be.
    As a result, Microsoft and Nvidia will likely have a weight of around 21%, while Apple will fall sharply to about 4.5%, Bartolini said.
    That is a change from the prior weightings, which saw Nvidia’s weight be kept artificially low by index rules. As of June 14, Microsoft and Apple were both at about 22% each in the fund, while Nvidia was just 6%.

    XLK Shake-Up

    Portfolio weight as of 6/14
    Estimated weighting post-rebalance




    Source: SPDR

    The race to finish in the top two came down to the final day. As of Monday, market cap data from FactSet shows that all three companies are over $3.2 trillion and within $50 million of each other, though that data does differ slightly from the calculations used in the index.
    The XLK has about $71 billion in assets under management, so a 15-percentage-point change in the fund equates to more than $10 billion. SPDR does not comment on specific trading strategies around rebalances.

    The big shift in the XLK is an extreme example of how even passive index funds can diverge, especially when focusing on narrow slices of the market.
    “Understanding how they might be weighted, where they’re allocated, what the rebalance frequency is, is really important because it can create differences in exposures and make what’s beneath the label seem different from fund to fund,” Bartolini said.
    The fund follows the Technology Select Sector Index from S&P Dow Jones Indices, which uses a float-adjusted calculation to determine market cap. The rebalance officially takes effect at the end of this week.
    The free-float adjustment for market cap accounts for large holders of an individual stock unlikely to be trading on a daily basis. For example, Warren Buffett’s Berkshire Hathaway owns more than 5% of Apple, which could count against it in the index, Bartolini said.
    “Its free-float market capitalization is reduced because you have so many controlled interests in the company,” Bartolini said.
    The rebalance will be in effect for one quarter, even if Apple outperforms Nvidia significantly ahead of the official date.
    On Monday, shares of Apple were up 2%, while Nvidia dipped 0.7%.

    Don’t miss these exclusives from CNBC PRO More

  • in

    80% of Americans say grocery costs have notably increased since the pandemic started, survey finds

    New government inflation data shows the rate of price increases for food is subsiding.
    But many Americans still report feeling financially strained from paying for groceries.

    A customer shops at a Safeway store on June 11, 2024 in Mill Valley, California. 
    Justin Sullivan | Getty Images

    The rate of price increases for food has subsided in recent months, according to the latest government inflation data.
    However, shoppers still report feeling burdened by the prices they’re seeing in the grocery store aisles. To that point, within the past few years, 80% of Americans say they’ve felt a notable increase in the cost of groceries, Intuit Credit Karma reported last month.

    Since the start of the pandemic, grocery prices have risen 25%, the report also found.
    Some consumers have had to sacrifice necessities to afford food, the personal finance company found.
    That includes 28% who sacrificed other needs like rent or bills to pay for groceries, and 27% who occasionally skipped meals. Additionally, 18% have either applied for or considered applying for food stamps, while 15% rely on or have considered turning to food banks.
    Yet, 53% indicated they earn too much to qualify for food stamps or other government assistance but still have difficulties paying for necessities.
    While most consumers report noticing higher grocery costs, 51% have also seen increases in gasoline prices; 39% said other bills like cable, electricity and internet have spiked; 27% said housing costs have gone up; and another 27% said dining out costs have risen.

    The survey was conducted online by Qualtrics on behalf of Intuit Credit Karma, from May 7-13 among 2,011 adults.

    The high cost of groceries has caught the attention of Congress.
    “Grocery prices skyrocketed during the pandemic, and in many cases they’ve kept going up, even though the pandemic is over,” Sen. Elizabeth Warren, D-Mass., said at a recent Senate hearing.
    Some retailers have moved to reduce grocery prices in response to consumer price fatigue. Target announced plans to reduce prices on about 5,000 items including meat, milk, fruits and vegetables. Amazon Fresh plans to cut prices on about 4,000 items online and in stores. Walmart has also increased its “rollbacks” on groceries and sales on other items.
    For those who are truly struggling to cover grocery costs, finding a local food bank through may help, according to Credit Karma.  
    For those who have the flexibility to reevaluate their spending, trying new strategies may also help.
    “It’s a good opportunity to create smart shopping habits,” said Trae Bodge, a smart shopping expert at
    While food inflation is subsiding, certain categories still had notable year-over-year price increases as of May. That includes juices and drinks, frankfurters and bacon.
    Avoiding categories where food costs are surging may help keep grocery costs low, experts say.
    Where possible, consumers can shift their purchasing habits — by eating at home rather than dining out or by buying chicken instead of beef, for example — to limit the effects of rising costs, said Mark Hamrick, senior economic analyst at Bankrate.
    “There is a range of opportunities to make choices and to substitute at lower prices and to get better value,” Hamrick said.
    More from Personal Finance:Treasury Department announces new Series I bond rateCash savers still have an opportunity to beat inflationHere’s what’s wrong with TikTok’s viral savings challenges
    Visiting different retailers — both in person and online — may help consumers find the best value available and take advantage of sales.
    If a store has a loyalty program, Bodge recommends signing up for it to make sure purchases are eligible for discounts or rewards. Switching over to store or generic brands can also provide meaningful savings. Additionally, buying products in bulk may help save up to 40%, she said.
    Certain websites and apps help make shopping more efficient.
    Coupon sites like CouponCabin may give discounts for ordering groceries online. Flashfood may provide alerts to deals on overstocked grocery items. Martie also has offers on deeply discounted items.
    “If you combine all of those things, you can save significantly on your groceries,” Bodge said.
    The method of payment at the checkout counter may also lead to more savings, specifically concerning cash-back rewards through credit cards, she said.
    To effectively use those perks, it’s important to maintain a balance you can pay off each month. Research from the Urban Institute shows Americans may be saddled with debt after turning to credit cards, buy now pay later programs and payday loans to pay for groceries. More

  • in

    To get lower interest rates, ‘take things into your own hands,’ analyst says. Here’s how

    The Federal Reserve signaled that just one cut is expected before the end of the year, which means anyone who carries a balance on their credit card won’t get much relief from sky-high interest charges.
    Rather than wait for a Fed move, consumers should take matters into their own hands, experts say.
    Here are the best ways to lower your credit card’s annual percentage rate.

    The Federal Reserve left rates unchanged last week and signaled that only one cut is expected before the end of the year. That means anyone who carries a balance on their credit card won’t be getting much of a break from sky-high interest charges.
    “Consumers need to understand that the cavalry isn’t coming anytime soon, so the best thing you can do is take things into your own hands when it comes to lowering credit card interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

    The good news is there are options out there, especially if you have solid credit, he added.

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. In the wake of the recent rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to almost 21% today — near an all-time high, according to Bankrate.
    “As long as interest rates remain relatively high, it’s important that consumers continue to use credit smartly, especially when it comes to higher interest products such as credit cards,” Michele Raneri, vice president of U.S. research and consulting at TransUnion, recently told CNBC.
    “It’s best to only use these cards to the extent there is confidence they can be paid off relatively soon, as interest can pile on quickly, particularly at the higher rates of today,” she added.

    How to lower your credit card APR

    Annual percentage rates will start to come down once the Fed cuts rates, but even then they will only ease off extremely high levels. Since the central bank now projects it will cut interest rates just once in 2024, APRs aren’t likely to fall much, Schulz explained.

    “Those anticipating a dip in new credit card APRs in the near future should probably adjust their expectations,” Schulz said.
    Rather than wait for a modest adjustment in the months ahead, borrowers could call their card issuer and ask for a lower rate, switch to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a personal loan, Schulz advised.
    More from Personal Finance:Treasury Department announces new Series I bond rateCash savers still have an opportunity to beat inflationHere’s what’s wrong with TikTok’s viral savings challenges
    Cards offering 15, 18 and even 21 months with no interest on transferred balances are still out there, according to Ted Rossman, senior industry analyst at Bankrate.
    “The fact that zero-percent balance transfer cards remain widely available, is, on its face, surprising,” said Rossman, particularly given the amount of inflation and the number of interest rate hikes the credit card market has weathered since the pandemic.
    Meanwhile, U.S. consumers are carrying more credit card debt.
    Total credit card balances have been above $1 trillion since August 2023 and are currently hovering around $1.12 trillion, according to the most recent report from the Federal Reserve Bank of New York.
    But that hasn’t deterred credit card issuers from offering generous terms on balance transfer cards, Rossman said.

    “It’s actually a very profitable time for credit card issuers because rates are up and more people are carrying more debt for longer periods of time,” Rossman said. “But most of those people are paying that debt back. If we were to see the job market worsen or delinquencies to go up even more, that’s when I think issuers get nervous. But right now, it’s kind of a Goldilocks environment for credit card issuers.”
    It’s also an ideal time for consumers to take advantage of all the options credit card issuers are offering.
    “Balance transfer cards are still your best weapon in the battle against credit card debt,” Schulz said.
    A balance transfer credit card moves your outstanding debt from one or more credit cards onto a new card, typically with a lower interest rate.

    Alternatively, “consumers should consider exploring lower interest products to help consolidate their higher interest debt and lower their monthly payments,” TransUnion’s Raneri said.
    Currently, the interest rate on a personal loan is just above 12%, on average, according to Bankrate.
    “If you don’t have good enough credit to get a zero-percent balance transfer card, a personal loan can be a good alternative,” Schulz also said.
    And consolidating comes with the added benefit of letting you simplify outstanding debts while lowering your monthly payment.
    Subscribe to CNBC on YouTube.

    Don’t miss these exclusives from CNBC PRO More

  • in

    Here’s why car payments are so high right now

    Car payments have skyrocketed in recent years due to a combination of high prices and high interest rates. While some relief may come soon, industry insiders say prices may still remain high for quite some time.
    As of May, customers were paying, on average, $760 a month for an auto loan, according to Moody’s Analytics. While that is a drop from a high of $795 in December 2022, it is still a roughly 40% increase over the $535 average payment in May 2019.

    More from Personal Finance:Here’s the inflation breakdown for May 2024 — in one chartThe Federal Reserve holds interest rates steadyMaintenance costs can be a surprise for first-time homeowners
    A near-record 17% of car owners are paying more than $1,000 a month, according to Edmunds, a car shopping site and industry data provider. Though slightly down from the record of 17.9% in the fourth quarter of 2023, the rate has remained above 17% for a year.
    “The idea you’re going to pay $700, $800 a month for the next six years, I mean, it just sounds crazy for a depreciating asset,” said Charlie Chesbrough, senior economist for Cox Automotive, which owns Autotrader and Kelley Blue Book, plus provides a range of services for the auto industry.

    ‘Underwater’ trade-ins are bumping up payments

    Many customers who bought vehicles at high prices in the middle of the Covid-19 pandemic are now “underwater” or have negative equity — meaning the loan on their car is larger than what the car is worth — by a record amount. In the first quarter, 23% of customers with trade-ins had negative equity of more than $6,167 on average, according to Edmunds.
    The steep drop in used-car prices from pandemic-era highs has produced unusually high rates of depreciation for a lot of vehicles.

    It is not uncommon for car owners to have a bit of negative equity on a vehicle when they trade it in. About one-third of trade-ins carried negative equity prior to the pandemic. It is the amount of negative equity that is concerning, says Edmunds Senior Director of Insights Ivan Drury.

    Trading in a vehicle with negative equity often means the consumer rolls that balance owed into the new auto loan, resulting in higher payments, with higher interest rates, for longer periods.
    In the first quarter of 2024, the average payment with a trade-in was $736, with an average interest rate of 7.1% for 68 months. The rate for a trade-in with negative equity was $887, at a rate of 8.1%, for nearly 76 months.
    Steeper payments on that new car can create a kind of vicious cycle that dog consumers for much of their lives, Drury said.
    “You’re paying off a car from like 10 or 15 years ago,” Drury said. “You’ve never actually paid off a vehicle. That means you’re constantly paying for something you don’t even own anymore.”

    When and how car buyers may see pricing relief

    Customers at a Ford dealership in Colma, California, on July 22, 2022.
    David Paul Morris | Bloomberg | Getty Images

    The good news for car shoppers is that incentives have risen over the course of the past year by 81%, according to Moody’s.
    Incentives can vary. There are straightforward discounts on a car, sometimes called “cash on the hood.” There is interest rate subvention, where a customer might receive 0% interest for a certain number of months. There are also trade-in allowances, where a dealer might give an above-market price on a trade-in.
    But it is unclear when the Federal Reserve will lower interest rates, and even when they do, there is about a six-month lag before those changes show up in auto loan rates.
    The Federal Reserve does not determine auto loan rates, but it does determine the rate at which banks can borrow federal funds. Due to that, it influences the rates banks then charge customers for loans, including ones on cars. In addition, inflation pushes vehicle sticker prices higher.
    “Inflation has remained a little higher and stickier than we thought,” said Mike Brisson, senior economist for Moody’s. “So the Fed’s expected date of lowering interest or lowering the prime rate has been pushed out. The manufacturers lower the interest rate artificially using incentives. So you’ll see some relief there. However, real relief in the actual interest rate isn’t going to come until after this year.”
    That relief may be short lived, however. Longer-term structural changes to the auto market may keep prices — and payments — high for years to come.
    Watch the video to learn more. More

  • in

    Treasury, IRS unveil plan to close ‘major tax loophole’ used by large partnerships

    The U.S. Department of the Treasury and the IRS on Monday unveiled a plan to “close a major tax loophole” used by large, complex partnerships.
    The plan targets so-called “related party basis shifting,” and could raise more than $50 billion in tax revenue over the next 10 years.
    Pass-through business filings with more than $10 million in assets increased 70% between 2010 and 2019, but the audit rate for these partnerships fell from 3.8% to 0.1% during that period, according to the Treasury. 

    IRS Commissioner Danny Werfel testifies before the House Appropriations Committee in Washington, D.C., on May 7, 2024.
    Kevin Dietsch | Getty Images

    The U.S. Department of the Treasury and the IRS on Monday unveiled a plan to “close a major tax loophole” used by large, complex partnerships, which could raise more than an estimated $50 billion in tax revenue over the next 10 years.
    The plan targets so-called “related party basis shifting,” where single businesses operating through different legal entities trade original purchase prices on assets to take more deductions or reduce future gains, according to the Treasury.

    “These tax shelters allow wealthy taxpayers to avoid paying what they owe,” IRS Commissioner Danny Werfel told reporters on a press call Friday.  
    More from Personal Finance:Taxpayers may avoid a penalty by making a second-quarter estimated payment by June 17Senate Democrats call for higher taxes on Wall Street profits to address deficitBiden advisor unveils tax policy plan ahead of expiring Trump tax cuts
    After a year of studying the basis-shifting issue, the agencies announced their intent to issue proposed regulations. They also released a revenue ruling on related-party partnership transactions involving basis shifting without “economic substance” for the parties or “substantial business purpose.”    
    The plan builds on ongoing IRS efforts to increase audits on the wealthiest taxpayers, large corporations and complex partnerships.
    “Treasury and the IRS are focused on addressing high-end tax abuse from all angles, and the proposed rules released today will increase tax fairness and reduce the deficit,” U.S. Secretary of the Treasury Janet Yellen said in a statement.

    Pass-through business filings with more than $10 million in assets increased 70% between 2010 and 2019, but the audit rate for these partnerships fell from 3.8% to 0.1% during that period, according to the Treasury. 
    This has contributed to an estimated $160 billion a year tax gap — the shortfall between what is owed and collected — attributed to the top 1% of tax filers, the agency said.

    The battle over IRS funding

    The announcement comes less than one week after President Joe Biden’s top economic advisor unveiled his “key principles” for tax policy, including sustained IRS funding.  
    “We should ensure ultra-wealthy taxpayers pay what they owe and play by the same rules by maintaining the President’s investment in the IRS,” White House National Economic Council advisor Lael Brainard told reporters Wednesday during a press call.
    IRS funding has been a target for Republicans since Congress approved nearly $80 billion in funding via the Inflation Reduction Act. More