Investing

By some measures, Black women are outpacing Black men when it comes to homebuying.
Yet, it does not necessarily mean that homebuying is easier for this group, experts say. 
Here are some of the reasons women of color face challenges toward homeownership.

Kali9 | E+ | Getty Images

Black women are outpacing Black men when it comes homebuying.
Single female homebuyers are most common among Black women, representing 27% of Black homebuyers, according to the 2023 Snapshot of Race and Home Buying in America report by the National Association of Realtors. To compare, single women represent 24% of Asian homebuyers, 17% of white buyers and 7% of Hispanic buyers.

Female buyers represented 32.4% of all Black homebuyers between October 2017 and September 2018, according to a 2022 data analysis by Realtor.com. The share jumped to 35.4% from October 2020 to September 2021.
The share of Black female homebuyers grew at an average annual rate of 7.3% from October 2018 to January 2020. Black male buyers only grew at an annual rate of 3.4% during the same period, Realtor.com found.
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But single Black women buyers still face plenty of challenges.
“There are instances where Black people are buying homes, Black women are buying homes. That doesn’t mean that it’s easy for them and that doesn’t mean that it’s not being made unnecessarily difficult by certain societal hurdles that stand in the way, that should not exist,” said Jacob Channel, a senior economist at LendingTree.

“I think it’s demonstrably true if you’re a Black woman in America, you’re probably going to have a harsh time buying a house in many circumstances,” he said.

3 hurdles that affect homeownership for Black women

1. Education debt: While Black women are becoming more educated, it also means they are more likely to have student loans. Compared to other female undergraduate borrowers, Black women carry the most undergraduate student loan debt, averaging $41,466.05 a year after graduation, according to Bankrate. 
Higher student loan debt can make it harder to save for a down payment and qualify for mortgages. Lenders consider student loan payments when figuring out how much you can afford.
2. Mortgage access: Lending standards in the early 2000s were more relaxed than they are today, said Channel. Single Black women were less likely to be homeowners in 2021 compared to 2007, according to a report by the National Women’s Law Center.
That said, those who got mortgages before the Great Recession often didn’t fare well: Banks were more likely to offer Black women high-cost mortgages and when the housing market crashed, women of color were overrepresented in foreclosures, the report found.
During the Great Recession, Black women were 256% more likely to have a subprime mortgage compared to white male borrowers of similar economic circumstances, said Sarah Hassmer, director of housing justice at the National Women’s Law Center. 

3. Low-wage jobs: Black women, as well as Latinas, are also disproportionately represented in low-wage jobs such as child care and hospitality work.
“These jobs are vastly undervalued but critical to our economy,” Hassmer said.
The median hourly wage of a child care worker in 2022 was $13.71 per hour, or $28,520 annually, according to the U.S. Bureau of Labor Statistics. 
“That makes it very hard to afford a down payment, which is one of the biggest obstacles to afford a home,” Hassmer said. More

With household finances still tight for many Americans, increasing your credit score may be one way to save money.
A new LendingTree study finds increasing your score may help you save $22,263 over the life of your credit and loans.

Jose Luis Pelaez Inc

With consumer prices still rising due to higher inflation, there is one way to save money that you may be overlooking: raising your credit score.
Increasing your score from fair (580 to 669) to very good (740 to 799) may help you save $22,263 over the life of your credit and loans, according to a new LendingTree study. Mortgages represent the biggest portion of that savings, with $16,677.

Overall, consumers stand to save an extra $92 per month, LendingTree estimates, based on four common debt types: auto loans, credit cards, mortgages and personal loans.
The total projected savings is down from a sum of $49,472 calculated by LendingTree in 2022, due to changes in the interest rate environment. Nevertheless, consumers with good credit scores still have an advantage.
“There is little in life that’s more expensive than crummy credit,” said Matt Schulz, chief credit analyst at LendingTree.
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Improving your credit score can save you tens of thousands of dollars over the course of your life through lower interest rates, lower fees and other terms associated with loans, according to Schulz.

“It’s a big deal, especially when you consider what else you could do with that extra money,” Schulz said.
A lot of people are relying on credit cards and loans for purchases, based on data from the last quarter of 2023, said Bruce McClary, senior vice president at the National Foundation for Credit Counseling.
“Many people right now are still struggling with the cost of living and keeping up,” McClary said.

The credit score you should shoot for

Prospective lenders use your credit score to gauge your financial behavior, particularly when it comes to how likely you are to pay a loan back on time.
Credit scores typically range from as low as 300 to as high as 850.
Generally, if you are over 700, you are doing OK, according to Schulz. But the higher above 700 you can get your score, the better off you are, he explained.
“If you can get up to 740, 750, you’re going to get most loans that you apply for,” Schulz said.

If your score is lower — around 670 or 680 — you will still have a lot of options, he said.
Keep in mind that your credit score may vary by provider, such as FICO or VantageScore. If you’re applying for a loan, it helps to ask the lender which score they will check, Schulz said.

How to best improve your score

Your credit score is based on a mathematical model that takes multiple factors into account.
That includes your current unpaid debts; bill payment history; the number and kinds of loans you have; how long you have had your accounts open; how much of your available credit you’re using; any new applications for credit you have made; and whether you have any debts in collection, foreclosure or in bankruptcy.
To improve your score, it first helps to look at your credit report to see what might be weighing it down. You can monitor your credit report weekly, for free, from the three major credit reporting agencies by visiting AnnualCreditReport.com.
“It’s a great resource in situations where you’re looking for ways to improve your credit score,” McClary said.
Inaccuracies on those reports can drag your score down and alert you to potential fraudulent activities in your name, Schulz said. If you spot those discrepancies, it helps to contact the credit bureau and lenders as soon as possible, he said.

One way to quickly boost your credit score is to ask your lenders to raise your credit limits, which can bring your credit utilization down, he said.
The best way to improve your utilization is to pay the balances down, if you can afford to, he said.
It also helps to consolidate your debts. To assess your options, consider reaching out to a nonprofit credit counseling agency for advice.
Automating your payments can also help ensure you do not miss a bill due date, which can lower your credit score.
While your credit score affects the rates of the loans you receive, it may also affect other aspects of your financial life, such as your car insurance rates, recent Bankrate research found.
If your credit score improves, you may have your auto insurance policy adjusted by reporting the change to your insurer, said Bankrate analyst Shannon Martin. More

The logo of Chipotle Mexican Grill is seen in Manhattan, New York.
Shannon Stapleton | Reuters

Inflation worries and concerns around the timing of the Federal Reserve’s rate cuts have shaken the market, but attractive stocks are available if you know where to look.
Wall Street analysts are ignoring the short-term noise to focus on picking stocks with strong fundamentals and long-term growth potential. 

Here are three stocks favored by the Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
Chipotle Mexican Grill
We start with fast-casual restaurant chain Chipotle Mexican Grill (CMG). The company recently reported better-than-expected fourth-quarter results, as customer traffic at its restaurants maintained its momentum despite ongoing macro pressures.
In reaction to the upbeat results, Baird analyst David Tarantino reiterated a buy rating on CMG stock and boosted the price target to $2,850 from $2,650. The analyst noted the company’s robust transaction momentum in the fourth quarter, driven by factors like better unit-level execution, enhanced menu promotion and robust marketing efforts.
The analyst thinks that these factors can continue to drive healthy sales for CMG in 2024 and beyond, with management focusing on growing average unit volumes to more than $4 million in the long term, compared to $3 million in 2023.
Tarantino noted that CMG aims to ramp up its unit growth to about 10% annually by 2025. He thinks that this pace of unit growth, coupled with mid-single-digit comps, would help the company “sustain scarce top-line growth characteristics for many years to come.”

Tarantino ranks No. 321 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 10.8%. (See CMG Financial Statements on TipRanks)
Meta Platforms
Next up is social media giant Meta Platforms (META). The company’s earnings per share more than tripled in the fourth quarter of 2023 and bolstered investor sentiment for the stock. Moreover, Meta announced its first-ever dividend, backed by its splendid performance and strong cash flows.
Impressed by Meta’s results, Monness analyst Brian White reaffirmed a buy rating on the stock and significantly raised the price target to $540 from $370. The analyst highlighted the company’s accelerated revenue growth, solid operating margin, dividend initiation and $50 billion stock repurchase plan.
While regulatory headwinds persist, White is bullish on Meta as he believes that the company is “well positioned to benefit from the digital ad trend, innovate with AI, and leverage a leaner cost structure.”
The analyst noted that the company is much more efficient now, with its leaner cost structure and efficiency measures expected to continue this year. That said, the company is committed to investing in innovative products and services, while enhancing its platform with generative artificial intelligence capabilities, White added.
The analyst cautioned that macroeconomic uncertainties and geopolitical tensions might impact ad spending in the upcoming quarters. Nonetheless, he thinks that Meta deserves to trade at a premium to the market and tech sector in the long term, given its impressive sales growth and operating margin.  
White holds the 28th position among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 68% of the time, with each delivering an average return of 21.5%. (See Meta Hedge Fund Trading Activity on TipRanks)
Costco Wholesale
Membership warehouse chain Costco Wholesale (COST) is this week’s third pick. Earlier this month, the company announced a 4.5% rise in its sales for the January retail month, ended Feb. 4. Total comparable sales growth came in at 2.7%, with e-commerce comps rising 21%.
Baird analyst Peter Benedict noted that the calendar-adjusted core comps of nearly 6.7% in January showed improvement when compared to December’s 5.1% growth, despite steep multi-year comparisons. He added that comps accelerated across all regions — U.S., Canada, and other international markets — and merchandise categories, thanks to a rise in transactions.
The analyst also highlighted the acceleration in e-commerce sales and the impressive traffic trends. Overall, Benedict thinks that Costco’s premium valuation is justified due to multiple strengths, including its sticky membership model and strong balance sheet.
He reiterated a buy rating on Costco stock and increased the price target to $775 from $700, saying, “Valuation is steep, but accelerating comp momentum, easing compares and a potential membership fee increase lend an upward bias to estimates in coming quarters.”
Benedict ranks No.71 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 70% of the time, with each delivering an average return of 14.6%. (See COST Stock Analysis on TipRanks) More

One of my goals for this year is to be more intentional with my savings.
While I can’t predict the future, I can certainly prepare for it, even as I’m paying down student loan debt at my own pace.

Klaus Vedfelt | Digitalvision | Getty Images

‘The Roth IRA is an incredible savings vehicle’

Roth individual retirement accounts require investors to pay taxes on the contributions they make now, rather than when they take withdrawals in their retirement years. That trade-off means after-tax dollars grow tax-free for decades.
A Roth can be a powerful tool for younger investors, who are often starting out their careers with lower salaries, putting them in lower tax brackets. And in all likelihood, they are in lower tax brackets than they’ll be later in their careers.
“For younger professionals, the Roth IRA is an incredible savings vehicle, because given our earnings, it’s very likely that we’re not being taxed at the highest rate,” said Clifford Cornell, a certified financial planner and associate financial advisor at Bone Fide Wealth in New York.
Roth IRAs also tend to be great for younger savers because there are income limits on eligibility for single and married filers, he said.
Original contributions to a Roth IRA can be withdrawn at any time without penalties, serving as a great tool for long-term goals or short-term emergencies. However, there are penalties involved if you withdraw earnings from the account too early.
Here are three more key strategies I learned or was reminded of as I prepared to open a Roth IRA:
1. Investors can make prior year contributions before tax season ends: You have until the end of tax season, or April 15 this year, to save money in your Roth IRA that will count toward the prior tax year, experts say.
“If you’re between January [1] and April 15, you can technically make both a 2023 contribution and a 2024 contribution,” said CFP Tommy Lucas, an enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
2. While you can’t get a deduction, you may qualify for a credit: Unlike a traditional IRA, you can’t get a tax deduction from Roth contributions. Yet, there is a perk that gets overlooked a lot, said Lucas: Roth savings count toward the so-called Saver’s Credit, which is available to low- and moderate-income taxpayers.
“Depending on your income level, it can go as high as for every $2 you put in, you get $1 back,” he said. “To be able to put money tax free and essentially get some sort of matching contribution from the IRS is actually really nice.”
3. Remember to invest the money: This point was more of a self-reminder for me, especially after I saw my initial deposit linger in cash in my account for 24 hours. In order to make your money grow, it’s not enough to merely fund the account; you have to invest the money. (Not doing so is actually a common mistake.)
“The Roth IRA is kind of like a label on the account; it still must be invested,” Cornell said.
While there’s a plethora of investment products to choose from, ask yourself two important questions: “How hands-on do you want to be? What’s your risk tolerance?” Cornell said.
Younger investors are able to be more aggressive with their investments because these are savings they won’t, ideally, use for two or three decades, Lucas explained.
“Investing in a diversified way is what yields results over the long term,” he said.
Investors can either build their portfolios themselves or delegate the decision-making process to an account manager or robo-advisors. From there, you can decide how you want your post-tax dollars to grow over time.

What I learned about high-yield savings accounts

About 56% of adult Gen Zers, or ages 18 to 26, did not have enough savings aside to cover three months of expenses, according to Bank of America, which conducted the survey in August.
Reading these reports sometimes feels like I’m looking into a mirror, or even the renowned line from Taylor Swift’s song “Anti-Hero”: “It’s me, hi. I’m the problem, it’s me.”
To address the issue, I opted for a high-yield savings account. While you are typically limited to a certain amount of penalty-free withdrawals per month, these accounts can be an ideal nest for both emergency funds and sinking funds, or money saved for bigger goals such as homeownership.
Here are two things to know about opening an account like this:
1. Compound interest does not make money appear overnight: When it comes to compound interest, it will depend on the bank or financial institution you choose to work with. But usually, the 5% interest is an annual rate, not monthly, said Lucas.
For example, if you put in $10,000 into an account that earns a 5% APY, you could earn $500 worth of interest, said Lucas.
“So it’s not $500 a month, it’s $500 for the year — and that’s assuming that the interest rate doesn’t change with the high yield savings account,” he said.
2. The IRS wants a piece: The tax man considers money earned from compound interest as an income. Any time you make over $10 in interest income, the bank will notify the IRS, which will send you a 1099-INT form, said Lucas. Even if you earn less than that, you’re supposed to report it on your taxes.
“The IRS knows you made $500 on that interest, you need to pay tax on it,” Lucas said.
Even so, “that is a lot better versus a checking account making half a percent,” he added. More

JetBlue Airbus A321LR is displayed at the 54th International Paris Air Show at Le Bourget Airport near Paris, France, June 20, 2023. 
Benoit Tessier | Reuters

Company: JetBlue Airways (JBLU)

Business: JetBlue is a New York-based airline company serving over 100 destinations across the United States, the Caribbean and Latin America, Canada and Europe. JetBlue was incorporated in August 1998 and commenced service on Feb. 11, 2000.
Stock Market Value: $2.36B ($6.96 per share)

Stock chart icon

JBLU’s performance over the past year

Activist: Carl Icahn

Percentage Ownership:  9.91%
Average Cost: $5.57
Activist Commentary: Carl Icahn is the grandfather of shareholder activism and a true pioneer of the strategy. He is very passionate about shareholder rights and good corporate governance and will go to extreme lengths to fight incompetent boards and over compensated managers. While Carl Icahn is not slowing down at all, in October 2020, he reached an agreement with his son Brett Icahn to rejoin the firm as the eventual successor. Brett has said that he plans to employ his father’s favored approach of pushing companies to make changes designed to boost their stock prices, though he hasn’t ruled out friendly bets. This is not a departure from the strategy Carl has succeeded with for many years. He can be friendly (i.e., Apple, Netflix) or he can be confrontational (i.e., Forest Labs, Biogen). Often it depends on the response of management. Brett is an impressive activist investor in his own right, not because he is Carl’s son, but because he has demonstrated a long track record of extremely successful activist investing. Much has been written about the Sargon portfolio he co-headed at Icahn, which at one time totaled around $7 billion and included extremely profitable investments in companies such as Netflix and Apple. The Sargon portfolio significantly outperformed the market with an annualized return of 27%. However, prior to that Brett started in 2002 with Icahn as an analyst and was later responsible for campaigns like Hain Celestial (280.3% return versus 46.7% for the S&P 500), Take-Two Interactive (81.5% versus 64.5%) and Mentor Graphics (106.4% versus 79.4%).

What’s happening

Behind the scenes

Carl Icahn is the quintessential, iconic corporate governance investor. When he takes a nearly 10% position in a company and does not state that he wants board seats, he generally wants them. When, as here, he states in his 13D filing that he has spoken to the company about getting board seats, he will not stop until he obtains them. On Jan. 8, JetBlue’s CEO stepped down. On Jan. 16, a federal court blocked the JetBlue/Spirit merger. On Jan. 19, Carl Icahn started acquiring his position. This is an inflection point in the history of JetBlue, and there is no better time to have an activist on the board – at least if you are a shareholder. This is less the case if you are the brand-new CEO.

Investors seemed relieved that JetBlue wouldn’t be paying $3.8 billion for Spirit, which has a market capitalization of $702 million. On Jan. 16, JetBlue’s stock rose 4.9% on the development, and we believe that Icahn acquiring after the news signals that he was not a fan of the merger. The company is now appealing the decision, and we would expect Icahn and other shareholders to convey their opinion to put the merger behind them and move on with an organic plan to create value for shareholders.
This plan will be happening with a new CEO, Joanna Geraghty. On Feb. 12, her first day in her new post, she had a Carl Icahn 13D on her desk. This 13D filing is certainly not a reflection on her; it is a reflection on the trading price of a company that Icahn sees as undervalued. However, former CEO Robin Hayes resigned abruptly. Geraghty was not appointed after a thorough CEO search, so it is still somewhat of an unknown as to whether she is the right person to lead JetBlue. While the Spirit deal was part of Hayes’ growth strategy, Geraghty has been at JetBlue for nearly two decades, most recently as president and chief operating officer, so she would at least be aware of the company’s issues.
With everything moving so quickly, Icahn likely has not even been able to decide as to whether Geraghty is the right CEO for the company. That is probably one of the reasons he sought board seats. He wants a seat at the table to evaluate these important decisions as JetBlue embarks on a turnaround to close its valuation gap. As he has done so many times in the past, from a board level he can work with management in executing its plan, but he can also hold them accountable if they fail.
JetBlue has an excellent brand and has historically had innovative ideas to improve the customer experience, but it has been struggling with cost controls and reliability. Among U.S. airlines, it is ninth in on-time arrivals through the first 10 months of 2023, per the Transportation Department. Yes, it is difficult for JetBlue to compete as a small player in an industry dominated by four large airlines (American, Delta, United and Southwest) that control about 80% of the domestic market. But JetBlue’s last annual profit was in 2019, before the pandemic, while its peers have returned to profitability. The company said it is on track to cut as much as $200 million in costs by the end of the year and is reportedly working on $300 million in new revenue initiatives. This is a good start, but there is likely a lot more that can be done and having an experienced shareholder representative on the board during this time will be very beneficial to investors.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments.  More

Many studies show that there is a strong connection between financial literacy and financial well-being.
One recent report found a lifetime benefit of roughly $100,000 per student from taking a one-semester course in personal finance during high school.

Taking a financial education class in high school does pay off.
In fact, there is a lifetime benefit of roughly $100,000 per student from completing a one-semester course in personal finance, according to a recent report by consulting firm Tyton Partners and Next Gen Personal Finance, a nonprofit focused on providing financial education to middle and high school students.

Much of that financial value comes from learning how to avoid high-interest credit card debt and leveraging better credit scores to secure preferential borrowing rates for key expenses, such as insurance, auto loans and home mortgages, according to Tim Ranzetta, co-founder and CEO of Next Gen.
But then there is the ripple effect, he added.
“Students bring these lessons home,” Ranzetta said. “When you take that $100,000 in savings and multiply it across families and communities, it’s an incredible economic engine.”
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“I get to show students the value of having a savings and checking account and then they are able to share that with their parents,” said Kerri Herrild, who has been teaching personal finance at De Pere High School in Wisconsin for 18 years, referring to what’s known as the “trickle up effect.”

“Getting this basic knowledge — that’s powerful,” she said.

Meanwhile, the trend toward in-school personal finance classes is gaining steam.
As of 2024, half of all states already require or are in the process of requiring high school students to take a personal finance course before graduating, according to the latest data from Next Gen.
In addition, there are another 35 personal finance education bills pending in 15 states, according to Next Gen’s bill tracker.

‘The research is overwhelming’

Many studies show there is a strong connection between financial literacy and financial well-being.
“The research is overwhelming,” Ranzetta said.
Students who are required to take personal finance courses starting from a young age are more likely to tap lower-cost loans and grants when it comes to paying for college and less likely to rely on private loans or high-interest credit cards, according to a study by Christiana Stoddard and Carly Urban for the National Endowment for Financial Education.
Students are also even more likely to enroll in college when they are aware of the financial resources available to help them pay for it.
“Our results show that high school financial education graduation requirements can significantly impact key student financial behaviors,” the authors said in the report.

Further, students with a financial literacy course under their belt have better average credit scores and lower debt delinquency rates as young adults, according to data from the Financial Industry Regulatory Authority’s Investor Education Foundation, which seeks to promote financial education.
In addition, a report by the Brookings Institution found that teenage financial literacy is positively correlated with asset accumulation and net worth by age 25.

I tell them this is going to be the most important class they are going to take in their life.

Christopher Jackson
personal finance teacher at DaVinci Communications School

“I start off my class by telling them that my No. 1 goal is to affect their children’s children,” said Christopher Jackson, who teaches personal finance to 12th graders at DaVinci Communications High School in Southern California.
“I tell them this is going to be the most important class they are going to take in their life,” Jackson added.
As part of Jackson’s course, students open Roth individual retirement accounts with an initial grant of $100, which many then maintain on their own.

Among adults, those with greater financial literacy find it easier to make ends meet in a typical month, are more likely to make loan payments in full and on time and less likely to be constrained by debt or be considered financially fragile.
They are also more likely to save and plan for retirement, according to data from the TIAA Institute-GFLEC Personal Finance Index based on research over several years.
“The need is real, the effect is real, and it motivates me as a teacher,” Jackson said. 
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Large credit card issuers had interest rates exceeding those of small banks and credit unions by about 8 to 10 percentage points in 2023, according to the Consumer Financial Protection Bureau.
Consumers with a $5,000 balance would save about $400 to $500 a year by using a smaller card issuer, the CFPB said.
Consumers who use cards responsibly may be better off with large lenders.

Olga Rolenko | Moment | Getty Images

The nation’s largest credit card companies typically charge higher interest rates than small banks and credit unions — and switching may save the average cardholder hundreds of dollars a year, according to an analysis issued Friday by the Consumer Financial Protection Bureau.
However, some consumers, depending on their card and use, may get a bigger financial benefit by sticking with large lenders, experts said.

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In the first half of 2023, the largest U.S. lenders charged a typical credit card annual percentage rate that was 8 to 10 percentage points greater than that of smaller lenders, according to the financial watchdog.
Rates for consumer debt, and savings, products have risen as the U.S. Federal Reserve has raised its benchmark interest rate. The CFPB analysis captures all but the most recent increase, a quarter-point hike in July.
Consumers with a $5,000 balance can save $400 to $500 a year by using cards from small versus large lenders, according to the CFPB analysis, which said the “stakes are high” for cardholders. The average person has a balance of $6,360, according to TransUnion.
“We’re finding many of them would be better off with newer entrants or smaller players in the market,” CFPB Director Rohit Chopra said Friday during an appearance on CNBC’s “Squawk Box.” “For the average household … switching can actually save them hundreds and hundreds of dollars over the course of the year.”

Card balances and total debt are at all-time highs

The agency’s findings come as average credit card balances and total credit card debt hit all-time highs at the end of 2023. The average credit card interest rate for all accountholders was more than 21% in November, also a record, according to Federal Reserve data.
The federal agency’s analysis defines large lenders as the nation’s 25 biggest, and small lenders as all others in its sample. Its data is based on 643 general-purpose credit cards offered across 156 total issuers, including 84 banks and 72 credit unions.

Large lenders account for the vast majority of the credit card market: The 10 biggest have 83% market share and the top 30 have roughly 95%, according to another recent CFPB report.
The credit-card market is highly competitive and gives consumers a broad range of cards from which to choose, said spokespeople for the Consumer Bankers Association and American Bankers Association, trade groups representing banks and lenders.
“Sometimes a consumer just wants a drive-thru hamburger. Sometimes a consumer wants a steak. A thriving marketplace means that consumers can choose products that may have different prices and offer features, perks, or other value that’s specific to them,” Lindsey Johnson, CEO of the Consumer Bankers Association, said in a written statement.

Credit scores didn’t impact findings

The CFPB’s new interest-rate findings are consistent regardless of a consumer’s credit score, it said.     
For example, someone with “poor” credit (a credit score of 619 or less) had a median 20.62% average percentage rate at a small institution versus 28.49% at a large one, according to CFPB data. Likewise, small lenders charged a median 15.24% rate for someone with “great” credit, compared with 22.99% for large firms.

One caveat: By law, federal credit unions — which fall in the small-lender category — can’t charge interest rates exceeding 18% APR. Even excluding credit unions, however, small issuers tend to have lower APRs than larger ones, CFPB said.
And this isn’t to suggest that an 18% rate is good for consumers: That would still fall into the bucket of high-interest debt, said Ted Rossman, industry analyst at CreditCards.com.

Why interest rates may not matter for some users

The CFPB report doesn’t necessarily offer a complete picture of the credit card market, Rossman said.
For one, interest rates are only an issue for cardholders who don’t pay their bill in full and on time each month, i.e., those who carry a credit card balance from month to month, he said.
About half — 51% — of cardholders didn’t carry a monthly balance as of November, according to Bankrate. Their accounts don’t accrue interest. That share is down from 61% in 2021, however.
“It’s not that [the interest rate] doesn’t matter ever, but it doesn’t matter as long as you’re paying in full,” Rossman said.

We’re finding many of them would be better off with newer entrants or smaller players in the market.

Rohit Chopra
CFPB director

Large lenders also tend to offer more generous rewards programs such as cash back on purchases or perks related to travel and other categories, for example, Rossman said.
While large issuers tend to charge higher annual fees, those fees may be worthwhile for users whose rewards value exceeds their annual fee and who use their cards responsibly, Rossman said. Consumers may still “come out way ahead” via card benefits received for purchases they’d planned to make anyway, he said.
To that point, 27% of the credit cards issued by large firms charge an annual fee, versus 9.5% of those from small firms, the CFPB found. Large institutions’ average annual fees for those cards were also higher: $157 versus $94, respectively.

Further, while small issuers tend to charge lower APRs on an ongoing basis, large lenders may offer promotions for temporary 0% interest on balance transfers from existing cards, for example. These promotions, when used appropriately, can perhaps help users pay off high-interest card debt, Rossman said.
Ultimately, cardholders who carry a balance may be best served by avoiding use of credit cards altogether: Try to stick to cash or debit as you pay down your existing card balance, perhaps with the help of a nonprofit credit counselor, he said.
“I’d be hard-pressed to find a case where even an 8%, 10% or 12% card makes sense for them,” Rossman said. More

The U.S. Department of Education has been reviewing the accounts of borrowers who have been in repayment for decades to see if they are eligible for forgiveness.
Marlon Fox, a chiropractor in North Charleston, South Carolina, is one person to benefit.
In August, he learned that his more than $100,000 student debt balance had been canceled. He’d carried the debt for 35 years.

Marlon and his dog, George.

Since 1988, Marlon Fox has been paying down his federal student debt.
He didn’t see an end in sight. Then, on Aug. 25, 2023, an email popped up in his inbox with the subject line: “Your student loans have been forgiven!”

His $119,500 balance was reset to zero.
“I couldn’t believe it,” said Fox, 65, a chiropractor in North Charleston, South Carolina. “I’d been battling this for so long. I’ve been on cloud nine ever since.”
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Why some borrowers are in repayment for decades

After the Supreme Court blocked the Biden administration’s sweeping student loan forgiveness plan last June, it has explored all of its existing authority to leave people with less education debt. One of those strategies has been to take another look at the accounts of borrowers who have been in repayment for decades. Such stories are not uncommon.
Under the U.S. Department of Education’s income-driven repayment plans, student loan borrowers are entitled to get any of their remaining debt forgiven after 20 years or 25 years.

Yet many have not seen that promised relief.
“This is due, in part, to strong financial disincentives for student loan servicers to inform consumers about the program and their ability to qualify for it,” said Nadine Chabrier, a senior policy and litigation counsel at the Center for Responsible Lending.
The Education Department contracts with different companies to service its federal student loans, including Mohela, Nelnet and EdFinancial, and pays them more than $1 billion a year to do so. The companies earn a fee per borrower per month, which advocates say discourages transparency around loan forgiveness opportunities.
Even when borrowers are enrolled in these plans, servicers don’t always keep track of their payments, experts say. Records can also get lost when borrowers’ loans are transferred to a different company — a common occurrence.
By the time Fox’s debt was forgiven, he’d been in repayment for 35 years and his account had been managed by at least three different servicers during that time.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, denied that the companies benefit by veering from the government’s orders.
“We are incentivized to meet the requirements that the government sets, which includes giving borrowers the benefits that the law provides,” Buchanan said. “We are audited, and get business or lose it based on meeting those standards.”

I’ve been on cloud nine ever since.

Marlon Fox

So far, the Education Department’s review of borrowers in income-driven repayment plans has erased the debts of about 930,000 people, for more than $45 billion in aid.
Some have even been refunded for their months or years of overpayments.
Shortly after Fox heard that his student loans were forgiven, he received a payment from the government for $56,801.

A $60,000 debt that only grew

In the 1980s, Fox borrowed roughly $60,000 to attend the Palmer College of Chiropractic. Shortly after he graduated, his monthly student loan bill was around $1,000. Early in his career and just starting a family, he struggled to come up with that sum.
After his father had a stroke, Fox became his main caregiver and was forced to pick up his expenses and debts. Things got even harder.
At times, Fox enrolled in forbearances, which caused his balance to mushroom. This option for struggling borrowers can keep loans on hold for up to three years, but interest continues accruing. The interest rate on his federal student loans was over 8%.

Fox lived frugally and made payments on his student debt whenever he could. He enrolled in an income-driven repayment plan in the mid-1990s, after Congress established the first one. The plan left him with a more manageable monthly bill, but he barely saw a dent in his balance.
“It still drops so amazingly slowly,” he said.

Time passed. Fox’s hair grayed, and he sent his own children off to college. When he told people he was still paying off his student debt, they scratched their heads.
“Every time I tried to explain this to someone, they’d say, ‘How could that be?'” Fox said.
He wrote to his House representatives and senators, asking them for help. He believed he should have gotten his debt forgiven after a certain point. He got nowhere.
The lawmakers, when they did get back to him, said he should reach out to his servicer. The companies, meanwhile, didn’t have a full record of his payments.

Student debt’s shadow: ‘I’ll probably always work’

Fox, who considers himself a conservative-leaning independent, said he can’t help but be impressed with the Biden administration’s work.
“No other administration would look into this, and correct the wrongs,” he said.
Fox doesn’t tell many people his story. He lives in a mostly Republican area, where there is a deep skepticism toward forgiving the debt of those who’ve benefited from a higher education.
“They say, ‘Hey, you got your school loans paid off? That’s unfair,'” Fox said. “But if they let me tell my full story, then they understand.”
Over the decades, based on Fox’s records, which CNBC reviewed, he paid around $200,000 on his federal student loans.
That debt still casts a shadow over his life.
Those large bills left Fox with little money to save toward retirement.
“I’ll probably always work,” he said.
He can’t remember the last time he took a full week off from work.
“That’s a whole week without pay, and that would make it difficult to meet these huge payments,” he said. “My wife was really upset I wouldn’t take off.”
For the first time in years, though, he and his wife, Debbie, booked a vacation: a week in Maui. He’s excited to spend time on the beach, and to see the turtles and whales, and to eat red snapper.
As for his refund? It’s gone. He used the cash to pay off his children’s student loans. More