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Credit cards are a widely accepted, convenient form of payment, but they come with potential drawbacks like high interest rates and fees when not used responsibly. 

<p>Credit cards can offer a convenient way to pay for everyday purchases, like groceries, and come handy in an emergency. </p><p>While it’s easy to get excited about the convenience and perks credit cards can provide, it’s also important to be aware of the potential risks of overspending and high interest charges. Understanding the advantages and disadvantages of credit cards can help you decide if a credit card makes sense for you.<sup>[1]</sup>   </p><h2>What are the pros and cons of credit cards? </h2><p>To determine whether using credit cards is the right move for you, here’s a closer look at some of the top credit card pros and cons.  </p><table><tr><td><p><b>Top 5 credit card pros</b> </p></td><td><p><b>Top 5 credit card cons</b> </p></td></tr><tr><td><p>Convenient payment method </p></td><td><p>Potential for overspending </p></td></tr><tr><td><p>Good way to build credit </p></td><td><p>Usage may negatively affect credit scores </p></td></tr><tr><td><p>No interest when monthly balance is paid in full by the due date</p></td><td><p>Potential high interest rates   </p></td></tr><tr><td><p>May offer fraud protection on unauthorized purchases  </p></td><td><p>May charge fees </p></td></tr><tr><td><p>Potential for rewards, discounts, or cash back </p></td><td><p>Credit limits vary </p></td></tr></table><h2>Pros of using credit cards</h2><p>There are a lot of reasons to consider using credit cards in your everyday life. Here are some of the more prominent benefits of using credit cards that can add value to your financial life. </p><h3>Convenient payment method </h3><p>There was a time when cash was king, and it was difficult to use credit cards. Now, the opposite is true. If you use a credit card for a good chunk of your spending, you don’t have to worry about always having cash on hand, and you can even add your credit card to a digital wallet for additional convenience. And if you travel, you don’t have to worry about finding an ATM or converting your currency as long as the local merchants accept your credit card’s payment network.<sup>[1]</sup> </p><h3>Good way to build credit </h3><p>One of the keys to building solid credit is a history of on-time payments, and prudent use of a credit card is an easy way to do that. In fact, if you use a credit card for modest purchases each month, keeping your balance relatively low compared to your credit limit, and then pay off the balance in full by your monthly due date, you can build credit without paying interest charges.<sup>[2]</sup> </p><h3>No interest when monthly balance is paid in full </h3><p>Credit card interest rates can make the cost of borrowing expensive—and <a href="https://www.lendingclub.com/resource-center/personal-loan/apr-vs-interest-rate-whats-the-difference"><b>interest charges</b></a> can add up quickly. For some credit cards, if you pay off your balance in full by the due date each month, you won’t be charged interest. To avoid getting caught in a cycle of debt with high interest costs, only put charges on your credit card that you know you can pay off at the end of the cycle.   </p><p>Paying off a charge immediately after using the credit card can also help you avoid interest. For example, if you regularly spend $50 on your rewards card to fill up your gas tank, transfer a $50 payment to such credit card immediately from your checking account.<sup>[3]</sup>   </p><h3>Fraud protection on unauthorized purchases </h3><p>Most major credit card issuers offer zero-liability protection on unauthorized charges. If you spot and dispute unauthorized charges before you pay your monthly bill, you may withhold payment for the disputed charge as long as the dispute is upheld. Also, credit card technology has improved to the point where if you use your card’s chip or tap to pay, the transaction is encrypted to help prevent hackers from stealing your card information.<sup>[4]</sup> </p><h3>Potential for rewards, discounts, or cash back </h3><p>Many credit card companies frequently offer rewards with every purchase you make, or on certain types of purchases. Depending on the rewards program, you could get cash back, or you could earn points or miles and redeem them in a variety of ways, such as travel, gift cards, online shopping, and more.  </p><p>Some credit cards also offer sign-up bonuses to new cardholders after you meet a minimum spending requirement. You might even receive additional perks, such as cell phone protection, travel insurance, travel or dining credits, and more.<sup>[5]</sup>  </p><h2>Cons of using credit cards </h2><p>While there are some clear benefits to using credit cards, there are also some inherent risks that can damage your credit and threaten your financial well-being. Here’s what to consider. </p><h3>Potential for overspending </h3><p>It can be tempting to put a purchase on your credit card, however it’s still important to budget for the expense and be sure you can pay your bill in full to avoid interest. If you’re prone to overspending, you could end up spending more than you can afford to pay back or rack up costly interest charges.   </p><h3>Usage may negatively affect credit  </h3><p>How you use your credit cards plays a large role in your credit score calculations. In particular, your <a href="https://www.lendingclub.com/resource-center/personal-finance/what-is-credit-utilization-and-how-to-improve-it"><b>credit utilization rate</b></a> is one of the most influential factors in your FICO score. This rate is calculated by dividing your card’s balance by its credit limit, and it’s done for each individual card, as well as for all of your accounts.  </p><p>For example, if you have a $2,500 balance on a credit card with a $10,000 limit, your utilization rate on that card is 25%. If you have three credit cards with a combined balance of $6,000 and a combined limit of $15,000, your credit utilization rate for all accounts is 40%.  </p><p>Generally, a lower credit utilization is better for your credit versus a higher one. If your utilization rate gets too high, it could negatively impact your credit score until you pay down the balance. This can even be true if you pay your bill in full every month, so keep an eye on your balances and consider using your cards less or making multiple payments throughout the month to keep your credit utilization rate low.<sup>[2]</sup> </p><h3>High interest rates </h3><p><a href="https://www.lendingclub.com/resource-center/personal-loan/signs-you-have-too-much-credit-card-debt"><b>Carrying credit card debt</b></a> can be expensive thanks to high interest rates. Since 2022, average credit card rates have reached a record of high 21.76%, according to the <a href="https://www.newyorkfed.org/microeconomics/hhdc"><b>Federal Reserve</b></a>. Data from a recent <a href="https://ir.lendingclub.com/news/news-details/2024/Nearly-50-of-Americans-Unaware-Federal-Interest-Rate-Hikes-Raised-Their-Credit-Card-APR-by-Over-5-Percentage-Points/default.aspx"><b>LendingClub Bank study</b></a> reports that almost half (47.1%) of Americans are unaware of the current APR on their credit cards, and 49.5% are unaware that their credit card APR automatically rose by over 5 percentage points following the Federal Reserve’s rate increases between March 2022 and July 2023. </p><p>When using a credit card, it’s important to pay your balance in full by the due date every month to avoid paying interest. Carrying debt can limit your opportunity to achieve your other financial goals.  </p><h3>May have fees  </h3><p>Some credit cards have annual fees, which can range from around $50 a year to several hundred dollars. For example, certain travel cards have annual fees of $500 or more. While this type of rewards card may come with many perks for frequent travelers, it may be a waste of money for some. </p><p>If you don’t pay your bill on time, you may also be hit with a penalty late fee and a higher interest rate. Credit card issuers may charge fees for other services like balance transfers or cash advances. It’s important to understand what fees a credit card has before applying, so be sure to read the fine print when researching cards.<sup>[6]</sup> </p><h3>Credit limits vary  </h3><p>The amount you’re able to charge on your credit card depends on your credit limit. Credit card limits are set when you first open the card. People with <a href="https://www.lendingclub.com/resource-center/personal-finance/what-is-a-good-credit-score-and-how-to-boost-yours"><b>good credit</b></a> generally qualify for higher credit limits than those with poor credit—and the difference can be thousands of dollars.  </p><p>For instance, if you’re new to credit or working on rebuilding your credit, your credit card could have a spending limit of just a few hundred dollars, compared to someone with excellent credit who may have a $10,000 limit. If you demonstrate a solid payment history and keep your spending in check, you may be able to request a credit card limit increase. However, in some cases, your credit limit could be reduced if you rarely use the card or your credit situation changes.<sup>[7]</sup>  </p><h2>What else to consider about credit cards </h2><p>When used responsibly, credit cards can provide a lot of value, and you may even be able to avoid some or all of the potential drawbacks. However, if you’re concerned about going into debt or paying unnecessary fees and interest, they might not be worth it. Before applying, take the time to consider why you want a credit card and how using one might affect your financial well-being.  </p><p>Think carefully about your situation, spending habits, and preferences to determine the right path for you. Spend time considering whether a credit card is a financial tool that makes sense for you. Evaluating credit card issuers, rewards programs and perks, and how the card can help move you toward your financial goals is a key part of making the right decisions for your wallet. </p><h2>The bottom line  </h2><p>Like most financial tools, credit cards aren’t inherently good or bad. Used properly, they can help you build a strong credit profile and give you access to appealing perks and rewards. On the other hand, they can lead to overspending, excessive interest charges, and potential damage to your credit score.  </p><p>If you decide to use credit cards, be mindful of your usage and be diligent about reviewing your spending. Your vigilance can help you enjoy the benefits while limiting the risks. And If you’ve built up more debt than you can handle, a personal loan may help you <a href="https://www.lendingclub.com/personal-loan/credit-card-consolidation-loan">consolidate your credit card debt</a> and save you money on interest over time.    </p><hr/><ol><li><p><a href="https://www.fdic.gov/system/files/2024-06/ch2.pdf">FDIC</a>. “Credit Cards - General Overview.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/">Consumer Financial Protection Bureau</a>. “How do I get and keep a good credit score?” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/how-does-my-credit-card-company-calculate-the-amount-of-interest-i-owe-en-51/">Consumer Financial Protection Bureau</a>. “How does my credit card company calculate the amount of interest I owe?” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/am-i-responsible-for-unauthorized-charges-if-my-credit-cards-are-lost-or-stolen-en-29/">Consumer Financial Protection Bureau</a>. “Am I responsible for unauthorized charges if my credit cards are lost or stolen?” </p></li><li><p><a href="https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-credit-card-rewards/">Consumer Financial Protection Bureau</a>. “Credit Card Rewards.” </p></li><li><p><a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-bans-excessive-credit-card-late-fees-lowers-typical-fee-from-32-to-8/">Consumer Financial Protection Bureau</a>. “CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/why-did-i-get-a-low-credit-limit-on-a-credit-card-en-11/">Consumer Financial Protection Bureau</a>. “Why did I get a low credit limit on a credit card?” </p></li></ol><p></p>

Wondering when to teach kids about money? Here's a helpful guide for every age group, from toddlerhood to early adulthood.

<p>According to the <a href="https://www.moneyconfidentkids.com/content/dam/mck/pdfs/2022_Final_PKM_Deck_2022_Update.pdf">2022 T. Rowe Price Parents, Kids &amp; Money Survey</a>, over half of American parents are reluctant to talk to their kids about money. So if you&#39;re struggling with this, you aren&#39;t alone. However, getting comfortable discussing money with your children will help them build a stronger financial foundation—and it could also help you develop more positive views about money.     </p><p>Here&#39;s when to <a href="https://www.lendingclub.com/resource-center/personal-finance/financial-lessons-to-teach-teens-before-they-graduate-high-school">teach kids about money</a> and actionable strategies for doing so, no matter your child&#39;s age. </p><h2>When to teach kids about money </h2><p>You might be surprised to find out you can start teaching your child about money in toddlerhood, and your lessons can carry through to their teen years—and hopefully into adulthood. Here are some tools and strategies for teaching your kid about money at any age.   </p><h3>Ages 2–5 </h3><p>They may not yet understand the value of money or why you can&#39;t afford an expensive toy at the store, but you can teach younger kids about exchanging cash for goods and services.   </p><p>Playing store or restaurant is a fun and engaging way to help toddlers start to understand commerce. You can use real goods like cereal boxes or cans, or opt for a toy cash register and products or foods. Asking about prices can teach kids the concept of costs, even if, at first, they think an apple is worth $100.  </p><p>While preschool-age children will enjoy playing store or restaurant, they can also help trace and identify coins or clip coupons before a grocery store or shopping trip. Just ensure you supervise, so they don&#39;t put coins in their mouth. </p><h3>Ages 6–8 </h3><p>Kids learn math concepts like addition, subtraction, and money identification in their earliest school years. As you help with homework or reinforce these concepts outside of school, you can bring money into the discussion. Consider having them play with real coins (or play money if you have it), and introduce how to add and subtract money.   </p><p>For instance, you might start by counting coins, then have your child add up different combinations of coins to make a dollar. If you have several coins lying around, you could also have your child collect them and bring them to the bank to cash in for paper money.    </p><p>It can also be smart to introduce a <a href="https://www.lendingclub.com/resource-center/personal-finance/should-you-give-your-kids-an-allowance">monetary allowance</a> at this age, and consider discussing the concepts of saving and spending. Your child can earn their allowance by doing chores, or you could simply choose to give them some money each week, allowing them to save for something they really want.<sup>2</sup>  </p><p>If giving an allowance is out of budget, there are still ways to teach the foundations of earning and saving. For example, you might use marbles as currency, and create a system where a certain number of marbles earns treats—like extra screen time or a scoop of ice cream.  </p><h3>Ages 9–11 </h3><p>By age 9, your child may understand the concept of money fairly well. Chances are they&#39;ve watched you pay at checkout countless times, overheard family financial discussions, and browsed for toys and other items online. And if they earn an allowance, they likely have basic knowledge of working for their money.   </p><p>Opening a custodial savings account and teaching kids about banking can be smart strategies for kids in this age bracket. Note that your child won&#39;t be able to open a new custodial savings account on their own; instead, you&#39;ll need to open it on their behalf. You can work together on:  </p><ul><li><p>Making regular deposits from their allowance into their savings account. </p></li><li><p>Routinely logging into their account online to review their balance and transaction history. </p></li><li><p>Helping them understand what happens to their savings balance if they withdraw money.  </p></li></ul><p>This is also a good time to teach your children about the basics of <a href="https://www.lendingclub.com/resource-center/personal-loan/compound-interest-vs-simple-interest-whats-the-difference">earning interest</a>. Explain that the bank gives account holders a special reward for saving money, and show them how much interest they earn on their balance in a given month.<sup>3</sup> </p><h3>Ages 12–15 </h3><p>Kids in this age bracket are old enough to start learning about investing using a kids app or a custodial account. Introduce the concept of investing, what it entails, how to do it, and what the purpose of investing is. Explain that you can earn or lose money on investments, and discuss the risks of common investments like company stocks, exchange-traded funds (ETFs), and bonds.  </p><p>By using investment tools while they&#39;re still under your roof, you can instill in them the importance of putting money away so that it works for them in the future. This could give your child an edge when they enter the workforce as a young adult and start putting money into a workplace retirement account.<sup>4</sup> </p><h3>Ages 16–18 </h3><p>Many teens start driving at 16, so it&#39;s an ideal time to teach your child about real-life expenses. For example, by walking them through the true costs of car ownership—including monthly loan payments, insurance, gas and maintenance—they can have a better understanding of how to budget and save for a car of their own some day.<sup>5</sup>  </p><p>If your teen doesn&#39;t drive or have a car, you can teach similar concepts by having them contribute to their phone or phone plan. Though many kids share their parents&#39; accounts, having to pay a set amount each month puts their <a href="https://www.lendingclub.com/resource-center/personal-finance/sticking-to-a-budget-common-problems-and-solutions">budgeting knowledge</a> into practice. You could even siphon that money into a separate account and give it to them after their high school graduation.   </p><p>Besides applying budgeting concepts to real life, this is a great age to teach your kids about <a href="https://www.lendingclub.com/resource-center/personal-finance/what-affects-your-credit-scores">credit score</a>. Start by explaining what building credit means, why it&#39;s important, and how to do it. </p><h2>The bottom line </h2><p>No matter your child&#39;s age, you can start teaching them important financial lessons, either through play or real-life activities. Teaching your child about money helps build financial literacy and understand their <a href="https://www.lendingclub.com/resource-center/personal-finance/do-you-know-your-financial-values">financial values</a>, which can give them an edge when they become adults. Ideally, they&#39;ll carry the knowledge you&#39;ve given them about saving, budgeting, and investing through their lives, making them more likely to reach their financial goals. </p><hr/><ol><li><p><a href="https://files.consumerfinance.gov/f/201501_cfpb_digest_financial-well-being.pdf">Consumer Financial Protection Bureau</a>. “Financial well-being: What it means and how to help.” </p></li><li><p><a href="https://greenlight.com/learning-center/earning/average-allowance-by-age-for-kids">Greenlight</a>. “Average allowance by age for kids and teens.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/">Consumer Financial Protection Bureau</a>. “What is the difference between a loan interest rate and the APR?” </p></li><li><p><a href="https://www.consumerfinance.gov/about-us/blog/budgeting-how-to-create-a-budget-and-stick-with-it/">Consumer Financial Protection Bureau</a>. Discovering the benefits of investing early.” </p></li><li><p><a href="https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_discovering-benefits-investing-early_guide.pdf">Consumer Financial Protection Bureau</a>. “Budgeting: How to create a budget and stick with it.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-credit-report-and-a-credit-score-en-2069/">Consumer Financial Protection Bureau</a>. “What is the difference between a credit report and a credit score?” </p></li></ol><p></p>

Closing your credit card can hurt your credit temporarily, but there are steps you can take to minimize the effect.  

<p>You can choose to close a credit card for many different reasons. Maybe you want to simplify your personal finances. Or, perhaps you want to avoid an upcoming annual fee on a card you no longer use. Maybe you want to remove the temptation to spend by having one less card in your wallet, especially if you used a <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-debt-consolidation"><b>debt consolidation loan</b></a> to pay down your credit cards.  </p><p>Before closing a credit card, it’s important to keep in mind that your credit score may take a dip. However, with careful planning, it’s possible to minimize the impact.   </p><h2>How to cancel a credit card without hurting your credit score </h2><p>Your <a href="https://www.lendingclub.com/resource-center/personal-finance/understanding-your-credit-score"><b>credit score</b></a> could take a dip when you cancel a credit card. However, you may be able to reduce the impact by following these steps.  </p><ul><li><p><b>Don’t close your oldest card.</b> If possible, try not to close your oldest credit card. Doing so could affect the average age of your accounts, which is a factor credit-scoring companies use when calculating your credit score.<sup>[1]</sup> </p></li><li><p><b>Pay your bills on time before canceling.</b> Your payment history also impacts your credit score. A closed account in good standing remains on your credit report for 10 years after it’s closed. So, check your account status and catch up on any payments before shutting down the card.<sup>[1]</sup> </p></li><li><p><b>Pay down or limit use of other credit cards.</b> Canceling a card lowers your available credit and can lead to a higher utilization rate, but that’s only true if your overall balance stays the same. Before you cancel your card, consider paying down your other cards, too. At the very least, try limiting your credit card usage, which helps minimize an increase to your utilization rate.<sup>[1]</sup>  </p></li><li><p><b>Make early payments on your other credit cards.</b> Credit utilization depends on the balance reported to the credit bureaus. Ask your credit card issuer when it reports balances, and pay off yours before that date to maintain a low reported utilization rate.<sup>[1]</sup> </p></li></ul><h2>How canceling a credit card impacts your credit history </h2><p>The length of your credit history accounts for about 15% of your <a href="https://www.myfico.com/credit-education/whats-in-your-credit-score"><b>FICO</b></a><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score"><b><sup>®</sup></b></a><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score"><b>Score</b></a>. Generally, keeping your accounts open longer will help lengthen your credit history, which can help boost your credit score. When you close a credit card, your credit score may temporarily dip because the closure lowers the average age of your accounts. However, your score should rebound if you continue to make timely payments on other lines of credit.   </p><p>Your payment history—which is different from credit history—also impacts your credit score. A closed account in good standing can remain on your credit report for 10 years after you close it. So, you should consider your account status before canceling the card. An account that’s in “good standing” means it doesn’t have a history of missed or late payments. On the other hand, if you had late payments, those entries can remain on your credit reports for up to seven years—even if you close the account.<sup>[1][3]</sup>  </p><h2>How closing a credit card affects credit utilization </h2><p>Closing a credit card can lead to a higher credit utilization ratio and a lower credit score. Credit utilization is an important factor when determining a credit score, including the amount of debt owed which makes up 30% of a FICO score. When you close a credit card, you reduce your total available credit.<sup>[1]</sup>  </p><p>For instance, let’s say you have two credit cards: a cash-back card with a $2,000 credit limit and a $0 balance, and a travel rewards card with a $3,000 credit limit and a $1,000 balance. Factoring in your $5,000 overall credit limit, your aggregate credit utilization rate would be 20%.  </p><p><b>$1,000 combined balance ÷ $5,000 available credit = 20% credit utilization ratio</b> </p><p>If you close the cash-back credit card (without paying down any of the outstanding $1,000 balance on the other card), your utilization rate would increase. This is because you have less credit available to you, yet you carry the same amount of credit card debt.  </p><p><b>$1,000 combined balance ÷ $3,000 available credit = 33% credit utilization ratio</b>  </p><p>Keep in mind that credit scores consider your utilization rates on individual credit accounts (each account separately), as well as your overall combined rate (all accounts taken together). You can use a credit utilization calculator to keep close tabs on your overall utilization rate. As a rule of thumb, most financial experts suggest keeping your overall utilization below 30%.<sup>[1]</sup>  </p><h2>When should you close a credit card? </h2><p>Before closing a credit card, it’s important to consider why you want to cancel. Are you looking to switch to a new type of card? Do you want to ditch an annual fee? Or perhaps you simply don’t want credit cards around because you use them too much. It may make sense to close a credit card if you want to do one of the following.   </p><ul><li><p><b>Avoid a high annual fee:</b> Credit cards sometimes have annual fees, especially rewards cards. If a card is costing you more than it’s earning you, it may be time to close the account. </p></li><li><p><b>Prevent overspending:</b> Credit cards are a convenient way to pay for purchases. However, if you tend to overspend when you have access to credit, you may want to close the card to cut back on unnecessary spending.  </p></li><li><p><b>Switch to a different type of card:</b> You might want to take advantage of another issuer’s promotional sign-up bonus. Or perhaps you want to exchange your card for one that offers cash back or travel rewards. If you want to limit the number of credit cards you carry, canceling a current card in favor of a new one might make sense.   </p></li></ul><h2>When shouldn’t you close a credit card? </h2><p>When closing a credit card, it’s important to get the timing right. Here’s when it could make sense to close your card.   </p><ul><li><p><b>It’s your oldest account.</b> Since the length of your credit history impacts your credit scores, canceling your oldest account could hurt your credit. Keeping an account open can help round out your credit profile—even if it’s minimally used.<sup>[1]</sup>  </p></li><li><p><b>You’re about to finance a large purchase.</b> Keeping the concept of utilization rates in mind, a big purchase would raise your outstanding balance. Without an offsetting repayment, your utilization rate would increase significantly. For that reason, it might make sense to keep a card open until you’ve made (and paid off) your expected major purchase.<sup>[1]</sup> </p></li><li><p><b>You’re feeling indifferent about the card.</b> Sometimes, we glance at our wallets and notice a credit card collecting dust. We think, “Hmm, I barely use that card anymore,” and consider closing the card. However, if you’re canceling simply for the sake of canceling, that might not be the wisest decision. You could potentially increase your utilization ration and hurt your credit scores.<sup>[1]</sup> </p></li></ul><h2>How to safely close your credit card </h2><p>When closing a credit card, you can avoid financial headaches if you approach the process the right way. Here are a few tips to safely close your credit card with your issuer. </p><h3>Send a written cancellation request </h3><p>Although you should be able to cancel your credit card via phone or online, it’s wise to get written verification for your records. This can help protect against errors in your credit report and expedite potential disputes down the road. Ask your issuer to send a written notice of your account’s closure. You can also send a short confirmation letter that details your request to your card issuer.<sup>[2]</sup> </p><h3>Ask the credit card issuer for a product change  </h3><p>Instead of canceling, some card issuers will let you keep the same account and credit limit, but they allow you to “product change” to another card they offer. For instance, consider this option if you’re hoping to switch from a standard card to a rewards card or want a card without an annual fee.  </p><p>Transfer recurring payments It’s convenient to use credit cards for recurring payments, such as utility bills and subscription fees. Before you cancel your card, remember to update your service accounts. Connect them to a new payment method to avoid missed payments and service disruption. </p><h3>Pay off your balance </h3><p>Closing a credit card won’t resolve any outstanding debt. If you leave a balance on your credit card past the grace period, your creditor could charge off your debt. This typically happens after 120 to 180 days of nonpayment, and it can result in a major black mark on your credit reports. The card issuer may also send your account to collections, leaving you with additional fees and a second negative mark. If you’re canceling a credit card, make sure you have a plan in place to pay off any remaining debt.<sup>[2]</sup>  </p><h3>Check your credit reports </h3><p>After you cancel a credit card, check your credit reports to make sure everything has been reported accurately. You can check your credit reports for free once a year at <a href="http://annualcreditreport.com/"><b>AnnualCreditReport.com</b></a>.  </p><h2>The bottom line </h2><p>Closing a credit card may <a href="https://www.lendingclub.com/resource-center/personal-finance/what-affects-your-credit-scores"><b>hurt your credit score</b></a>. When you cancel a credit card, it usually affects your credit history and credit utilization rate—two important credit-scoring factors. Before canceling, consider your reasons and whether the time is right. Keep in mind, you don’t have to actively use a credit card for your credit scores to benefit. As long as the card is open and in good standing, you’re earning a positive history.<sup>[1]</sup>  </p><p>However, your credit card company may eventually close your account due to inactivity. To keep your account open, ask the issuer about its cancellation policy. Alternatively, consider using a card only for a small monthly bill, such as a streaming service subscription. This can also help you improve your credit as long as you make timely payments.  </p><hr/><ol><li><p><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score"><u>myFICO</u></a>. “What&#39;s in my FICO Scores?”  </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/i-want-to-close-my-credit-card-account-what-should-i-do-en-84/"><u>Consumer Financial Protection Bureau</u></a>. “I want to close my credit card account. What should I do?” </p></li><li><p><a href="https://www.experian.com/blogs/ask-experian/when-are-closed-accounts-deleted/"><u>Experian</u></a>. “When Are Closed Accounts Deleted?” </p></li></ol><p></p>

Your credit score may be impacted when you refinance your auto loan thanks to a hard credit check, but the effects are typically short-lived.   

<p>Before deciding to refinance your vehicle, it’s important to understand how it may affect your credit score. Let’s take a closer look at how refinancing a car loan impacts your credit. </p><h2>Will refinancing your auto loan hurt your credit score? </h2><p>Yes, refinancing an auto loan may hurt your credit score. When you refinance a vehicle, you’re applying for a new auto loan, then using that loan to pay down your existing car loan. During the application process, the lender will check your credit reports, resulting in a <a href="https://www.lendingclub.com/resource-center/personal-finance/key-differences-of-a-soft-credit-check-vs-hard-credit-check"><b>hard credit pull</b></a>.<sup>[1]</sup> </p><p>Some lenders, like LendingClub, offer pre-qualification to <a href="https://www.lendingclub.com/auto-refinancing"><b>check your rates</b></a> first, which shows up as a soft pull rather than a hard pull on your credit report. </p><h2>How much will your credit score decrease if you refinance? </h2><p>Your credit score may decrease after a hard credit check when you refinance an auto loan. However, it could go down even more if you’re applying for additional credit over a short time.<sup>[1]</sup> If you’re <a href="https://www.lendingclub.com/help/auto-refinance-faq/how-do-i-apply-for-an-auto-refinance-loan"><b>applying for auto refinance loans</b></a>, you may want to reconsider whether applying for additional credit like a credit card or mortgage makes sense.   </p><p>When you refinance your auto loan, the age of your accounts—or the length of your credit history—goes down. Fortunately, this <a href="https://www.lendingclub.com/resource-center/personal-finance/what-affects-your-credit-score"><b>credit scoring factor</b></a> only makes up 15% of your score so your score may be impacted accordingly. Loans that are reported as “new” to the credit bureaus also signal that you’ve taken on more debt, which could lower your score.<sup>[2]</sup>   </p><p>Your credit mix, or the different types of accounts on your credit report, may not change much since you’re replacing one auto loan with another.<sup>[2]</sup>  </p><h2>How long will it take for my credit score to recover? </h2><p>According to Experian, hard inquiries from the application process can stay on your credit report for up to two years, but generally the impact on your score only lasts about a year.<sup>[3]</sup> </p><h2>When refinancing your car loan might make sense </h2><p>Refinancing your auto loan can offer many benefits, like lower interest rates or a longer loan term. However the timing may not always be right, depending on your financial situation and other factors. Here’s a closer look at when refinancing your car loan might make sense.  </p><h3>1. You got the loan from the dealership </h3><p>If you got your original loan from the car dealer, you may not have received the best rate possible. A dealership is typically an intermediary between the buyer and the auto lender, and the dealer may mark up the interest rate to compensate for their involvement.<sup>[4]</sup> You may be able to get a better rate by refinancing directly with an online lender, credit union, or other financial institution. </p><h3>2. Your credit has improved </h3><p>If your credit score has increased since you first took out the loan, and you’ve been making on-time payments on your original loan for at least a few months, you may qualify for a lower interest rate through refinancing.<sup>[5]</sup>  </p><h3>3. Interest rates have gone down </h3><p>Interest rates fluctuate often. If interest rates have decreased since you first took out your loan, you may be able to take advantage of lower rates. Rate shopping without a hard credit check can help you determine whether you qualify for a lower rate. Credit scoring systems such as the FICO® and VantageScore®  have built-in accommodations for rate shopping on installment loans. They treat inquiries related to multiple loan applications as a single event, as long as all applications are for the same loan amount and are submitted within a 14-day window.<sup>[6]</sup></p><h3>4. You need a lower car payment </h3><p>Even if you’re unable to lower your interest rate, refinancing can still help you get a lower monthly payment. You’ll refinance a lower balance than what you started with, which shrinks your monthly payments. Refinancing into a longer term may also lower your monthly payments because they’re spread over more months. This can free up cash for other monthly expenses. Just keep in mind that this strategy can result in a higher total interest cost over the life of the loan. </p><h2>When an auto refinance loan might not make sense </h2><p>Refinancing can come with a number of benefits, but it’s not always the right move. Here’s a look at common reasons when an auto refinance loan might not make sense.  </p><h3>1. Your loan is almost paid off </h3><p>If you don’t have much time left on your loan, lenders likely won’t want to refinance your loan. <a href="https://www.lendingclub.com/help/auto-refinance-faq/what-is-auto-refinance"><b>LendingClub Bank</b></a>, for example, requires at least 24 months left on the loan term to consider a refinance loan. </p><h3>2. Your loan is underwater </h3><p>Being upside-down or underwater on your auto loan means the repayment amount on your loan is more than the car is worth. While it can be possible to refinance an underwater loan, it typically comes with high interest rates and unfavorable terms.<sup>[7]</sup> </p><h3>3. The prepayment penalty is too high </h3><p>Since the new lender is <a href="https://www.lendingclub.com/resource-center/personal-loan/the-pros-and-cons-of-paying-off-a-personal-loan-early"><b>paying off your old loan early</b></a>, you may be subject to prepayment penalties in the process. Check with your original lender to see what fees you may incur, then compare it with your potential savings to make sure it’s worth it.<sup>[8]</sup> </p><h2>Can you refinance an auto loan with poor credit? </h2><p>Yes, you can refinance an auto loan with poor credit. While it’s generally better to refinance when your credit is in good shape, it may be possible to refinance a car loan even with bad credit. However, you’ll likely pay a higher interest rate as your credit score decreases. Instead, you might consider working to improve your credit score before you try to refinance your auto loan.<sup>[9]</sup>  </p><h2>How to get started with the auto refinancing process </h2><p>Refinancing your auto loan is a straightforward process, but it&#39;s important to understand what’s involved before you get started. Here are a few pointers to keep in mind.   </p><ul><li><p><b>Determine if refinancing makes sense for you.</b> Consider current interest rates, whether your credit score has improved, and other factors that may make it a good time to refinance or require you to wait. Be sure to also assess your car’s value to make sure you’re not upside-down on your existing loan. </p></li><li><p><b>Shop around. </b>Many lenders will let you prequalify without a hard inquiry to your credit score. If you choose to complete the application, be sure to have all your documents in order, like your car’s vehicle identification number (VIN), existing loan’s payoff amount, and your Social Security number. Try to compare offers within a short period of time—usually no more than two weeks—to minimize the impact on your credit score.<sup>[6]</sup>  </p></li><li><p><b>Evaluate loan offers. </b>Compare refinancing offers from different lenders to your existing loan to see how your financial situation will be impacted. Calculate how much you could save over the life of the loan, how much you could lower your monthly payment, and how quickly you could pay down the loan. With this knowledge in hand, you can confidently decide which refinancing offer will help you accomplish your financial goals.<sup>[9]</sup> </p></li></ul><h2>The bottom line </h2><p>Is refinancing a car bad for your credit? It may impact your score, but as long as you make your monthly payments on time, your score should recover. Unless you’re planning to take out a large new loan in the very near future—for example, a mortgage—don’t let a short-term, small drop in your credit score keep you from refinancing your auto loan and saving money. </p><p>If you didn’t shop around for your current auto loan, your credit score has improved, or interest rates have decreased since you took out your initial car loan, it’s likely worth looking into refinancing options.    </p><hr/><ol><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/whats-a-credit-inquiry-en-1317/#:~:text=Hard%20inquiries,frequently%20you%20apply%20for%20credit.">Consumer Financial Protection Bureau</a>. “What’s a credit inquiry? </p></li><li><p><a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">myFICO</a>. “What&#39;s in my FICO Scores?” </p></li><li><p><a href="https://www.experian.com/blogs/ask-experian/hard-inquiry-vs-soft-inquiry/#:~:text=Hard%20inquiries%20can%20impact%20your,for%20less%20than%20a%20year.">Experian</a>. “What’s the Difference Between a Hard and Soft Inquiry?” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-dealer-arranged-and-bank-financing-en-759/">Consumer Financial Protection Bureau. </a>&quot;What are the different ways to buy or finance a car or vehicle?&quot;</p></li><li><p><a href="https://www.experian.com/blogs/ask-experian/how-soon-can-you-refinance-car-loan/">Experian.</a> &quot;How soon can you refinance a car?&quot;</p></li><li><p><a href="https://www.experian.com/blogs/ask-experian/what-is-rate-shopping/">Experian</a>. “What is rate shopping?”</p></li><li><p><a href="https://consumer.ftc.gov/articles/auto-trade-ins-and-negative-equity-when-you-owe-more-your-car-worth">Federal Trade Commission Consumer Advice</a>. “Auto Trade-Ins and Negative Equity: When You Owe More than Your Car is Worth” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/can-i-prepay-my-loan-at-any-time-without-penalty-en-843/">Consumer Financial Protection Bureau</a>. “Can I prepay my loan at any time without penalty?” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-before-i-shop-for-auto-loan-at-a-bank-credit-union-dealership-or-other-lender-en-755/#will-my-credit-impact-my-interest-rate">Consumer Financial Protection Bureau</a>. “What should I know before I shop for a car or auto loan?” </p></li></ol><p></p>

Taking stock of your situation and hedging your risks are crucial for maintaining peace of mind. 

<p>Having an income that fluctuates can sometimes make it tricky to manage your day-to-day finances. If your job has irregular hours, you rely on commissions or tips, or you’re a small business owner, budgeting can come with some extra challenges. However, understanding your income history and basic expenses, establishing a buffer, and carefully tracking your expenses are a few ways you can manage your money effectively.<sup>[1]</sup>  </p><h2>7 ways to budget if your income fluctuates month to month </h2><p>Budgeting on a fluctuating income may require a little extra work, but it&#39;s still possible to meet your financial goals and protect yourself from unexpected changes to your income and expenses. Here are some tips on how to budget when your income varies. </p><h3>1. Determine your baseline monthly income </h3><p>While you may not be able to control the fluctuations in your earnings, consider whether there&#39;s a minimum amount you can count on earning on a consistent basis.   </p><p>To see if this is possible, take a look at your monthly earnings over the past year. If your income doesn&#39;t fluctuate too much, you could simply calculate the average as your baseline. Otherwise, it may be more sensible to use your lowest-earning month as your benchmark.<sup>[2]</sup> </p><h3>2. List your basic expenses </h3><p>With no way of knowing what your earnings will be from one month to the next, it&#39;s important to make sure you always have your non-negotiable expenses covered, at the very least. Some examples of necessary costs include:  </p><ul><li><p>Rent or mortgage payment </p></li><li><p>Utilities </p></li><li><p>Phone bill </p></li><li><p>Insurance premiums </p></li><li><p>Groceries </p></li><li><p>Debt obligations </p></li><li><p>Transportation (such as fuel, train tickets, or tolls) </p></li><li><p>Child care </p></li></ul><p>While some of these expenses are fixed, others may change from month to month. However, looking back several months can help you determine a reasonable outlay amount for each category.<sup>[2]</sup> </p><h3>3. Evaluate other expenses </h3><p>In addition to your non-negotiable costs, you&#39;ll also want to assess other expenses where you might need to be more flexible. Examples include:  </p><ul><li><p><b>Other savings goals: </b>When you have some extra cash flow, think about which savings objectives you want to prioritize. Examples may include retirement savings, educational savings for a child, a home or vehicle down payment fund, an upcoming vacation, or home renovations. </p></li><li><p><b>Additional debt payments: </b>If you have high-interest debt you want to eliminate more quickly, consider how much you want to allocate during higher-earning months.  </p></li><li><p><b>Lifestyle expenses: </b>These may include streaming subscriptions, dining out, live entertainment, travel, and other big-ticket purchases.  </p></li></ul><p>Ordering all of your negotiable expenses based on how important they are to you can make it easier for you to determine where to put your extra cash when you have it.<sup>[2]</sup> </p><h3>4. Track your expenses </h3><p>Using past income and spending data can help you plan for the future, but it&#39;s still crucial that you track your spending to understand whether your forecasts are realistic.   </p><p>Tracking your expenses once or twice a week can tell you whether you&#39;re in line with your spending goals, or if you need to make further adjustments. This process can be particularly important if your irregular income is a recent development and you&#39;re not used to it yet. <sup>[2]</sup> </p><h3>5. Look for ways to minimize your costs </h3><p>Even if your baseline income is enough to cover your necessary expenses plus some, it&#39;s still worth looking for opportunities to cut back on your expenses. This may even be possible with some of your non-negotiable costs.<sup>[2]</sup>   </p><p>Here are a handful of examples to consider:  </p><ul><li><p><b>Share subscriptions. </b>Whether it&#39;s a streaming subscription or a retail membership, consider sharing some or all of your subscriptions with friends or family members to reduce your monthly or annual expenses. Before setting up your account, make sure the service provider allows account sharing. </p></li><li><p><b>Buy generic brands. </b>Whenever possible, consider buying generic brands over name brands. This can help you save on groceries, over-the-counter medications, clothing, and more. </p></li><li><p><b>Evaluate your insurance. </b>If it&#39;s been a while since you&#39;ve shopped around for auto or homeowners insurance, take some time to do so. Insurers often provide discounts to new customers, which could translate to hundreds or even thousands of dollars in annual savings.<sup>[3]</sup>  </p></li><li><p><b>Consolidate your debt. </b>If you have high-interest debt, a <a href="https://www.lendingclub.com/resource-center/personal-loan/what-is-debt-consolidation"><b>debt consolidation loan</b></a> could potentially give you a lower interest rate and possibly even a reduced monthly payment. It may also help you pay down your debt more quickly, freeing up that cash flow for other financial goals.<sup>[4]</sup>    </p></li></ul><h3>6. Build up a buffer </h3><p>An <a href="https://www.lendingclub.com/resource-center/personal-finance/your-emergency-fund-the-essential-guide"><b>emergency fund</b></a> is an important part of any strong financial plan, but it&#39;s all the more critical for people living with unstable income. When you get a month with some excess cash flow, try to prioritize building up your savings buffer so you can cover shortfalls when they occur.   Having a robust emergency fund can also make it easier to manage bigger financial emergencies, such as home or car repairs, medical bills, or a short-term income adjustment.<sup>[5]</sup>    </p><p>While many financial experts recommend building up three to six months&#39; worth of basic expenses in your emergency fund, evaluate your situation to determine the <a href="https://www.lendingclub.com/resource-center/personal-savings/how-much-of-your-paycheck-should-you-save"><b>right amount to save</b></a> for you.<sup>[6]</sup>   </p><p>Regardless of how you approach your financial buffer, it&#39;s a good idea to stash your savings in a <a href="https://www.lendingclub.com/resource-center/personal-savings/do-you-need-a-high-yield-savings-account"><b>high-yield savings account</b></a> to take advantage of better interest rates.<sup>[7]</sup>  </p><h3>7. Revisit your budget regularly</h3><p>Flexibility is the biggest part of <a href="https://www.lendingclub.com/resource-center/personal-finance/simple-steps-to-building-a-better-budget"><b>setting up a budget</b></a> with an uneven paycheck. While standard budgets rely on setting a goal and hitting it every month, budgets made for irregular incomes need to be reviewed and updated throughout the year to align with your changing work situation.  </p><p>Ideally, your expenses should remain the same. But when you have budget surpluses or deficits from one week to the next, you can assess where you&#39;re falling short and adjust accordingly.   </p><p>It&#39;s also important to reevaluate your income to determine if you&#39;re experiencing an upward or downward trend in your earnings. If you start seeing months where your income is below your baseline, you may need to cut back further. On the other hand, if you&#39;re regularly earning more than you expected, you may be able to comfortably expand your savings, debt payoff, and lifestyle expenses.<sup>[2]</sup>  </p><h2>3 budgeting methods to try </h2><p>Using an established budgeting method can save you some time and energy as you take steps to hone your budget. Some even offer some flexibility to customize your budget to your liking. Here are some budgeting approaches you can try. </p><h3>1. Zero-based budget </h3><p>With a zero-based budget, you&#39;re allocating every single dollar you earn. Once you meet your spending limit for a particular expense category, you&#39;ll stop spending in that area unless you&#39;re willing to pull money from other categories.   </p><p>A zero-based budget is worth considering if you want full control over where your money goes, and you&#39;re willing to spend extra time tracking and categorizing your expenses. </p><h3>2. 50/30/20 budget </h3><p>This budgeting approach allocates your money to just three categories. The idea is that 50% of your monthly income goes toward necessary expenses, 30% toward your lifestyle, and 20% toward your financial goals, such as saving and paying down debt. However, you can adjust the proportions however you&#39;d like based on your priorities.</p><p>Consider this option if you want a simpler approach to budgeting with less oversight on a monthly basis.<sup>[8]</sup>  </p><h3>3. Envelope system </h3><p>The envelope system is essentially a zero-based budget, but it goes one step further by restricting you to using cash only.   </p><p>Like the zero-based budgeting system, the envelope system has you divide your income into different spending categories, and you&#39;ll put cash in individual envelopes for each category. Once you&#39;ve spent all your cash from one envelope, you can&#39;t spend any more money in that category unless you pull from another envelope.   </p><p>This option can be beneficial for people who have had trouble with overspending on credit cards in the past or who simply prefer to use cash. </p><h2>The bottom line </h2><p>Budgeting with fluctuating income may require a little more diligence, but it&#39;s certainly possible, especially if you&#39;re taking steps to <a href="https://www.lendingclub.com/resource-center/personal-savings/ideas-to-build-passive-income"><b>increase your income</b></a> over time. Regardless of which steps you take, it&#39;s important to fully understand your financial situation and goals, so it can inform your budgeting approach. </p><p>As you look for opportunities to save money, consider whether a <a href="https://www.lendingclub.com/personal-loan/debt-consolidation"><b>debt consolidation loan</b></a> or a <a href="https://www.lendingclub.com/personal-savings/high-yield-savings"><b>high-yield savings account</b></a> with LendingClub Bank can make it easier to achieve your objectives.     </p><hr/><ol><li><p><a href="https://files.consumerfinance.gov/f/201501_cfpb_digest_financial-well-being.pdf">Consumer Financial Protection Bureau</a>. “Financial well-being: What it means and how to help.” </p></li><li><p><a href="https://www.consumerfinance.gov/about-us/blog/budgeting-how-to-create-a-budget-and-stick-with-it/">Consumer Financial Protection Bureau</a>. “Budgeting: How to create a budget and stick with it.” </p></li><li><p><a href="https://www.iii.org/article/how-can-i-save-money-auto-insurance">Insurance Information Institute</a>. “How to save money on car insurance.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-credit-counseling-and-debt-settlement-debt-consolidation-or-credit-repair-en-1449/">Consumer Financial Protection Bureau</a>. “What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair?” </p></li><li><p><a href="https://www.consumerfinance.gov/an-essential-guide-to-building-an-emergency-fund/">Consumer Financial Protection Bureau</a>. “An essential guide to building an emergency fund.” </p></li><li><p><a href="https://www.cnbc.com/select/how-much-to-save-in-emergency-fund/">CNBC</a>. “3 to 6 months of savings might be ‘tried and true wisdom’ but this expert has advice if you’re living paycheck-to-paycheck.” </p></li><li><p><a href="https://www.consumerfinance.gov/ask-cfpb/should-i-get-a-checking-account-that-pays-interest-en-925/">Consumer Financial Protection Bureau</a>. “Should I get a checking account that pays interest?” </p></li><li><p><a href="https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_learning-about-budgets_guide.pdf">Consumer Financial Protection Bureau</a>. “Learning about budgets.”</p></li></ol><p></p>

From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.

<p>From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce Stackit<sup>TM</sup> from LendingClub Bank—a <a href="/member-benefits/stackit/install?utm_source=Internal&utm_medium=Blog&utm_campaignid=stackit_launch">new browser extension</a> that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.</p><h2>Limited Time Offer to Double Your Cash Back Through 12/31/22</h2><p>Stackit is a free, new cash back and rewards program available to personal loan members that’s easy to download and install. Eligible members can activate their favorite offers with one click to start saving while stacking cash back offers with existing loyalty program rewards at eligible stores.</p><p>“We’re relentless when it comes to giving customers more, and Stackit is a perfect example of this,” said Amber Carroll, SVP of Membership and Lifecycle Marketing. “Stackit appears as you shop so it’s easier to activate. You can redeem your cash back for gift cards from hundreds of online stores. And you can continue accumulating loyalty points from merchants and rewards from credit cards while we stack coupon savings and cash back earnings on top of all of it,” she said. “Stackit demonstrates our promise to help members make smart money moves that are both easy and rewarding.”</p><p>To celebrate the new Stackit rewards program, LendingClub is offering its personal loan members double the cash back on eligible purchases made now through the end of the year. To start earning and stacking rewards, eligible members can simply <a href="/member-benefits/stackit/install?utm_source=Internal&utm_medium=Blog&utm_campaignid=stackit_launch">add the new Stackit Extension</a> to their browsers—<b>doubling their earnings for a limited time through 12/31/22.</b>* Cash back can be redeemed for e-gift cards through the Earnings Dashboard.</p><h2>New Name, Better Rewards</h2><p>Earlier this year, LendingClub soft-launched its exclusive member rewards program as a separate Chrome browser extension test that was made available to a small subset of customers. Drawing from these learnings,Stackit is LendingClub Bank’s new and improved rewards program featuring a new extension, expanded browser availability, and enhanced account integration that is rolling out to a wider member audience beginning in November.</p><p>Currently, any LendingClub personal loan member can download and start using the new Stackit browser extension. (Users of the old LendingClub Chrome Extension can continue earning cash back through 11/30/22; any amount remaining in users’ accounts after 11/30 will automatically be paid out via PayPal. Members are advised to add the new Stackit Extension to continue earning cash back and rewards, including double cash back, on future purchases.) In addition to Chrome,Stackit expands browser availability to Safari and Edge, and enables members to view recent transactions and cash back earnings inside their LendingClub account instead of a third-party site. Planned rollouts to LendingClub members with Auto, Deposit, and other accounts beyond personal loans are expected, however, timing is still under consideration.</p><p><i>*Double Cash Back Offer on eligible transactions expires 12/31/22. See </i><a href="/legal/terms-of-use"><i>Terms of Use</i></a><i> for full details. Offer is subject to change without notice.</i></p><p>Stackit is a non-deposit product offered by LendingClub Bank.</p>

Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals. 

<p>Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals. However, recent <a href="https://www.fdic.gov/analysis/household-survey/">FDIC research</a> shows approximately 7.1 million Americans are “unbanked,” meaning they do not have a basic checking or <a href="/personal-savings">savings account</a>.</p><h2>Being Unbanked Increases Costs for Families</h2><p>Reasons for being unbanked (and underbanked) vary from not having enough money to meet a minimum balance and high or unpredictable fees, to having a history of credit, ID, or banking problems, and/or a general distrust of financial institutions.As a result, this drives unbanked individuals to expensive, alternative financial outlets—such as check cashers, payday lenders, and pawn shops that charge high fees for financial products and services—to manage their money. </p><p>Such fringe financial “solutions” hold people back from making meaningful financial progress, many of whom are living on low incomes and, likely, already struggling to make ends meet. Without a <a href="/personal-checking/rewards-checking">checking account</a>, these families wind up overpaying for basic financial transactions, making it difficult for them to build savings and assets over time.</p><h2>More Rewarding Banking for More People</h2><p>In light of this, we’re proud to share that recent improvements to LendingClub Bank’s <a href="/personal-checking/rewards-checking">award-winning Rewards Checking</a> has earned us official certification by the national Cities for Financial Empowerment Fund as meeting the BankOn National Standards for trust and affordability for consumer transactional accounts.Key features of our award-winning Rewards Checking account include:</p><h3>Low Minimum Opening Balance</h3><ul><li><p>Access Rewards Checking with an opening deposit of only $25</p></li><li><p>Freedom from Fees Save more of your hard-earned money with no overdraft, monthly maintenance, and incoming wire transfer fees<sup>1</sup></p></li></ul><h3>Unlimited Cash Back</h3><ul><li><p>Earn <a href="/personal-checking/rewards-checking">unlimited 1% cash back</a> on Qualified (signature-based) Purchases when using your Rewards Checking debit card<sup>2</sup></p></li></ul><h3>Free ATM Access</h3><ul><li><p>Enjoy <a href="/help/checking-accounts-faq/how-do-i-earn-atm-rebates-on-my-checking">ATM access with no LendingClub ATM fees</a>, plus get unlimited ATM fee rebates on fees charged by other banks<sup>3</sup></p></li></ul><h3>Get Your Paycheck Early</h3><ul><li><p>Set up direct deposit into your account and you could be eligible to receive your money up to 2 days earlier<sup>4</sup></p></li></ul><h3>Earn Interest</h3><ul><li><p>Earn an APY that’s more than the national average with account balances of at least $2,500<sup>5</sup></p></li></ul><h3>FDIC Insurance</h3><ul><li><p>Rest easy knowing your deposits are FDIC-insured up to the maximum amount allowed—$250,000 per depositor for each ownership category</p></li></ul><h3>Best Online Experience</h3><ul><li><p>Based on our easy-to-use mobile app and award-winning <a href="/personal-checking/rewards-checking">online checking account</a>, NerdWallet named us <i>Best Bank or Credit Union for Online Experience</i></p></li></ul><h2>What Our Members Say</h2><p>It’s important knowing we’re offering products and services that are helping to improve the financial lives and stability of all Americans, including unbanked and underbanked individuals and families, in every community across the United States.Here’s what some of our members have to say about their Rewards Checking experience with LendingCLub Bank:<i>“I never knew how much money I was losing with my old bank whenever I used an ATM. [LendingClub Bank] reimburses fees from ATM’s and now I look forward to getting the cash back every month.”</i></p><p><b>Robin</b>, a LendingClub Bank Member<i>“The rewards checking account with cash back every month has helped me ditch my credit card and debt.”</i></p><p><b>Lauren</b>, a LendingClub Bank Member</p><p>Read more member reviews.</p><h2>Your Financial Well-Being Matters to Us</h2><p>At LendingClub Bank, making <a href="/personal-checking/rewards-checking">checking accounts</a> more rewarding for more people is an example of our belief that financial well-being should be attainable for everyone—not just for those who can afford it. Everything we do is centered around empowering our members to meet their personal financial goals by enabling access to a broad range of financial  products, services, and educational resources, all designed to help them pay less when borrowing and earn more when saving. </p><p><i>Testimonials reflect the real-life experiences of individuals who used our products; however, individual results may vary.</i></p><p><i></i></p><hr/><h4><i>Terms and Conditions</i></h4><p><i>Accounts subject to approval. $25 minimum opening deposit required. See Product Terms &amp; Conditions for additional details.</i></p><p><i>1. Miscellaneous fees may apply. View Product Terms &amp; Conditions for complete details.</i></p><p><i>2. The Debit Card Rewards Program (“Cash Back Rewards”) provides 1.00% </br>cash-back on all Qualified Purchases using a debit card tied to an Eligible Account.</i></p><p><i>Eligible Accounts are: Rewards Checking accounts that meet the following requirements for the calendar month in review:</i></p><p><i>1). Maintain an average monthly balance of at least $2,500.00; or 2). Receives at least $2,500.00 in Qualifying Direct Deposits.</i></p><p><i>Qualifying Direct Deposits are defined as: Recurring Automated Clearing House (ACH) credits, including payroll, pension or government payments (such as Social Security) made by your employer, or an outside agency. We may require documentation to verify that credits are Qualifying Direct Deposits. Qualifying Direct Deposits do not include peer to peer payments or ACH transfers (funds transfers) from your external accounts.</i></p><p><i>Qualified Purchases are defined as: Signature-based purchases made using the debit card </br>tied to an Eligible Account. These are “credit” purchases that can be made in stores and online. To make a signature-based purchase, select “credit” rather than debit at point-of-sale kiosks. The “credit” option is most often pre-selected when making purchases online using a debit card. Online subscription payments may not be considered signature-based purchases. The payment transaction type (signature-based or other) is ultimately decided by the merchant and is based on how the transaction is transmitted at the time of processing. Qualified Purchases do not include: (1) any goods or services purchased that are returned or otherwise credited to your Eligible Account; (2) unlawful purchases; or (3) purchases of currency, cash or cash equivalents (including, without limitation, currency from the U.S. Mint, Travelers Checks, gift cards, cryptocurrency, casino chips, peer to peer payments, prepaid debit cards, account openings, loan payments, or other cash equivalents).</br> </br>We may report the value of Cash Back Rewards to the IRS as required by law. Any client whose tax status would require us to impose tax withholding of any sort will not be eligible for Cash Back Rewards.</br> </br>Accounts are reviewed after the end of each month. Any earned Cash Back Rewards will be credited to your account on or before the 10th calendar day of the next calendar month. The Eligible Account must be open and active at the time the Cash Back Reward is credited.</i></p><p><i>3. LendingClub does not charge a fee for using another bank’s ATM. Plus, get unlimited automatic ATM surcharge rebates for ATM fees other banks charge you. ATM surcharge rebates apply to cash withdrawals from a Rewards Checking account. ATM fees will be rebated at the end of each statement cycle. Excludes international exchange fees. LendingClub makes its best effort to identify those ATM fees eligible for rebate. In the event that you have not received a rebate for a fee you believe is eligible, please contact Customer Service at 800.242.0272. LendingClub reserves the right to modify or discontinue the ATM surcharge rebate program at any time. Out-of-network ATM fees cost $2.50 on average — source: CNBC as of 01/26/2022. If someone were to use an out-of-network ATM 6 times per month at an average fee of $2.50 per withdrawal, they would spend $180 in ATM fees in 12 months.</i></p><p><i>4. Any account features that enable you to receive direct deposits, or that enable direct deposit funds to be made available to you early, are contingent upon and subject to the payor’s support of such features. </i></p><p><i>5. Annual Percentage Yield (APY) accurate as of 8/1/2022. Rate tiers are as follows: 0.00% APY applies to balances of $0.00–$2,499.99, 0.10% APY applies to the entire balance on balances of $2,500.00–$99,999.99, and 0.15% APY applies to the entire balance of $100,000.00 or more. Rates are variable and are subject to change, at the discretion of the bank and without notice, at any time after an account is opened. Fees may reduce earnings.</i></p>

Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.

<p>Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.</p><p>As the leading digital marketplace bank in the U.S. built on the belief that innovative, creative solutions deliver more value and a better experience, we’re always looking for new ways to provide more. In early 2021, LendingClub became a bank holding company operating a national bank, allowing us to expand our products and level the playing field for everyone.  </p><p>“Every day we help members leverage their money so they can earn more when saving and pay less when borrowing,” said Amber Carroll, Senior Vice President of Membership &amp; Lifecycle Marketing at LendingClub. “We&#39;re working to redefine banking, which means ensuring our interests are well aligned with those of our members and introducing new ways to better serve their needs.” </p><p>Since the beginning of the pandemic, how we work, live, and manage our finances has evolved in ways most of us would never have imagined. Increasingly, more Americans across varying credit profiles are struggling to stretch their dollars between paychecks. According to a recent survey from LendingClub and PYMNTS, even among workers earning more than $100,000 per year nearly half are living paycheck to paycheck.  </p><p>At LendingClub, we’re inspired every day by our members who continue to strive for financial well-being during these unprecedented times—such as by consolidating their credit card debt into a single, more manageable payment, refinancing their auto loan to free up room in their budget, or taking advantage of a CD or high-yield savings account to invest in their future. The Club is working hard to help members reach their goals and we’re incredibly proud to help simplify their path. As one of member recently shared: </p><p>“This is the third time I have utilized LendingClub&#39;s great rates and lending plans to assist with home repairs and debt consolidation. Their application and payment processes are quick and simple to use. I have saved so much time and money using this funding!” — Christine, a member from Texas </p><p>We believe everyone deserves a better financial future. If you’re ready to improve your financial well-being and are not already a member of the Club, we can help. From banking smarter with your <a href="/personal-deposits/online-banking">personal checking and savings</a>, to working toward larger financial goals—like <a href="/personal-loan">consolidating debt</a>, <a href="/auto-refinancing">refinancing an auto loan</a>, or making home improvements—you can easily check your rate for a personal loan in minutes, with no impact to your credit score. </p><p>Thanks again to all of our members for helping us achieve this incredible milestone.  </p>

In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 

<p>In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. </p><p>During the webinar, Anuj Nayar, our Financial Health Officer, discussed:</p><ul><li><p>Our journey to get to where we are today </p></li><li><p>Lessons learned from our 15-year history as a fintech pioneer</p></li><li><p>How we’re leveraging our digital marketplace bank to further our mission to help Americans on their path towards financial health</p></li><li><p>We recently reported Q4 2021 and year-end earnings</p></li><li><p>New data on the financial health of U.S. consumers from our latest Paycheck-to-Paycheck report</p></li></ul><p>A historic milestone, as one of the first fintech company to acquire a national bank we’ve paved the way for other fintechs to follow suit. With 15 years under our belt, more than 3.9 million members, and over $70 billion in loan originations, the marriage of LendingClub’s marketplace fintech business with all the benefits of being a bank is fundamentally changing the nature of our business and influencing change across the banking industry as a whole. We’re also creating something new for our members -- a bank that puts the customer at the center of what we do. </p><p><a href="https://vimeo.com/686043451">Check out the video below to learn more.</a></p>

LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  

<p>LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  </p><p>This includes our yacht loan business. Yacht loans are simply not in line with our mission to help <i>everyday </i>Americans on their path to financial health and we plan to grow our auto refinance business to take its place.  </p><p>During the review, we also thoroughly examined relationships and operating activities for the fintech partners. As a result of our review, we are asking certain partners to modify their activities and/or operations to match expectations and contractual commitments, and we have begun exiting certain partners. As part of the ongoing dialogue with these partners, we have discussed transition plans or operational changes that could impact the services available to these partners and their customers.   </p><p>As a pioneer in this space, we have a unique perspective. We operated for 15 years as a fintech with a partner bank model and now we operate as a fintech, a bank, and a partner bank. We work hard at LendingClub to maintain and build a robust, secure, compliant and scalable enterprise. We are guided by our core values, our extensive experience, our deep data set and technology investments, and governed by strong controls, to deliver on behalf of our members, communities, shareholders, partners, and team members.  </p><p><b>These business model changes will have no material effects on our business operations </b>and we plan to report more details when we issue our Full Year 2021 and Q4 earnings in a few weeks. </p><p><i>Scott Sanborn CEO </i> </p><p>LendingClub</p><hr/><p><i><b>Safe Harbor Statement</b></i></p><p><i>Some of the statements above, including statements regarding  the effect on our business operations as a result of the business model changes, are &quot;forward-looking statements.&quot; The words &quot;anticipate,&quot; &quot;believe,&quot; &quot;estimate,&quot; &quot;expect,&quot; &quot;intend,&quot; &quot;may,&quot; &quot;outlook,&quot; &quot;plan,&quot; &quot;predict,&quot; &quot;project,&quot; &quot;will,&quot; &quot;would&quot; and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include those factors set forth in the section titled &quot;Risk Factors&quot; in LendingClub&#39;s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, each as filed with the Securities and Exchange Commission, as well as in LendingClub&#39;s future filings made with the Securities and Exchange Commission. LendingClub may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. LendingClub does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. </i></p>

Related Impact

{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.

<p>A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.</p><h2>What is Revolving Credit?</h2><p>Revolving credit is a type of credit that lets you borrow money as needed up to an amount called your credit limit. Borrowing reduces your available credit, and repayment replenishes your credit limit (minus the interest and fees charged). Revolving credit does not have a fixed number of payments. This differs from installment credit which lets you borrow a lump sum and pay it back over a set number of fixed monthly payments.</p><h2>How Does a Revolving Line of Credit Work?</h2><p>It helps to think of a revolving line of credit as a renewable source of funds within a set credit limit. The lender sets the credit limit upon application approval. You can use as much of your credit limit as you need, paying interest only on the money you borrow. As you repay what you’ve borrowed (plus interest and fees), your available credit replenishes, and you can continue borrowing against your revolving line up to the credit limit.</p><h3>Types of Revolving Credit</h3><p>The most common revolving credit products are lines of credit and credit cards.</p><p><b>Lines of credit </b>come in different forms, including home equity lines of credit (HELOCs), personal lines of credit, and business lines of credit. Credit lines are typically issued by banks and credit unions, and generally you can draw on your line using special checks, ATM, telephone, and online banking. You’ll only pay interest on the money borrowed from your line of credit. </p><p>Some lines of credit may be limited in how the funds can be used, such as only for balance transfers from credit cards.</p><p><b>Credit cards</b> are revolving credit accounts that, unlike lines of credit, require you make a purchase or cash advance to access your credit line. While card issuers reserve the right to change your credit limit, you can access your available credit as long as your account is in good standing. When you make purchases on a credit card, you can repay the balance in full by the end of your billing cycle to avoid interest charges and fees. If you don’t pay your outstanding balance in full,the balance “revolves,” or rolls over, to the next month and will accrue interest until paid in full. </p><p>Note: Both lines of credit and credit cards can be secured or unsecured. Secured accounts require collateral; unsecured accounts do not. For example, a HELOC uses your home as collateral. Credit cards are typically unsecured, but some secured cards require cash deposits as collateral.</p><h3>Why is Revolving Credit Important?</h3><p>Revolving credit offers greater borrowing flexibility than installment credit. For instance, if you get a $10,000 installment loan for a home remodeling project, you typically receive all the money at once and must start repaying on the entire loan balance immediately plus interest on that amount—even if you don’t use the funds right away. If you need more money, you’ll have to apply for a new loan.</p><p>On the other hand, if you get a line of credit or credit card with a $10,000 limit, you can draw on it as needed—say, $1,000 in January, $2,000 in April and $1,500 in June­—and interest will accrue only on the amounts you borrow. As you pay back what you’ve borrowed, your available credit is restored up to your credit limit, so you can make future purchases without needing to apply for additional credit.</p><p>Since it doesn’t require fixed monthly payments, revolving credit can also offer greater payment flexibility than installment loans. If money is tight in a particular month, you have the option of only making the minimum payment on a revolving account, potentially making it easier to meet other financial obligations.</p><p>Revolving credit can also serve as a financial cushion. Even if you never use it, it’s there in case you need quick access to small amounts of cash in an emergency.</p><h3>What Are the Risks of Revolving Credit?</h3><p>Revolving credit has some drawbacks you should be aware of.</p><p><b>Collateral risk:</b> If you fail to make payments on a secured revolving credit account, you could lose your collateral. With a secured credit card, that loss could be a few hundred dollars. With a HELOC, you stand to lose your home.</p><p><b>High interest rates:</b> Revolving credit typically has higher interest rates than installment credit. Interest rates for most credit cards and many lines of credit are also <i>variable</i>, meaning they can change over time based on economic conditions.</p><p><b>Excessive debt: </b>If you only make the minimum payment on a credit card, you could accumulate a large balance. Credit card interest is typically <i>compounded</i>, meaning interest accrues on both the balance of your purchases and on previously applied interest. Compound interest can cause your balance to snowball until it’s difficult to pay down.</p><h3>How Does Revolving Credit Affect Your Credit Score?</h3><p>Revolving credit could help your credit score in several ways.</p><ul><li><p><b>On-time payments:</b> Making revolving credit payments on time could boost your credit, since timely payments are a major factor in your FICO®  Score.</p></li><li><p><b>Responsible credit utilization:</b> Keeping your revolving credit balance below 30% of your credit limit could increase your credit score.  Ideally, you would pay your credit card balances in full each month.</p></li><li><p><b>Diverse credit mix:</b> A variety of accounts, including installment credit and revolving credit, could show lenders you can successfully manage different types of debt.</p></li></ul><p>Revolving credit could also have negative impacts on your credit score when not managed responsibly. </p><p><b>Late payments: </b>Missing payments could have a significant negative impact on your credit score. Setting up auto-payments on your revolving credit accounts can help ensure you never miss a due date.</p><p><b>Excessive credit utilization:</b> Consistently carrying balances that exceed 30% of your available credit limit can reduce your credit score. </p><p><b>Hard inquiry:</b> When you apply for revolving credit, creditors perform a credit check called a <i>hard inquiry</i>, which could cause a small, temporary dip in your credit score.</p>

{noun} The total annual cost to borrow money, including fees, expressed as a percentage.

<h2>What is Annual Percentage Rate (APR)?</h2><p>Annual percentage rate (APR) is the cost of borrowing money on an annual basis. APR is expressed as a percentage, to make it easier to compare the cost of credit. </p><p>APR and interest rate are sometimes used interchangeably, however, APR and interest rate are different. APR includes both interest plus fees applied over the course of a loan. Because APR is a more complete measure of the cost of credit, it is usually higher than the interest rate.</p><h2>How is Annual Percentage Rate Calculated?</h2><p>To calculate APR on a loan, you’ll need to know a few other numbers first:</p><p><b>Interest:</b> The total interest charges paid over the life of the loan, also known as the cost of borrowing money.</br><b>Fees:</b> Review the terms and conditions of the loan to find the fees that apply to your loan. Fees vary by loan type and lender. </br><b>Principal:</b> The original loan amount.</p><p><b>Days in the Loan Term (n):</b> Since APR measures the annual cost of borrowing money, multiply 365 (days) by the number of years in the loan term. For loan terms under one year, use the number of days.</br></br>The formula to calculate APR is: </p><img src="//images.ctfassets.net/orqped9h4wgz/6cJEgR4ftSGoIaSuKLlek6/a3ce252e07839182be4e7550cd09e08a/Formula-Calculate-APR.png" alt=""/><p>The steps to calculate APR are:</p><ol><li><p>Find the interest charges</p></li><li><p>Add the fees</p></li><li><p>Divide the sum by the principal balance</p></li><li><p>Divide by the number of days in the loan’s term</p></li><li><p>Multiply by 365</p></li><li><p>Multiply by 100</p></li></ol><h3>Credit Card APRs</h3><p>Credit card APRs do not reflect fees and since a credit card has no set loan amount or fixed repayment term, its APR is simply its interest rate.</p><p>Under the Truth in Lending Act, passed in 1968, lenders and other financial institutions must disclose APR when offering credit. </p><h2>Why is Annual Percentage Rate Important?</h2><p>Knowing the annual percentage rate helps you understand the true cost of borrowing. </p><p>For example, all lenders are required to disclose APR, which makes it easier to compare loans from different banks and make a more informed borrowing decision.</p><h2>Are There Different Types of APRs?</h2><p>There are different categories of APRs depending on the type of financial product.</p><h3>Credit Card APRs</h3><p>Credit cards have several APRs that may apply to different transactions or account activities.</p><ul><li><p><b>Purchase APR: </b>The rate you pay for purchases. </p></li><li><p><b>Balance transfer APR: </b>The rate applied if you use a card to pay down balances on other credit cards or loans. </p></li><li><p><b>Cash advance APR:</b> The rate charged on ATM withdrawals or cash-equivalent transactions, like money-order purchases. </p></li><li><p><b>Introductory APR: </b> A promotional interest rate for a limited period of time that is lower than the card&#39;s regular APR, sometimes as low as 0 percent APR.</p></li><li><p><b>Penalty APR</b>:  A higher-than-normal rate that results from violating a card’s terms of service. </p></li></ul><h2>What’s the Difference Between Fixed and Variable APRs?</h2><p>APRs can be fixed or variable. A fixed APR remains unchanged for the life of your loan. A variable APR fluctuates in sync with a published market index, like the U.S. Prime Rate.<b>   </b></p><h3>Adjustable-Rate Mortgages</h3><p>Home loans with variable interest rates are called adjustable-rate mortgages (ARMs). With an ARM, your APR is fixed for an initial term (typically one, three, or five years, but sometimes as long as 10 years), then resets every six or 12 months, based on market rates. </p><h2>What Affects APR?</h2><p>The APR you&#39;re offered depends on a few factors: </p><ul><li><p>Whether a loan or line of credit is secured or unsecured</p></li><li><p>Current economic conditions</p></li><li><p>Your credit history</p></li></ul><p>Lenders may also consider your income and assets, down payment, and where you live when determining your APR.</p><h2>How Do You Get a Good APR?</h2><p>Getting the best APR on a loan or credit card typically requires shopping around. </br></br>Start by prequalifying with multiple lenders. Prequalifying is a quick process where you provide some basic information about your income and borrowing goal. Then, lenders respond with a preliminary, non-binding estimate of the loan amount and APR. This is typically done through a soft credit check, which doesn’t impact your credit.</p><p>Then, compare the preliminary offers and submit a full application to your lender of choice. With your detailed financial information and a hard credit inquiry, which will impact your credit, lenders can make a formal loan offer that includes your APR, fees, and repayment terms. </br></br>If you’re unhappy with the terms you’re offered (or if lenders decline your applications), your credit history might be the culprit. If this is the case, you can work to pay down your existing debts and bring late payments current, which can improve your credit score and chances for approval over time.</p>

{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 

<h2>What Is Accrued Interest? </h2><p>Accrued interest is the amount of unpaid interest that has accumulated as of a specific date, either on a loan or credit card you’re repaying or on an interest-bearing account or investment.  </br> </br>Accrued interest can be owed or earned. For example, with a loan or credit card, it’s the amount of interest (payment you owe) that has been incurred since you made your last payment. With an interest-bearing account or an investment, such as a bond, it&#39;s the interest (income you earned) that has accumulated since the last time you received a payment from the financial institution or bond issuer. </p><h2>How Does Accrued Interest Work? </h2><p>The way accrued interest works depends on several factors, including the type of account, the balance or principal, the interest rate, timing, and whether you are borrowing money (such as with credit cards, auto loans, and personal loans), or earning money (such as with interest-bearing checking or savings accounts).  </p><h2>Accrued Interest on Loans </h2><p>Personal loans, auto loans, and other types of debt charge interest to their borrowers. Most lenders use the simple interest method of accounting, which means that interest that accrues each day is based only on the principal balance of the loan and doesn&#39;t compound on previously accrued interest. </p><p>For example, on a personal loan, the interest on your debt accumulates daily based on your current loan balance and interest rate.  When you make a loan payment, a portion of your total payment amount goes toward the interest that has accrued since your last payment and the remainder goes toward paying down the principal balance of your loan. </p><p>If you have a fixed interest rate, the daily interest amount will go down over time as your principal amount owed decreases with on time payments. With variable rate loans, the amount of interest that accumulates can fluctuate along with the loan&#39;s interest rate, however there&#39;s generally a downward trend with timely payments.  </p><p> </p><h2>Accrued Interest on Bank Accounts </h2><p>Generally, with interest-bearing deposit accounts, such as a high-yield checking or savings account, interest typically accumulates daily and is paid out monthly. The amount of interest that accrues is based on your balance and the account&#39;s annual percentage yield or APY (which may adjust higher or lower as rates rise or fall) and compounding interest. The higher the APY and your balance, the more you&#39;ll earn. </p><p>Also, most banks and savings institutions will compound the interest you earn, usually daily. This means that the interest that accrues each day is based not only on your principal account balance but also on the interest that has accumulated since the last payment.  </p><p>For example, let&#39;s say you have a $10,000 balance in a savings account with an interest rate of 5%. On the first day, your balance earns $1.37 in interest, and that gets added to your interest-earning principal—compounded—at the end of the day. That happens every day. </p><p>By the end of the year, your principal will have grown to $10,512.67—$500 in interest on your principal balance, and $12.67 from the interest earned on your interest.  </p><p> Calculation for daily interest rate: </p><p>0.05 / 365 = 0.000136986 </p><p> Calculation for first day’s interest: </p><p>0.000136986 x 10000 = 1.36986 </p><p> While your interest rate is 5% compounded daily; your total return including compounding, or <a href="https://blog.lendingclub.com/apr-vs-apy-whats-the-difference"><u>annual percentage yield</u></a>,  is 5.1267%. </p><p>Compounding interest increases your savings over time, especially in a rising interest rate environment. </p><h2>Accrued Interest on Bonds </h2><p>If you&#39;re investing in bonds, interest is typically paid out every six months, and the amount that accrues between payments depends on the face value of the bond and its interest rate. This calculation is known as yield to maturity. </p><p>Interest on bonds does not compound; that is, you don’t earn interest on your interest. </p><h2>How Accrued Interest Affects Borrowers </h2><p>If you borrow money, understanding accrued interest gives you an idea of how your loan&#39;s costs are incurred. As you make your regular monthly payments, for instance, the amount of interest that accumulates over time decreases. And if you make additional principal payments on top of your regular payments, you can reduce how much interest accrues even more.   </p><p>Keep in mind that, if you make an extra payment on a loan the lender may use some of that money to pay off the interest that has accrued since your last regular payment unless you specify otherwise. You can request that the lender put the full amount of your additional payment toward the principal balance, saving you more money on interest in the long run. </p><p>Understanding how accrued interest works is particularly important if you have student loans. While college students aren&#39;t typically required to make monthly payments while they&#39;re still in school, interest accrues from the moment the loans are disbursed.  </p><p>For borrowers with federal subsidized loans, the federal government will typically pay interest that accrues while they&#39;re in school and during future deferment periods. If you have unsubsidized loans or private student loans, all the interest that accumulates while you&#39;re in school (and during periods of deferment or forbearance) is added to your balance once repayment begins.  </p><p>If you want to avoid a growing balance, consider making interest-only payments while you&#39;re still in school. </p><h2>How Accrued Interest Benefits Savers </h2><p>If you have an interest-bearing deposit account, look into how often (daily, weekly, monthly, quarterly, semi-annually, annually) your financial institution compounds the interest that accrues in your account. The more frequently interest is compounded (e.g., daily vs. quarterly) makes it possible for you to earn more interest more quickly. </p><p>And if you&#39;ve invested in bonds, understanding how accrued interest works can help ensure that you get the money you&#39;ve earned, especially if you sell the bond between scheduled interest payments. For example, if you sell a bond three months after your last payment, you won&#39;t receive the amount of interest that accrued during that time. Because the buyer will receive the full semi-annual (every six months) interest payment despite only owning the bond for three months, they should pay you the amount that has accrued since your last payment on top of the price of the bond. </p><h2>How Is Accrued Interest Calculated? </h2><p>On loans, lenders generally calculate interest on a daily basis using either a 360-day or 365-day year. The lender will divide the loan&#39;s interest rate by one of those numbers to determine your daily interest rate, which it then applies to your balance. </p><p>On interest-bearing deposit accounts, interest generally accrues daily. Depending on how often your financial institution compounds interest, the amount that accrues each day may be calculated based on the principal balance plus previously accrued interest. </p><h2>What Is an Example of Accrued Interest?  </h2><p>Let&#39;s say you have a personal loan with a $20,000 principal balance and a 12% interest rate. To calculate the amount of interest that accrues every day, you&#39;ll do the following equation: </p><p>Calculation for daily interest rate: </p><p>0.12 / 365 = 0.000328767123288 </p><p>Calculation for daily accrued interest: </p><p>0.000328767123288 x $20,000 = $6.58  </p><p> In other words, you&#39;ll have $6.58 in daily accrued interest. Over 30 days, that amounts to $197.40.</p>

A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.

<p>A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.</p><h2>What Is a Charge-Off?  </h2><p>A charge-off on your credit report indicates the financial institution or creditor has written the account off as a loss and has stopped attempting to collect on a debt that you owe. However, a charge-off does not mean your debt is forgiven—it may be transferred to a collection agency or sold to a debt buyer. As long as the debt remains outstanding, you&#39;re still responsible to pay it. </p><h2>How Does a Charge-Off Work? </h2><p>When you miss a payment on a loan or credit card or have a bank account with a negative balance, the creditor or financial institution will attempt to collect the amount you owe. At some point, the creditor may determine the debt is uncollectible and decide to charge it off. This means the creditor has written off the remaining balance as a loss.  </p><p>At this point, the creditor will report the account as “Charged Off” to the credit reporting agencies which will appear on your credit reports along with the account balance. If the charge-off is legitimate and you can&#39;t convince the creditor to remove it, a charge-off can remain on your credit reports for up to seven years after your first missed payment. </p><p>Once a creditor has charged off a debt, they may decide to sell it to a debt buyer or transfer it to a debt collection agency for pennies on the dollar. If this happens, your account will be closed, interest will stop accruing on your balance, and your credit report will reflect that the account was &quot;Charged Off.&quot; However, you will still be liable for paying off the debt to the debt collection agency. Additionally, the collection agency may report a collection account for the same debt, further impacting your credit score. </p><h2>Will a Charge-Off Impact Your Credit Score? </h2><p>Your payment history is the most influential factor in your FICO credit score. Missing just one payment could have a significant negative impact on your credit score. </p><p>If a debt balance remains unpaid long enough for the creditor to stop attempting to collect payment, the worsening delinquency and subsequent charge-off could have a long-term  and far reaching impact to your credit score.  </p><p>For example, a low credit score and history of nonpayment may make it more difficult to get approved for credit in the future. It may also impact your ability to get approved for a residential lease or to qualify for lower interest rates on auto or homeowners insurance.  </p><h3>How Can You Repair a Charge-Off? </h3><p>The best way to repair a charge-off is to prevent it from happening. If you start missing payments, don&#39;t ignore the situation. Contact your lender and ask if there’s anything that can be done to help you avoid a charge-off situation. </p><p>In the event your debt is charged off, as long as there is a balance, you’re still responsible for repayment which is why you should consider ways to pay off the debt as soon as possible to avoid having it go to collections. Even if you cannot pay off the debt in full, you may want to consider negotiating a payment settlement with the creditor for less than what you owe or, if necessary, having the debt discharged in bankruptcy.  </p><p>In some cases, you may be able to negotiate with the lender to remove the charge-off from your credit report in exchange for full payment—a process known as “pay for delete.” Even if you can&#39;t get it removed, paying off the balance could potentially reduce the impact to your credit score.  </p><p>If the creditor does sell the debt to a collection agency, you&#39;ll face more attempts to collect the amount you owe. Some debt collectors may even resort to lawsuits to force collection through a court order. </p><h3>How Can You Limit Charge-Off Damage? </h3><p>The timeframe for when a creditor decides to charge-off an account ranges from 120 to 180 days from your initial delinquency date. You&#39;ll typically receive letters and phone calls reminding you of the past-due payment, urging you to get caught up. Don&#39;t ignore the creditor—this is the best time to talk to the lender to see if you can avoid a charge-off. </p><p>If you&#39;ve had an account charged off recently, contact the creditor as quickly as possible to verify the accuracy of the account details and look for opportunities to pay off some or all of the debt to avoid transfer to a collection account and further damage to your credit score. </p><p>In some cases, a charge-off could be reported in error. If this happens, it could damage your credit score, so you should act quickly to dispute the negative item with the credit reporting agencies. As long as the dispute isn&#39;t frivolous, the credit bureaus are required to investigate it and remove or update the information if it&#39;s found to be innacurate.  </br> </br>To contact the credit bureaus:  </p><ul><li><p><a href="https://www.equifax.com/personal/credit-report-services/credit-dispute/"><u>Equifax</u></a> </p></li><li><p><a href="https://www.experian.com/contact/personal-services-contacts.html"><u>Experian</u></a> </p></li><li><p><a href="https://www.transunion.com/credit-disputes/dispute-your-credit"><u>TransUnion</u></a> </p></li></ul><p>If the creditor decides to charge-off your account, it&#39;ll only report only to the credit reporting agencies that it normally reports to. For many lenders, it&#39;s all three, but some lenders may only report to one or two of the major credit bureaus. </p>

{noun} An interest rate that remains the same for a set time, usually for the life of the loan.

<p> An interest rate that remains the same for a set time, usually for the life of the loan.</p><h2>What Is a Fixed Interest Rate?</h2><p>A fixed interest rate is an interest rate that remains the same for a set time, usually for the life of the loan. With fixed-rate financing, borrowers can enjoy payment stability and avoid the risk of a variable interest rate—which may increase substantially over time, especially in rising interest rate environments.</p><h2>How Do Fixed Interest Rates Work?</h2><p>When you take out a loan with a fixed interest rate, your loan terms will define the fixed rate period.</p><p>Generally, for financial products like fixed rate mortgages and personal loans, your interest rate will remain the same throughout your loan term, as will your monthly payment amounts.</p><p>For financial products such as adjustable rate mortgages, the interest is variable, which means it can change periodically. Often, an adjustable rate mortgage (ARM) will have an initial period where the rate is fixed. After the fixed period, your interest rate may stay the same or it may adjust based on prevailing interest rates at the time.</p><h2>What Is the Difference Between Fixed and Variable Interest Rates?</h2><p>Fixed interest rates generally won’t change—either for the life of your loan or during a predetermined fixed period. In contrast, variable interest rates fluctuate based on market conditions and may change at any time.</p><h3>What Benefits Do Fixed Interest Rates Offer?</h3><p> Having a fixed rate loan offers several benefits for your finances.</p><ul><li><p><b>Financial Predictability. </b>A fixed interest rate makes it easier to plan your finances since your monthly payments don’t fluctuate over the fixed period, usually the life of the loan. Such predictable payments can  help you more easily manage your budget and alleviate stress.</p></li><li><p><b>Eliminate Interest Rate Risk. </b>With a fixed interest rate, you don&#39;t have to worry if interest rates start to increase in a volatile economy. Compared to loans with variable rates, a fixed-rate loan with a lower interest rate could save you money in a rising interest rate environment.</p></li><li><p><b>Potentially Lower Borrowing Costs. </b>With fixed-rate loans, you’ll know your total borrowing costs—including interest and fees—before you sign your loan documents. With variable-rate loans, it’s difficult to calculate your total borrowing costs since your interest rate may change substantially over time.</p></li></ul><h3>What Are the Drawbacks to Fixed Interest Rates?</h3><p>While a fixed interest rate can help you plan your finances for the long term, there are a few drawbacks to consider.</p><ul><li><p><b>Potentially Higher Rates. </b>Adjustable-rate financial products often have lower interest rates for an initial, introductory fixed period which may temporarily lower your cost to borrow. Fixed-rate products don’t offer such “teaser” rates.</p></li><li><p><b>Risk in Decreasing Interest Rate Environments. </b>If interest rates start going down, you may end up paying more to borrow on a higher interest rate than if you took out a new loan.</p></li><li><p><b>Refinancing Costs. </b>Even if you decide to refinance to get a lower rate, refinancing costs may outweigh the savings you may realize, and the process can be time-consuming. It’s  important to compare the total cost of borrowing of your existing versus a potentially new loan before making a decision.</p></li></ul><h2>What Can You Do to Get a Good Fixed Interest Rate?</h2><p>Generally, having a high credit score and a demonstrated track record of responsible debt management can help you land a lower fixed interest rate. In contrast, if you have a low credit score and a spotty history of on-time payments, the lender may view you as a higher-risk borrower and may not offer you the best fixed interest rate they have available.</p><h2>Can You Switch from a Variable Interest Rate to a Fixed Interest Rate?</h2><p>In most cases, you can&#39;t switch from a variable to a fixed interest rate on an existing loan. While you may be able to refinance your loan—either with your current lender or a new one—and move to a fixed-rate loan that way, it’s important to consider how well you would be able to cope with economic uncertainty. A low variable rates may be tempting initially, but should economic conditions sour and rates begin to rise rapidly, it may be difficult to find a good fixed rate when you want one. Or you may experience an unexpected obstacle, like job loss, that could make refinancing into a fixed interest rate loan difficult.</p><h3>Are Credit Card Interest Rates Fixed?</h3><p>Generally, credit card interest rates are variable, not fixed.</p><h3>Are Student Loan Interest Rates Fixed?</h3><p>It depends on the type of student loan. Student loans like Perkins Loans and PLUS Loans have fixed interest rates. Many other direct federal student loans—both subsidized and unsubsidized—have fixed rates as well.</p>

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