The Weekly Commentary - 06/14/2021

Millions of Americans Pay Off Large Amounts of Credit Card Debt

The pandemic has been hard on many households’ finances as well as mental health. Dealing with the lockdown restrictions over the last year and the never-ending uncertainty that COVID-19 has provoked has been tough. However, for some, there are some glimmers of hope. One such piece of news is that millions of Americans have been able to pay off large amounts of credit card debt.

The reason being is that many Americans, when confined to their homes, simply were not using up as much of their income. As a result, they were able to pay off more of their expensive credit card debt. Given some of the high rates that credit card bills use, credit card debt can often be something difficult to break free from if only smaller payments are ever made.

Now, in the face of less travel, less commuting and less opportunity to spend on leisure activities, many households are able to make larger payments. In doing so, they have reduced the amount of interest they pay each month, making paying off a credit card entirely even more achievable. Plus, with the stimulus checks that the Government distributed, many Americans were able to use that cash to help pay off their credit card debt. It means that many Americans are able, now, to make the most of the benefits that the best credit cards have to offer, as opposed to being shackled to never-ending debt repayments.

The New Global Corporation Tax Floor Should Help Personal Finances

Those interested in investing – either with a lump sum or on a regular basis – will have been curious about the implications of the new global corporation tax floor that the G7 countries have recently agreed to. The new tax level, agreed as a minimum of 15%, will actually mean that many multinational companies will pay more tax. Those multinational companies will be the likes of Facebook or Amazon – ones that many investors will have in their portfolio as a way to help protect their capital and boost their personal finances.

Investors are therefore right to be curious and hesitant about the ramifications of such a historic action. On the face of it, many may think it will hurt the investment potential in these companies if they are forced to pay more tax. However, the hope of Governments in the G7 is that tax is paid more fairly. Plus, hopefully, there will no longer be a race to the bottom for countries with self-declared corporate tax rates which are consistently undercutting each other. For example, in Ireland, where Apple reports a lot of its profits, the tax rate is just 12.5%.

And, arguably, that will be better for the global economy and Americans’ personal finances as a result. By having more tax receipts due to a fairer way of paying tax, Governments will be able to channel that money back into the wider economy. For instance, here in the US, the administration is currently thrashing out a trillion-dollar deal that will be spent on infrastructures such as improving internet connectivity and roads. That will hopefully be paid by higher receipts from corporations, but will actually help those corporations like Amazon – who are so reliant on the internet and the highway system to deliver goods. Many, may therefore feel that multinational corporations will become an even more interesting investment opportunity.

IRS Notify Those That can Improve Their Household With Child Benefit

While many household finances improved over the pandemic due to fewer outgoings, other households were obviously hit hard due to a heavily reduced income. To help those faced with such hardship, the White House announced changes to who could receive child benefit and how much that child benefit would be.

And now, the IRS is actively notifying those households who will benefit from those changes to ensure that they are making the most of the scheme. It means that eligible households will now receive $250 a month for older children and $300 for children under 6. Households will receive half of their total payments in advance from July to the end of December.

The IRS is using a person’s 2020 federal tax return and income to calculate if a person is eligible for the new credit or not. The hope is that 88% of all US kids will be captured under the scheme – no doubt helping millions of households who are currently struggling.

Most Fixed Mortgage Rates Rise

One way that households start to feel a difference in their overall monthly budget is when their mortgage payments go up or down. Many individuals try to change their mortgage when they are eligible in the hope that they can make use of lower interest rates. However, this week, those who were hoping to reduce their mortgage payments may be frustrated to find that most fixed rates rose.

That, however, does not necessarily mean that changing is not a beneficial option. If the mortgage rate offered by a provider is still lower than your current fixed rate, it can still mean a big reduction in your mortgage payment. This week’s rise will simply have meant you could have lowered it further if you had chosen to remortgage last week. Refinancing your mortgage can often feel like an intimidating action, but even when mortgage rates rise, it does not necessarily mean you are automatically getting a bad deal. Just not the best possible one had you acted earlier.