Higher prices?  Here are money tips to deal with inflation

Higher prices? Here are money tips to deal with inflation


Inflation has slowed, but consumers still face generally higher price levels than existed a few years ago. This puts stress on household budgets, often forcing people to borrow more. Loan delinquency rates are increasing, although they remain at fairly modest levels.

So it is safe to conclude that inflation and debt levels will remain current for a longer time. Here are some final tips for dealing with debt and living costs:

Pay attention to vehicle insurance

Americans have struggled with rising costs across the board in recent years, but few categories have recently surpassed auto insurance.

Nationally, comprehensive coverage policies now average $2,543 a year, according to a new Bankrate.com study. That’s $529 or 26% more than last year, at a time when overall inflation has been closer to 3%. Arizona motorists pay about the same, or an average of $2,535.

To save money, it is smart to compare policy prices perhaps once a year or so. Other factors that can help keep insurance prices down include choosing high deductibles and maintaining a clean driving record: few, if any, accidents, speeding tickets, lapses in coverage or, especially, citations for driving under the influence.

Bankrate.com also recommends getting an insurance quote before buying a new vehicle, as more expensive and flashier models can be more expensive to cover. And pay attention to maintaining or improving your credit score.

Appraisal is a tool insurers use to set rates and, despite a controversial reputation, is allowed in Arizona and most states.

But while credit scores are built to predict the chances that a person will become delinquent on credit, insurance scores focus more on predicting losses or claims and thus are not typically used in isolation. Scores on the widespread FICO scale range from poor (579 and below), fair (580 to 669), good (670 to 739), very good (740 to 799), and excellent (800 to 850).

Avoid overdraft fees

Consumers under pressure from inflation and other costs sometimes incur overdraft fees to make payments, which can get expensive.

Overdraft fees are charged by banks and credit unions that temporarily cover a transaction when consumers withdraw from their account.

Some institutions also impose insufficient funds fees when they refuse to cash a check that would result in a negative balance on an account. Most of the fees were charged for transactions of $24 or less, and were mostly borne by lower-income consumers, according to the federal Consumer Financial Protection Bureau. If the proposal is implemented, the agency expects bank and credit union customers could save $2 billion a year.

Overdraft fees are incurred by a relatively small proportion of bank customers, although these are often the people who struggle the most.

“Many banks continue to supplement their profits by charging high overdraft fees to those least able to afford it,” said Chuck Bell, director of the advocacy program at Consumer Reports, who has studied the issue. “Bank overdraft services are basically short-term lending programs with extremely high interest rates.

However, the federal Consumer Financial Protection Bureau has proposed more protections. The agency could require banks and credit unions with more than $10 billion in assets to disclose overdraft fees expressed as an interest rate so consumers can better understand the costs that way. The proposal would also give big banks the option to charge a fee in line with their current costs, typically between $3 and $14.

The American Bankers Association claims the new regulations aren’t necessary, accusing the Consumer Financial Protection Bureau of creating a bank fee “that the bureau itself accepts for few — if any — banks.”

Pay off credit card balances

Americans continue to borrow across the board, and more strains are emerging. Total household debt hit $17.5 trillion in the fourth quarter, with delinquency rates rising, the Federal Reserve Bank of New York reported. Mortgages make up most of the debt, but credit card and auto loan balances are becoming more problematic.

About 0.8% of mortgages became 90 or more days delinquent during the fourth quarter, compared with 2.7% of auto loans and 6.4% of credit cards.

“This signals increasing financial stress, particularly among younger and lower-income households,” Wilbert van der Klaauw, economic research adviser at the New York Fed, said in a prepared statement.

Roughly half of all households pay their credit card balances in full, but high interest rates are burdening those who can’t. “High inflation and high interest rates are a big part of the story,” said Ted Rossman, senior industry analyst at Bankrate, which puts the average credit card rate at a record 20.74%.

It urges consumers in debt to pay off outstanding card balances. A tip worth considering: Look for balance transfer offers. Some card companies will let you move and consolidate higher-cost debts into accounts that offer up to 0% introductory fees for as long as 21 months.

Compare your budget with your area

Americans tend to talk about inflation as if it were a monolithic number. However, living costs vary widely.

To illustrate regional differences — and help people assess whether their budgets are in line with their neighbors’ — the Economic Policy Institute has unveiled a household budget calculator with 2023 data for all counties and areas of metro throughout the country. The calculator estimates seven categories of basic expenses — housing, food, transportation, child care, health care, taxes and other basic needs — for 10 types of families (one or two adults with zero to four children).

San Francisco topped the list as the most expensive metro area with a base budget of $181,277 per year for a two-parent, two-child household. Holmes County, Mississippi, had the lowest average spending of $76,455 for the same household configuration.

In Arizona, the same budget in metro Phoenix would run $107,866 — higher than Tucson ($93,043) but lower than Flagstaff ($116,510).

Contact the writer at [email protected].

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