According to IBM’s annual Cost of a Data Breach report, the average cost of a data breach to an organization in 2021 was 4.24 million dollars. That’s the highest average figure in its 17-year history. Most of these breaches were the result of compromised user credentials (where an attacker is able to gain unauthorized access to an account) and are often more costly where remote working is involved.
cyber attack
These breaches aren’t just costly for large enterprises, though. Many small organizations fail to recover from a serious data breach (where the average cost is just under $700,000), with 60% of them going out of business within 6 months of an attack.
But of course, we can also fall victim to cyber attacks as individuals, and the cost to us can be significant, too. If you’ve been unlucky enough to have been a victim of a data breach, or (worse), identity theft, you’ll know that you can lose eye-watering and potentially crippling sums: this hacking victim lost over $13k in 2020.
But when we talk about the cost of a cyber attack to an individual, we’re not talking simply about financial losses.
How to Avoid a Cyber Attack
Psychologically, the after-effects of a cyber attack can be damaging. The feeling that you’ve been manipulated by a stranger (and your personal data has been ‘invaded’) can be deeply unsettling. It can lead to a serious loss of confidence, and make you increasingly wary of trusting others. It can cause embarrassment, too, as a victim of a hack can be made to feel as if it’s their fault.
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
In the most extreme cases (where a cyber attack has led to a significant loss of funds or even the loss of a job) the effect can be even more harmful, leading to stress, anxiety and even depression. Whatever the financial cost of an attack, the emotional cost is often far more significant in the long run.
Fortunately, there are a number of steps you can take to secure your data and ensure you’re aware of the threats you might face while online.
Check If Your data Is at Risk
Without knowing it, your data might have already been involved in a breach. A breach usually occurs when a hacker gains access to the database of a service or company which contains users’ private information, including (but not limited to) usernames, passwords, email addresses and, in the worst cases, bank account details. If you’ve been involved in a data breach, some of your personal information might have been made public without you realizing, which could put you at risk of identity theft.
But don’t panic. You can check if your email address or phone number has been exposed in a data breach by going to Have I Been Pwned. If any of your accounts may have been compromised, change those passwords immediately, and make sure you’re not reusing the same passwords across multiple accounts.
Use Strong Passwords
Speaking of passwords, nearly a quarter of Americans have admitted to using a password like “password” or “123456”. These should clearly be avoided, as they’re easily guessable and won’t take long for a hacker to crack. The longer and more complex a password is, the stronger it is. You can check the strength of your passwords at Security.org.
Using a “passphrase” (a series of unrelated words with spaces in between) is often more effective than using a simple combination of letters and numbers, as these can be harder to crack. This can help to protect your accounts from threats like brute-force attacks, in which attackers will submit vast numbers of possible passwords in an effort to guess correctly.
Protect Your Website(s)
This action may not apply to you, of course — but if you happen to run a website (for a small business, perhaps, or even just a hobby such as blogging) then your personal information is inextricably linked to it, and it can be a huge point of vulnerability. If someone gains access to it through a CMS exploit or a comparable weakness, they can learn your passwords, uncover private information, or even hold the site hostage in an effort to extort you.
Keeping extortion efforts at bay is largely a matter of investing in technical safeguards. Top managed hosting platforms are particularly good at keeping ahead of potential attackers, and some (e.g. Cloudways with its 2022-launched Cloudflare CDN integration) are investing in native features that make it all but impossible for run-of-the-mill hackers to gain access. Overall, though, the biggest thing you can do is refrain from storing any sensitive information on your website. Anything intended for public viewing inevitably makes a bad storage vault.
Beware of Suspicious Emails
One of the most common ways individuals fall victim to cyber crime is through phishing attacks, a type of ‘social engineering’ where an attacker sends a fraudulent email to an intended victim enticing them to click a suspicious link or hand over personal information. Phishing emails often appear as though they’re from a legitimate organization (like your bank, for example) but there are some classic signs to look out for.
Check the email domain (the bit after the @ symbol) to see if it looks legitimate. If it’s misspelled (or a public domain like gmail.com) it could be a scam. Next, check for poor spelling and grammar in the body of the email, as phishing attempts are often shoddily written. If you have the slightest suspicion that the email may not be legitimate, do not respond or click any links in the email. To ensure you’re aware of the telltale signs, IT Governance has produced a handy guide on the ways to detect a phishing email.
Update Your Software
Cyber threats are constantly evolving, with hackers developing newer, more sophisticated ways to gain access to our devices and our personal data. That’s why it’s so important that our operating systems and software programs are always updated to the latest available versions. These newer versions will fix previously discovered vulnerabilities and offer greater protection against emerging threats.
If you’re still using an outdated operating system, for example, it may contain weaknesses that can quite easily be exposed by an attacker, especially if those weaknesses are public knowledge. Use a tool like Soft4Boost to check for out-of-date and potentially vulnerable software, and update to the latest supported versions where necessary.
Secure Your Devices
It’s also important to protect our physical devices, as a lost or stolen device could present an easy opportunity for an attacker to gain access to your personal data. Ensure a password or PIN is always required to access the device (and don’t use anything easily guessable like 0000 or 1234). Many devices now enable facial recognition or fingerprint access, so enable these functions where possible. When you’re not using your device, make sure it’s locked.
Backing up your data is essential, too, so that it can be recovered in the event of a data breach. Most computers will include a backup facility, while mobile phone data can usually be backed up using cloud storage. Finally, beware of unsecured public Wi-Fi networks (where no password is required for access) as these are often prime targets for an attacker, and disable your Bluetooth function when you’re not using it.
Although the number of identity theft cases fell from 16.7 million in 2017 to 14.4 million in 2018, the number of people held financially liable in these cases and the amount of their losses increased, according to the Insurance Information Institute. These identity theft statistics show that identity theft is still a major concern and consumers need to be on high alert to avoid becoming the next victims.
Today, criminals don’t need physical access to your financial documents to wreak havoc on your life. They can simply find your personal information online and use it to steal your identity. Fortunately, in the age of cybersecurity, you can fight back.
How Our Daily Activities Are Digitized and Prone to Data Breaches
Thanks to the Internet of Things, easily accessible Wi-Fi, and other technological advances, we’re almost always connected to others. You can chat with family across the country through video chat, watch a video online for a recipe you’re preparing, and add items to your grocery list all at the same time. While this technology can make our lives easier, in many ways, it can also make us more vulnerable to attack.
Every digital activity leaves a footprint and a possible access point for criminals. Everywhere you go, there’s data stored about you. The International Data Corporation prepared the 2020 Thales Data Threat Report, which revealed that nearly half of U.S. companies have experienced some type of data breach at some point. Furthermore, researchers estimated that at least 26% of U.S. companies have experienced a data breach within the last year.
If that’s not concerning enough, a University of Maryland study found that a hacking attempt occurs every 39 seconds. If you’re not careful, hackers can infiltrate your digital bubble and steal your sensitive information.
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Common Types of Identity Theft and Their Consequences
According to the 2020 Data Breach Investigations Report (DBIR), some of the most common data breach attempts include:
Credential stuffing – Credential stuffing occurs when many username and password combinations are inserted to try to gain access to an account. According to the DBIR, an average of 922,331 attempts were made at organizations that experienced this type of attack.
Malware – Malware is a type of virus that infiltrates your network, often to steal information, such as your personal data and identification. Malware usually relies on exploiting a system’s vulnerabilities.
Ransomware – Ransomware takes a hold of an account and blocks out the authentic user. To regain access, you are instructed to pay a large ransom.
Phishing – Phishing attempts that try to get you to hand over your credentials by pretending to be your bank or other trusted sender are increasingly using social engineering to trick you, according to the DBIR. An example of this type of attack was committed by Chinese hackers who breached an email system of a Mumbai branch to learn the rhythm of the business, identify important members of the business, and learn its vocabulary and customs. The hackers ran off with nearly $19 million.
A newer method to try to steal identities is account takeover fraud in which the criminal gains access to your account and then changes information about it so that you’re not informed of luxury purchases or cash withdrawals.
Identity theft can cause tremendous damage to your credit. It often takes months or longer to learn about the theft and the accounts affected, so by the time you notice, the thief could have been racking up thousands of dollars of debt in your name and not paying on any of it. Additionally, you can face additional legal consequences, such as having your wages garnished or being sued. Once your information is stolen, it can be difficult to stop the damage because your information might be sold on the dark web.
How to Avoid Identity Theft
It’s more important than ever to be vigilant about protecting your identity online since more people are working from home and logging into public Wi-Fi than ever before. Here are some tips to help you avoid identity theft:
Keep an eye on your credit and changes in your score
Avoid accessing any financial data from an unsecured network
Consider using credit monitoring tools
Use strong passwords and don’t repeat passwords across various sites
What to Do If You’re a Victim of Identity Theft
If it’s already too late and you suspect someone has already stolen your identity, it’s time to move on to damage control. You might want to freeze your credit so that no one can apply for new credit in your name. Order a free credit report and carefully review it for any unauthorized accounts or changes.
Report the theft to law enforcement. You might need to make a police report and provide a copy to your creditors. The FTC’s website has additional resources for identity theft victims.
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Summer has officially ended, and with it comes some of the best end-of-season sales on home decor. If you want to cozy up your space for the fall season, it’s a great time to shop for rugs.
That”s because right now you can find washable rugs for less. The the Boutique Rugs End of Summer Sale and get an additional 20% off at checkout with promo code SUMMER20.
best rugs in different patterns, sizes, and shapes, so you can easily find the best option for your space.
The Best Washable Rugs on Sale at Boutique Rugs
Bozkurt Distressed Washable Rug
Was $189-$729, now $87-$339 at Boutique Rugs If you have a bohemian or cottagecore style space, this gorgeous Bozkurt Distressed Washable Rug is a must. It’s low pile, machine washable, and comes in several sizes in both a rectangle area rug and a runner style, too. I love that it adds a subtle pop of color to the home while still feeling neutral enough to go with everything.
Cream Holi-2301 Washable Area Rug
Was $123-$968, now $69-$439 at Boutique Rugs This Cream Holi-2301 Washable Area Rug boasts a nice, neutral pattern in a beautiful distressed finish. It comes in a rectangle shape in five different sizes as well as a runner style in four sizes, is no pile, and is – of course – machine washable. Since the rug is no pile and so neutral, it would be a great top piece for a layered rug look.
Judy Solid White Washable Rug
Was $85-$631, now $39-$298 at Boutique Rugs As far as cleanup is concerned, all-white rugs are a tad terrifying. However, with a washable rug, you don’t have to worry about mess as much. This Judy Solid White Washable Rug features a high pile texture, a non slip backing, and is machine washable. Plus, it comes in several sizes in both rectangle and runner shapes. And, if white isn’t for you, the rug is also available in four additional colors, including brown, pink, dark gray, and light gray.
Moora Washable Area Rug
Was $89-$596, now $43-$329 at Boutique Rugs If you love the look of a traditional rug but want something a little easier to care for, consider this washable option from Boutique Rugs. Moora Washable Area Rug is pet-friendly, machine-washable, and comes in both a rectangle and runner style in several sizes. I love that it has a subtle mix of colors that allow you to pull in accent pieces to tie everything together.
Askeaton Washable Area Rug
Was $157-$657, now $73-$299 at Boutique Rugs The Askeaton Washable Area Rug is another top pick for the best washable rugs on sale as it features a chic pattern that adds some nice texture to a space and comes in rectangle, round, and runner shapes, giving you lots of variety. The machine washable rug also boasts a low pile texture and ships within 24 hours so it’s a great option if you need something fast.
Kuval Checkered Brown Rug
Was $85-$1,065, now $39-$489 at Boutique Rugs For an outdoor washable rug option, consider the Kuval Checkered Brown Rug. This indoor/outdoor rug is made from a polypropylene material and, while it’s not machine washable, it’s easy to hose down and keep clean when dust, dirt, and food spills come into play. The rug is available in rectangle and round shapes in several sizes and features a trendy checkered pattern that adds some nice print without feeling too busy, too.
Rugs are un utterly underrated part of your interior decor. A rug can make or break a space, either adding a little texture and interest and elevating a room or completely derailing a color scheme and mood. They can be a comfortable, soft base for a coffee table or a scratchy scrap of fabric detracting from the rest of your style. That’s why we put so much effort into covering the best rugs for every space. We’ve also covered the best outdoor rugs, because these have very different materials and needs than indoor rugs. If none of our choices work for you, we’ve also covered all of the best places to buy rugs so that you can shop around for yourself.
You’ve probably used Venmo a lot this past year, but is Venmo safe? And if so, what are the advantages of Venmo over other online payment providers? Read answers to these questions and more in our helpful guide below.
In This Piece
What Is Venmo?
Venmo is a type of peer-to-peer—or person-to-person—payment app. Its parent company is money-moving giant PayPal, which had over 377 million registered users in the last quarter of 2020. Think of Venmo like “PayPal lite”—you can receive cash and send money to people, but you can’t send invoices or do anything complex.
PayPal launched Venmo for one reason—to compete in the P2P payment marketplace. Not everyone needs PayPal’s full suite of services, but they appreciate a convenient way to split the bill. You can pay for part of a dinner or your share of the shopping with Venmo, and some online retailers also accept Venmo as a form of payment.
Venmo began offering a cash back rewards debit card—the Venmo Debit Card—in 2018. In late 2020, it launched the Venmo Credit Card. Like the Venmo Debit Card, the Venmo Credit card offers cash back—up to 3% on your “top spend” category.
How Does Venmo Work?
Venmo works a little like PayPal. To use the services you simply:
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Download and install the app on your phone
Link the app to your bank account, debit card, or credit card
Begin sending payments to friends, family members, and select online retailers
Venmo has an initial $299.99 weekly sending and receiving limit. To lift that limit, you need to provide identification documents. Once your ID is confirmed, you’ll have a $4,999.99 weekly limit.
If you want a Venmo Debit Card, you’ll need to apply online. To get a Venmo Credit Card, you need to be over 18 and a U.S. resident—and you also need to have had your Venmo account for at least 30 days.
Is Venmo Safe? What Are the Risks of Using Venmo?
Venmo is generally very safe—the company uses bank-level encryption to keep your data safe. You can add a PIN number and enable multi-factor authentication (MFA) to make your account even more secure. A strong password combined with a PIN and MFA greatly reduces the chance of hacking.
Venmo’s default profile and payment settings are public. Thankfully, you can change your privacy settings to keep your payment settings under wraps. Venmo’s three privacy levels are:
Anyone can find you and see your transactions.
Only you and the person you send payment to will see a transaction.
Friends only. Your Venmo friends can see you and can also see your transactions.
You can set your privacy settings to default to any of these three levels, or you can set levels on a transaction-by-transaction basis. You can also hide your past transactions.
Is Venmo Free?
Depending on how you use Venmo, it can be 100% free. Believe it or not, if you’re strictly using Venmo to transfer payments from one party to another and you’re not using a credit card, you may be able to use it for free.
However, there are some instances where Venmo does charge a fee. For example, if you’re using Venmo as part of your business, you’ll likely need to pay merchant fees. Here’s a look at the various fees Venmo charges account holders.
Instant Transfer Fees
You can transfer money from your Venmo account to your bank account at any time. This process can take 1-2 days to complete. If you need the money faster, you can opt for the instant transfer option, but it will cost you. Venmo charges an instant transfer fee of 1.75%, with a minimum fee of $0.25 and a maximum fee of $25.
Processing Fees
If you choose to make a Venmo payment using your bank account or debit card, you’ll incur no additional fee. If, on the other hand, you use a credit card to make this payment, you must pay processing fees. Venmo’s processing fees are 3%.
Check Deposit Fees
Venmo allows account holders to deposit checks directly into their Venmo account. However, it charges a fee for this service. The check deposit fee is 1% or a $5 minimum when depositing government-issued or payroll checks and 5% or a $5 minimum when depositing all other checks.
Merchant Fees
If you’re using Venmo to accept payments for a business you operate, you must pay merchant fees. Venmo charges business owners a 1.9% merchant fee plus an additional $0.10 per transaction.
What Is Venmo Debit Card and How Does It Work?
If you use your Venmo account quite often or have your payroll or government check deposited into your Venmo account, you might want to consider applying for a debit card with Venmo. This card is similar to any other debit card from a financial institution. It lets you spend the money in your Venmo account anywhere that accepts debit cards.
You can track your deposits and payments directly on the Venmo app, and you can also check the balance in your account. Since this is a debit card, it doesn’t have the same strict credit requirements you might run into when attempting to obtain a credit card. Obtaining this type of debit card can avoid the need to transfer funds from your Venmo account to your bank account.
There can be some fees associated with having a Venmo debit card. For instance, you incur a $2.50 fee when you withdraw funds from your Venmo account via an out-of-network ATM. There’s no fee for using an in-network MoneyPass ATM. A $3 fee applies for an over-the-counter cash withdrawal at a bank. Additionally, you can only withdraw up to $400 per day from your Venmo account.
Venmo and Taxes
If you’re only using Venmo to transfer funds to friends and family members, taxes won’t be an issue. If, on the other hand, you’re using Venmo to collect payments for your business, you may be responsible for paying taxes. If you earn over a certain amount during the year, you need to include any Venmo payments you received for your business on your taxes. Before starting any business, it’s important to understand what your tax responsibilities are.
Venmo Scams to Watch Out for
If you’re wondering “Is Venmo safe to use?” the answer is yes, it’s relatively safe to use. Venmo uses encryption security to protect your personal information from hackers. Its robust security features are in place to keep your money safe.
Even these robust security features can’t stop all scammers. But there are steps you can take to avoid this type of bank account fraud. It’s important to recognize these scams before scammers take advantage of you. Below is a look at the most common Venmo scams.
Fake Products for Sale
One of the most common Venmo scams involves online sales. The scammer pretends to be selling something online. However, once you make a payment, you never receive the product.
Once a Venmo payment is processed, you can’t reverse it and there’s no way to get your money back. This is why it’s so important to only submit payments to people and businesses you know and trust.
Pretending to Be from Venmo
Another common scam involves scammers pretending to be Venmo. If you receive an email or text message claiming to be from Venmo, don’t automatically assume it is. Some scammers send these messages to try to steal your personal information, such as your account number and password. Once they have this information, they can hack into your account and make payments without your permission.
Using Your Phone
There have been reports of strangers asking a person to borrow their phone. Instead, they actually open the Venmo account on your phone to send money to an account associated with them. Unfortunately, trying to do a good deed by letting someone borrow your phone could cost you hundreds or thousands of dollars.
Why Does Venmo Require Identify Verification?
If you open an account with Venmo, you’ll have to prove your identity. This isn’t just a Venmo requirement. According to the Consumer Identification Program under the U.S. Patriot Act, all financial institutions must verify the identities of all their customers.
This program helps prevent terrorists from sending and receiving money and helps to stop money laundering. It can also help reduce the risk of fraud on Venmo. However, even identity verification can’t prevent all forms of fraud. It’s important to always remain vigilant and report any suspicious activity to Venmo.
Staying Safe with Venmo
There are several things you can do to protect yourself when using Venmo.
Monitoring Your Account
Be sure to periodically check your Venmo account for unauthorized transactions. If you notice any, report it to Venmo immediately.
Set Up Venmo Notifications
Receiving notifications as soon as there’s suspicious activity on your Venmo account may help prevent a scammer from accessing your account. Always be sure to have your notifications on for Venmo.
Secure Your Account
There are multiple ways to secure your Venmo account if you lose your phone or allow someone to use it. First, turn on the PIN feature. This step requires you to enter a specific PIN number before you can even open your Venmo account. You should also set up the two-function authentication feature to make it even more difficult for someone to hack into your account.
Choose Private Setting
You may not realize it, but Venmo automatically makes all accounts public. While other users can’t see the specific details of your account, they can see how often you use Venmo. To keep your account safe, it’s recommended to switch your account to private so only your friends and family members can see your information.
Don’t Keep a High Balance
It’s recommended to avoid keeping a high balance in your Venmo account. This way, if your account is hacked, you’re not at risk of losing too much money. Instead, take steps to transfer your Venmo balance to your bank account as soon as possible.
Don’t Share Phone
Even if you’re using the passcode and two-factor authentication features, it’s recommended not to let a stranger use your phone. Only those you know and trust should have access to your phone.
Only Enter Venmo Through the App or Website
Don’t activate your Venmo account through a link you receive in an email or text message. This could be a phishing email designed to steal your Venmo account information, such as your account number and password. Instead, only access your Venmo account through the Venmo app or website.
Venmo Alternatives
Venmo isn’t alone in the payment marketplace. Like most other payment options, it has a long list of rivals. Let’s line up three formidable adversaries for comparison.
Tip: PayPal is another popular payment app. Check out our safety review for more information.
App Name
Venmo
Zelle
Cash App
Parent company
PayPal
Early Warning Services
Square
Need a bank account?
No
Yes—but you can still use and download the app if your bank doesn’t offer Zelle
No
Who can you pay?
Friends, family members and other people you trust
Friends, family members and other people you trust
Anyone, including contractors, utility companies and charities
Debit card available?
Yes
No
Yes
Can you hold a balance?
Yes
No—but Zelle is connected to your bank account by default
Yes
How much does it cost?
Free if you use a bank account, a debit card or your Venmo balance. If you use a credit card, Venmo charges a 3% fee. Instant outgoing bank transfers cost 1%, while standard bank transfers are free.
No fees to send or receive money. Your connected bank may charge fees, however.
Free if you use a bank account, a debit card or your Cash App balance. If you use a credit card, Cash App charges a 3% fee. Instant outgoing bank transfers cost 1.5%, while standard bank transfers are free.
Any limits?
You’ll have a $299.99 weekly peer-to-peer limit immediately after signup. If you confirm your identity, your weekly limit will go up to $4,999.99.
Limits depend on the financial institution. If your bank doesn’t offer Zelle, your weekly transaction limit will be $500.
You can send or receive up to $1,000 during a period of 30 days.
Venmo Versus Credit Cards
What if you don’t want to pay via an app, and you don’t like carrying cash around either? In that case, your best bet might be a credit card. You’ll need to ask your waiter or your cashier to split the bill, but most merchants are happy to oblige.
Look for credit cards with the following perks:
A low APR. Choose a low-interest credit card to save money on interest payments.
Cash back rewards. Why go for a standard credit card when you can get a little money back each time you shop?
Balance transfer offers. Transferring your balance from another credit card? In that case, look for a 0% balance transfer offer.
Credit builder cards. If you don’t qualify for an unsecured credit card, go for a secured card or a credit builder card to boost your credit score.
So is Venmo Safe?
Let’s recap. Venmo is a P2P payment app, and its parent company is PayPal. You can send money to friends, family members and other trusted individuals via Venmo. Some online stores accept the payment method, too. Venmo offers a debit card and—if you qualify—a credit card. You can fund your account with your bank account, a credit card or a debit card.
If you prefer not to pay by app and you don’t feel safe carrying cash, you might want to go with a credit card. Looking for the right credit card for you? Check out ExtraCredit® today. You’ll see select personalized credit offers when you visit your Reward It portal.
The number on your credit card is more than a passcode to payments when you swipe your card. Many of the digits have a specific meaning. Find out what a credit card number is, what it means, and why it matters.
In This Piece
What Is a Card Number?
A credit card number is a unique number that helps identify your account and card. This number makes it possible for you to pay with the card and for money to be taken out of the right account.
Think about it similarly to your checking account number. Your personal checks are printed with a specific series of numbers. First is the routing number, which indicates which bank the check draws on. Next is the account number, which tells which account the money should come from.
Credit card numbers work the same way. Each part of that long number has a specific function. These are standardized by the International Organization for Standardization (ISO).
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
How to Tell the Credit Card Type by the First Four Digits
The first digit in any credit card number tells you what type of card it is—Visa, Mastercard, Discover, or Amex. Card numbers of each type always start with the same number:
3: American Express or cards under the Amex umbrella
4: Visa
5 or 2: Mastercard
6: Discover
American Express goes even further by starting card numbers with either 34 or 37, depending on the secondary branding on the card.
That first digit plus the next five in the credit card number is called the Issuer Identification Number (IIN) or Bank Identification Number. This identifies the credit card company and its network, similar to the bank routing number on a personal check.
In some cases, the IIN may be eight digits. To allow for more IINs to support growing needs, the ISO is requiring the financial industry to move to eight-digit IINs.
The rest of the digits in your credit card number, with the exception of the final number, are related to your specific account. They aren’t necessarily the same numbers that appear in the account number on your statement. But this string of numbers is tied to your account so that payment processes use the right account when you make a credit or debit card payment.
The last digit of a credit card number is known as the check digit. This number is applied in an unusual formula that helps determine if your credit card number is valid when you enter it. Using this formula, it takes only a fraction of a second for a computer to confirm that a credit card number is valid.
What Do the Last Four Digits on a Credit Card Mean?
The last four digits of your credit card number don’t actually mean much on their own, but there’s a reason you might be asked for them. If you save a credit card in an online account or other database, the information has to be encrypted. Employees of that company can’t just look up accounts and see full credit card information. They’re usually only able to see the last four digits.
You might be asked to confirm those numbers to ensure the right card is being charged. You might also be asked to confirm them when buying something online with a saved card number to ensure you’re really you and not someone who’s hacked into an account.
You can’t tell a credit card number by the last four digits. However, you could find a credit card you’ve saved in an account, such as on Amazon, by the last four numbers. Those are the only digits you’ll be able to see when you look at the saved payment methods in your account.
How Many Numbers Are in a Credit Card?
Typically, credit card numbers are 16 or 15 digits. Only American Express uses the 15-digit format. Around 2020, Visa started issuing some cards with 19-digit card numbers, but these aren’t typically used in the United States.
Finding the Right Credit Card
Before applying for a new credit card, determine what kind of credit card you need. For example, if you want to maximize rewards, you may want a cash-back card with perks that match your budget. If you’re looking to build credit, you may need to apply for a secure credit card that’s easy to get with lackluster credit.
To understand what options might be right for you, check your credit. This helps you know what type of credit card you might be approved for.
Then educate yourself about applying for a credit card online. Review options that seem appropriate for you and pick the best one. You can get started in our credit card marketplace. Gather all the information you need and apply.
While full-on Crayola-like green conjures less than complimentary connotations—green with envy; green around the gills; the grass is always greener—take the hue down a notch by mixing in some gray or black and the color yields a whole different experience. Deep-green hues evoke nature in a more meditative manner. Such elements feel nearly spiritual; think of jade, pines, and seaweed. Green is the color of the outdoors and it nurtures the soul. So, pull deep green-decor into your home.
One might balk at the thought of a green dresser, but Acerbis’s Storet subtly teases color out of a rich walnut. Think of it as a functional fern in the corner of your bedroom. Astreus Clarke’s Roebling lamp is a minimalist and earthy green marble alternative to a banker’s lamp with a lollipop-green glass shade. And, it looks as home in a library as on a nightstand. Sara Hayat’s Bevel sofa is a statement piece around which one builds a room; luscious green velvet upholstery is much more inviting than gray. Dive into deep green; we consider a timeless neutral.
Acerbis back in 1994, and the 150-plus-year-old Italian furniture firm recently updated the cabinet’s wood surface. That said, its defining feature is the glossy, lacquered horizontal moldings, which come in a dozen colors both serious and playful, including dark green. $19,173
Sara Hayat scoured industry sources near and far to find a fill that would give the Bevel a bit of bounce while ensuring its cushions would retain their pebble-like shape. Indeed, each velvet-upholstered seat cradles a person perfectly. As it should: It takes the team about a month to hand-stitch this low-slung belted beauty. $28,495
Minotti who passed away in August, played with the idea of balance in the Solid Steel coffee table, despite the heavy-metal inference of its moniker. Party-ready glossy and mirrored finishes belie the architectural geometry of the streamlined, staggered slabs. Even with its fashion-forward feel (or backward: the materials reference 1970s glamour), it evokes an unflinchingly Bauhaus sensibility. Price upon request
Astraeus Clarke found inspiration in N.Y.C. The Roebling table lamp takes its form, albeit loosely, from the Brooklyn Bridge and its name from the bridge’s engineers, John A. Roebling and his wife, Emma. The lamp’s deep-green marble pillars support a gable-shaped top that hides the light source. But there’s a twist: That top segment pivots 360 degrees, allowing the user to direct illumination as needed. $12,500
New Ravenna. Duo, a waterjet mosaic, features boxy, mustard-toned cross-stitches that punctuate a large, dark grid over elegant marble with green veining. The coastal Virginia–based company replicates the texture of stone that has been well-worn by salt air, ensuring your kitchen, bath, or patio looks suitably lived-in. $229 per square foot
What a difference a few months make in the real estate market. Last summer, home prices were selling on the cheap in many cities across the nation.
Fast forward to spring, and the housing market kind of “sucks.” There’s really no other way to put it.
First off, there’s no inventory. This has been an issue for a while now.
Put simply, there’s just very little out there for an individual or family looking to buy a home, at least in the areas they might want to live.
Sure, there are those properties that have been on the market for months, but there’s a reason they’ve been on the market for months.
And yes, you can probably go to a new community built by a mega home builder and find a house, but it’ll likely be on the fringe of a major city next to empty dirt lots and tractors.
Bad Inventory Rising
Because there is a shortage of homes to buy
Prospective sellers are able to list their duds
Knowing that buyers are becoming increasingly desperate
And may overlook flaws or simply settle as a result of the slim pickings available
Now that the housing market is heating up and the media is (rather obnoxiously) getting on board, inventory is finally rising. Let’s call it an inevitable timing thing.
You see, there is real hope in the housing market. And while hope is good for some, it’s not good for buyers, just sellers who finally see the light after so many years in the dark.
Their real estate agents are giving them the green light to dump their properties while avoiding the lengthy short sale process and nasty credit score ding.
Today, these would-be sellers are able to push the values just that little bit more to sell them as standard sales, instead of going the formerly popular short sale route.
After all, a short sale made sense when there was no hope of getting out unscathed, but now that things are looking up, why not hang on a touch longer and avoid the negative ramifications of selling short?
Unfortunately, this means the individual on the other end is picking up the slack at an inflated price, instead of snagging a deal.
Competition Is Extremely Fierce
Not only are the available homes often less desirable
But the competition for these properties is much higher than normal
Making the housing market a really bad place to be as a buyer
Since no one wants to overpay for a home they don’t even love
Factor in the intense competition and you’ve got a double whammy on your hands.
We’re talking inflating the listing price to make it a standard sale, then receiving multiple bids that often push the final sales price above the original ask.
In other words, today’s buyers are acquiring properties with the future home price appreciation already built in.
And that assumes prices actually do increase – it’s not a foregone conclusion, just a rosy expectation at the moment.
I’m also seeing a lot of the notoriously bad properties rear their ugly heads again. Many of these homes sat on the market for months without a single offer, but now they’re going into escrow in a matter of days.
Something is definitely wrong with this picture. I don’t care how low mortgage rates are…
I’ll Wait for Another Dip
The housing recovery won’t feature home prices that go up in a straight line
Just like the downturn ebbed and flowed despite ultimately declining
There might be windows if you’re patient and keep an eye on things
But do expect home prices to keep on rising, and know that it’s okay to just hold off if you don’t find something you truly love
If I wanted to buy a home, I’d hang on and wait for the temporary madness to come to an end. There’s clearly a bubble mentality in the air again, with everyone and their mother bullish on housing.
Whenever that’s the case, it makes for a rather ominous situation. The increase in inventory involves a ton of previously underwater homes that no one wanted, even at lower prices. Or homes that were taken off market and abruptly thrown back on the MLS.
So why would you buy these same homes today at a significant premium? Because a magazine cover said, “Housing Is Back?”
The economy is still in tatters and things don’t exactly appear bright. If anything, a looming stock market crash seems to be on the horizon.
No, the sky isn’t falling, and housing is indeed on the mend after so many off years. But I do see the current cycle as an unsustainable period of growth that will likely unravel as the year goes on.
It’s going to be a bumpy road to recovery, not just a bottom followed by a surge back to new highs. We’ve seen this optimism in past years, only to watch the wheels fall off time and time again.
If you see something you love, go for it. If you’re worried about the missing the boom, you might want to sit down and reassess the situation.
Read more: Buying a home during a seller’s market.
With most of the year under our belt, the holiday season is just around the corner. No matter what you celebrate, this season is full of food, celebrating and spending time with loved ones.
While you’re hard at work prepping for the holiday season, scammers are too. A survey conducted by Experian found that a full 1 in 4. Americans have been a victim of identity theft or fraud in the holiday season. If you’re worried about scammers this year, don’t worry—we’ve got tips on how to look for holiday shopping scams this season.
When the pandemic hit in early 2020, COVID-19 scams became a popular method for criminals to get access to your information and steal your identity. However, the holidays are when these scammers go into overdrive, meaning it’s important to be extra cautious as you do your online shopping and holiday giving. Here are some of the most common holiday shopping scams to be aware of.
Illegitimate Charities
Many people use the holidays as a reason to be a bit more generous, but be careful before you make that donation. Many scammers create fake charities in an attempt to get you to donate. They get your money—and possibly access to your identity info—and no good ever comes from that generosity.
Check for social media presence, news stories, financial records and proof that any charity you’re considering donating to actually exists and has a good reputation.
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Fake Online Stores
Online shopping is a convenient way to check off all the items on your list without having to actually brave the holiday crowds. However, it’s important to ensure that the sites you’re shopping from are actually legitimate. Scammers create fake online storefronts—sometimes even mimicking well-known retailers—and you don’t know it’s fake until the merchandise never comes or you start seeing evidence of identity fraud.
Empty Gift Cards
Gift cards are the perfect choice if you’re not sure what someone on your gift-giving list wants or if they like to pick out items themselves. But selling gift cards that have a $0 balance or have already expired is a common and remarkably easy scam. This happens most often on local sales sites, such as Craigslist and Facebook Marketplace.
Email Scams
Have you ever gotten an email about something you bought online—but you never actually purchased anything from that retailer? Maybe the email said you needed to reset your password or gave you a link to track your package. These are phishing email scams designed to get you to enter your personal info so scammers can use it for identity theft.
Shipping Problems
One of the biggest worries that comes with online shopping—especially with the supply chain issues that have come as a result of the COVID-19 pandemic—is whether the gifts will arrive on time. Criminals capitalize on this fear by sending out emails, texts and other communications letting you know there’s been an issue with your package. You’re asked to provide personal information such as your address, credit card info and birth date to confirm your order, but all you’re really doing is giving scammers the information they need to steal your identity.
While the holidays are a common time for shopping scams, it doesn’t mean there’s nothing you can do about it. Learn what to look for and how to protect yourself from identity theft with these tips.
1. Pay Attention to Website URLs
Online searches can lead you to scammer-run websites that unleash computer malware or collect credit card numbers for identity theft. Carefully read website domain names. Watch for unfamiliar vendors or missing letters, misspellings or other tweaks to the name of a legitimate company. Pay special attention to the last letters. For example, tiffanyco.mn indicates a Mongolia-based website, not the legitimate website for Tiffany & Co., tiffany.com.
2. Make Sure the Site Is Legitimate
Before ordering, check the “Contact Us” page for a phone number and physical address and the “Terms and Conditions” link detailing return policies and such. Unlike legitimate vendors, bogus websites are less likely to post these—or they’ll provide them in a suspicious manner, such as via a faxed request only.
How do you know if a holiday website is legit? Check the Better Business Bureau as well as Facebook and Google reviews before you buy from a new place. If the business doesn’t have any social media or online presence other than the website, that’s a red flag.
3. Only Buy Gift Cards From Retailers
Buy gift cards directly from the retailer and avoid shopping for discount gift cards through local swap sites. You may also want to buy gift cards online or from the checkout instead of the display racks, which are less secure. Fraudsters can peel off stickers to glean gift card codes, replace them in envelopes and wait for an unsuspecting shopper to buy them. Once purchased and activated, they enter stolen codes at the retailer’s website to make online purchases—leaving the intended recipient with a useless card.
4. Look for HTTPS Sites
When buying online, check the URL to see whether the website starts with “http://” or “https://.” The “S” is for “secure” and is your best bet for safe shopping. Some legitimate retailers may use http sites, but your information is much more vulnerable to attack in this case because it’s easier for hackers to get to it. Even with a secure page, avoid using public Wi-Fi hotspots for online shopping or other financial transactions.
5. Use Prepaid Gift Cards for Online Shopping
Consider buying prepaid cards for online shopping instead of using your actual debit or credit card. These cards are often reloadable for ease of use, and if your information does happen to be stolen, hackers will only have access to the amount on the card and not your entire bank account.
6. Take Care on Craigslist
On Craigslist or when answering local classified ads, deal only with sellers who provide a phone number you can verify. Don’t rely solely on email correspondence. Assume any request for wire-transfer payment is a scam, and be suspicious of prepaid debit card transactions. Using PayPal or a credit card is your safest bets.
7. Avoid Deals That Seem Too Good to Be True
Stay clear of prices from private sellers that seem too good to be true or are tied to hard-luck stories, such as a need to sell quickly because of divorce or military deployment. No one is selling the latest gaming console for only $50, no matter how hard up they are. These are common scams to get advance payment—and you’ll likely get no merchandise.
8. Don’t Open Holiday E-Cards From People You Don’t Know
Delete E-Cards or general holiday emails if you don’t know the sender. These mass-sent greetings likely contain malware. Legitimate card notifications should include a confirmation code to safely open the card at the issuing website.
9. Beware of Undeliverable Package Emails
Avoid emails claiming that FedEx, UPS, DHL or the U.S. Postal Service has an undeliverable package with links for details. The links will install malware that can log keystrokes to steal computer files and passwords. Unless you previously provided an email address, courier services won’t contact you this way. This scam baits you to call for details—at which point you’ll be tricked into making an expensive overseas call or revealing your personal and financial information. Look up the callback number yourself if you’re curious.
Gearing up for the holidays? Go ahead and enjoy your holiday shopping this year. Just be a little careful—keep an eye out for anything suspicious and make sure that any website you buy from is legitimate.
If you’re worried that you might already be a victim of identity theft or just want to keep a closer eye on your credit, ExtraCredit can help you know what’s going on with your credit report and spot identity theft as soon as it happens.
Identity thieves are almost always opportunistic—but the crimes they commit feel very personal. Unauthorized credit card charges, bogus loan applications, missing money, and other financial violations make fraud a major nightmare. To keep fraud in check, you need to know how to check your credit report for identity theft, and how to deal with problems when they arise.
In this post, we’ll talk about the warning signs of identity theft—and then we’ll show you how to stamp out fraud before it starts.
Warning Signs of Identity Theft
How Do I Check My Credit for Identity Theft?
To avoid falling victim to identity theft, examine your credit report regularly. You can access a free copy of your credit report from all three bureaus—Equifax, Experian, and TransUnion—once a year. (Through April 2022, you can get free weekly copies of your reports.) You can also use a tool like Credit.com’s Credit Report Card or ExtraCredit to monitor your credit.
When you download your credit report with ExtraCredit, you’ll see a list of positive accounts, late accounts, collections, public records, inquiries and account balances. Your credit report contains a lot of information about you and about your financial habits, and if that information changes unexpectedly, it can indicate identity theft. Here are five of the biggest fraud warning signs to watch out for.
Warning Sign 1: Incorrect Personal Information
Sometimes, incorrect personal information is the result of an innocent mistake. Other times, it means something sinister is going on. If you see your name misspelled, a wrong phone number or address, or an incorrect Social Security number on your credit report, investigate immediately.
I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.
Warning Sign 2: Lender Inquiries You Don’t Recognize
Credit bureaus keep the details of companies who ask for information about you on record for at least two years. Promotional inquiries and account review inquiries are nothing to worry about, because they’re preapproved credit offer inquiries or inquiries by companies you already do business with.
Hard enquiries from companies you don’t recognize are a different matter. Sometimes, fraudsters make a lot of credit card and personal loan applications in a short period of time, so if you see a recent list of unknown inquiries, someone might be trying to steal your identity.
Tip:Sometimes, the name of a financial institution doesn’t precisely match the name of the company checking your credit. Car dealerships, for example, sometimes run a series of credit checks via different finance companies—so it’s worth double checking before filing a fraud complaint.
Warning Sign 3: Accounts You Never Opened
Only your own accounts—including accounts that you’ve cosigned and for which you’re an authorized user—should appear on your credit report. If you find an unknown account on your credit report, one of two things has happened:
Your credit information has been commingled with someone else’s information by mistake
Your credit has been compromised by a fraudster
If you find an unknown account on your credit report, contact the relevant lender right away and tell them what’s going on.
Warning Sign 4: You Credit Utilization Goes Up
If you suddenly owe more than before and you haven’t changed your spending habits, someone else might be splurging on your behalf. Check your credit card statement very carefully and flag any suspicious transactions straight away. Most credit card companies have a maximum 120-day limit for chargebacks, so it’s important to review purchases regularly.
Warning Sign 5: Your Score Goes Up or Down Unexpectedly
Credit scores change over time. When negative information falls off your credit report after a certain period of time, your score increases. On the other hand, if you apply for too many loans or credit cards in a short space of time, your credit score could take a hit. If your credit score changes dramatically—especially if it’s for the worse—dig deeper.
Warning Sign 6: Public Records You Don’t Recognize
Negative public records can substantially impact your creditworthiness. Bankruptcies, for instance, often remain on record for up to a decade. If you see public records you don’t recognize, alert the issuing agency without delay.
Tip:Liens and civil court judgments used to appear on credit reports, but credit bureaus no longer collect information about those types of public records. Bankruptcies are now the only public records included on credit reports.
Can Someone Steal Your Identity with Your Credit Report?
Your credit report contains a lot of personal information, so it’s a goldmine for identity thieves. With a copy of your report in hand, a potential fraudster might be able to see:
Full name
Birth date
Social Security number
Current and past home addresses
Phone number
Accounts held in your name
Payment records
Public records, including bankruptcies
Many other valuable personal and financial details
Credit report content sometimes varies according to the credit bureau.
If thieves need more information after accessing your credit report, they often choose to misrepresent themselves to get it. Phishing and smishing scams are when criminals pretend to be legitimate financial institutions—or government agencies like the IRS—to get personal information from victims via email or text.
What Is the Safest Way to Check My Credit Report?
You can check your credit report quickly and easily with Credit.com’s ExtraCredit monitoring service. ExtraCredit includes five helpful tools, which help you monitor, build, earn, protect, and restore your credit profile. Two tools in particular can help you avoid or combat identity fraud: Track It and Guard It.
Track It
With ExtraCredit’s Track It tool, you get access to all three credit bureau reports. You can also monitor 28 FICO® scores—the real scores lenders see when they consider auto loan, credit card, and mortgage applications. Track It also includes a helpful credit monitoring tool, which gets updated every month. If something suspicious happens, you’ll notice right away.
Guard It
Many hackers sell consumer information on the dark web. Nefarious individuals use software, specific net configurations, or special authorizations to access the dark web. Thankfully, ExtraCredit’s Guard It tool actively monitors the dark web for consumer information and sends out security alerts when data breaches happen. You also get a $1 million ID insurance policy when you sign up with ExtraCredit.
Get Identity Theft Protection
Identity theft is a big problem in the United States. There were 650,572 cases of identity theft in America in 2019—and over 270,000 of those cases involved credit card fraud. If you see an unknown address or notice an unknown credit card on your credit report, flag it up right away. Tools like ExtraCredit from Credit.com make it easier to monitor your report on a monthly basis, so you can rest more easily.
However, a silver lining in the subdued housing market is the strength in new-home sales. Builders are providing rate buy-downs for first-time homebuyers, which aligns with their interests, Duncan explained.
Read on to learn more about Duncan’s views on the housing market, loan performance and affordability challenges homebuyers face.
This interview was condensed and lightly edited for clarity.
Connie Kim: The Federal Reserve decided to keep the benchmark rate unchanged in the target range of 5.25%-5.5%. With the majority of Fed officials expecting another rate hike before the end of 2023, how do you think this decision will affect housing and your forecast for the economy?
Doug Duncan: It’s our forecast that they won’t make another change until they drop rates. I think the forwards suggest that in either November or December, there’s a 50/50 chance to make an increase. I would say the risks are tilted that way, but we don’t have it in our forecast model.
We don’t have (the Fed) dropping rates until the end of Q2 next year, and we have a mild recession that starts in that quarter.
The reason that forwards are suggesting a 50/50 chance of another increase is that growth has been stronger than anticipated. We actually think that’s going to slow; I think that this is kind of like a final burst of activity.
Wedon’t know what third-quarter growth was. Our expectation, at an annual rate, is it’s north of 3%. If there’s another quarter like that, and oil prices have pushed to $100, then I think you get another quarter-point move by the Fed, especially if you don’t see a substantive change in employment.
Kim: Spreads in the mortgage space are wide. What are the reasons for that?
Duncan: There are several reasons for that. If that business flow for a time period helps them cover the variable costs, then it can be effective.
For one thing, no fixed-income investor thinks that mortgage-backed securities with 7% mortgage rates will be there when the Fed finishes the inflation fight. They’re going to cut rates and that will prepay. So you’re having to encourage investors with wider spreads to accept that.
It’s also the case that the Fed is running its portfolio off because they don’t talk about it much. But somebody has to replace the Fed, and the Fed is not an economic buyer. That is they weren’t buying for risk-return metrics; they were buying to affect the structure of markets. So they are a policy buyer.
They were withdrawing volatility from the market, and they were lowering rates to benefit consumers. When [the Fed] is replaced, it’s likely to be by a private investor who’s going to have yield expectations. They may require wider spreads than the Fed because the Fed is not an economic buyer.
Kim: A bit of good news for lenders in Q2 was that their production volume went up and origination costs went down. Are you optimistic this trend will continue?
Duncan: If rates stay at the 7.25% level, it’s going to be worse, not better. On the production side, the mortgage business is in recession because the levels of existing-home sales are back where they were at the end of the great financial crisis at around 4 million units. That’s very low historically.
I don’t see how it can go much lower than that. Even if we have a recession, we don’t see it going just a hair under 4 million. The reason why some of the headlines look good about housing is because house prices were expected to fall when rates ran up. They did for a quarter as households sort of adjusted to the idea that they were going to be running at a new higher level.
But prices are rising again. For existing homeowners, that’s good news because it means equity accumulation. But if you’re a first-time buyer, that’s not good news because it means it’s harder to qualify — especially with interest rates where they are.
Production is in a recession. The servicing side of the business is doing very well because those loans are simply not going to prepay for a long time. So, the servicing valuation on those loans is strong, because pre-payments are low. It’s a bifurcated market in that sense. We expect production volumes to remain low through 2024 and start to pick up maybe toward the end of 2024.
Kim: The silver lining in the current housing market is an uptick in new construction sales due to a lack of existing-home inventory. To what extent builders will offer rate buy-downs to drive sales remains to be seen. How likely are builders to support rate buy-downs, especially when it’s becoming expensive to do so?
Duncan: The traditional way in which builders gave borrowers choices regarding affordability was to offer them granite countertops. So if sales volume slows, they will throw in granite countertops, finish the basement or finish out the garage.
In doing interest rate buy-downs, they’re focused more on the problem of the first-time buyer. That’s because [the cosmetic] attributes of a house are more for move-up buyers. Builders recognize they’ve got to do something for affordability for the first-time buyer.
The share of new-home sales that are going to first-time buyers is the highest it’s ever been. The share of total sales that are new-home sales is also the highest it’s ever been. This is a highly unusual structure for the market.
The builders know that those loans are likely to get refinanced, even if they buy down two points. So they go from 7.5% to 5.5%. When the Fed is done with the inflation fight and if economic growth is back to the 2% to 2.5% level, mortgage rates will probably run to 4.5% to 6% over the cycle. These loans are going to refinance, and the consumer will be in good shape, building equity to become a move-up buyer. So there is an alignment of interests for the builders in doing this.
Kim: The housing market was relatively active during the spring and summer homebuying seasons despite lower historical sales than previous years. Looking ahead, do you see another rough Q4 like last year when rates surged? What are some factors that Fannie Mae is monitoring?
Duncan: If growth surprises to the upside, that will get the Fed to increase interest rates, which will push [mortgage] rates again. That would be the biggest challenge and just seasonality; the fourth and first quarters are the low points for seasonality.
Kim:Bankruptcies and layoffs are still happening. How far are we into the industry’s consolidation?
Duncan: I was looking at the bankruptcy data. It’s just gotten back to the pace of bankruptcy we saw in 2019. It is true [consumer] bankruptcies have been rising but from extremely low levels. I actually expect that to continue. In part, that’s because some businesses (probably smaller and midsized businesses) were kept going by very low interest rates for a very long time.
In the mortgage space? Certainly, you’ll continue to see exits from the business. Typically, mortgage companies are not publicly owned. So it happens quietly. It’s people in the industry that know who the players are that are in trouble. The employment data comes out on a lag basis for brokers and loan officers. So that has picked up. I would expect more.
Kim:Executives at Dark Matter Technologies noted that lenders are most interested in bringing down their origination costs and retaining their clients in this rising-rate environment. What other demands do you see from lenders?
Duncan: They have been investing in technology — primarily consumer-facing technologies to get business in the door. Now, that’s not a possibility. Because of the changes in interest rates and a drop-off in demand, they are now focused on tech investments that go into cost savings.
They are turning their attention to what they can do to lower origination costs. Can they convert fixed costs to variable costs? That’s really the question that the industry has to focus on. If they can convert fixed costs to variable costs, then when the cycle changes, they don’t get hit as hard by the drop-off in this business. That’s because the operating structure also drops off.
Kim:I notice a lot of independent mortgage banks roll out down payment assistance (DPA) programs for conventional loans. DPA programs were predominantly for FHA loans. What are the pros and cons of IMBs rolling out DPA programs for conventional loans?
Duncan: For the independent mortgage companies, down payment assistance gets the business through the door, right? If they’re covering their variable costs, they can keep going for a while and, eventually, they have to cover the fixed costs.
The question is, what are the other credit characteristics of the borrower? If they are an IMB, they have to place it with an investor. So the investor will be monitoring. For example, if it’s Fannie Mae or Freddie Mac, we monitor that. We look at making sure there are not layered risks in any consumer’s profile. For example, if they have a spotty employment record, but they’ve always paid their bills on time, and they have savings, they’ve got money to pay 20% down, then it would probably be acceptable to have that spotty employment record. But if there’s a spotty employment record and a spotty repayment record on their credit, that’s not going to make it through the screen.
Kim: DPA programs offered with FHA loans come with higher rates. If the FHA loans layered with a DPA are more costly, how do first-time buyers benefit from these programs?
Duncan: The question you ask is a really interesting social question. The foreclosure rate for FHA loans is higher than the foreclosure rate for VA loans or Fannie Mae or Freddie Mac loans. Fannie and Freddie are the lowest; VA is a little bit higher. FHA is the highest. There’s not a clear answer on what’s the optimal rate of foreclosure.
If [that rate] is zero, we can get to zero. But we aren’t going to be making very many loans. So there is some optimal level of risk-taking to help people realize their hope of owning a home. But it’s not a hard and fast number. Different people have different points of view on that.
