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TAX FILING IN 2022: HOW TO CHOOSE YOUR FILING STATUS

On the surface, it may seem like the easiest part of your income tax form to fill out, aside from your name and address. At the top of the 1040 tax form, the instructions read: Filing status. Check only one box. Sounds easy, right? But the more you think about it, you may find yourself stumped. After all, if you’re married, you can file jointly or separately. Which is better? And who counts as “head of household,” a filing status that may sound like a throwback to the 1950s?

While this decision may not seem like a big deal, your tax filing status is important because it determines your tax bracket and ultimately the amount of tax you pay. Your tax filing status also determines your standard deduction as well as whether you qualify for certain tax credits. Here’s what to know about each of the five filing statuses.

Single

Who qualifies: Single people without dependents. So if you’re divorced with kids, but you refer to yourself as single to your family and friends, keep in mind that “single” is not your tax filing status.

What are the benefits of “single” as a tax filing status? If you earn a lot, you could owe less taxes because you are single. When you get into the highest tax brackets, in many states you’ll wind up in a higher tax bracket as a married couple faster than as a single taxpayer.

You’ll often hear people call this situation the “marriage tax penalty.” Still, married taxpayers get plenty of financial benefits, such as often having a two-paycheck household.

Married Filing Jointly

Who qualifies: Married couples.

Usually it’s smarter to file jointly, according to Jeffrey Wood, a certified public accountant and partner at Lift Financial, a wealth management firm in South Jordan, Utah.

“There are certain tax deductions that may phase out or be lost when a couple files separately,” Wood says. “Some common and often-used deductions such as the earned income credit, the American opportunity credit, the student loan interest deduction and the lifetime learning credit are not available to married individuals who file separately. In addition, tax rates are typically higher for individuals filing as single or married filing separately than for those who file jointly.”

Another thing to consider: It’s typically easier and cheaper to file jointly, rather than pay or spend the time preparing two different tax forms.

Married Filing Separately

Who qualifies: Married couples.

Occasionally it is smarter to file separately, Wood says. “If one party in the married relationship had preexisting debts that could be garnished by the IRS, the other spouse may want to file separately to protect their expected tax return,” he says.

Another scenario: You and your spouse have a significant difference in income. “In this circumstance, the lower-earning spouse may want to file separately to preserve their lower tax bracket and perhaps their expected refund,” Wood says.

And yet another reason a married couple may choose to file their taxes separately: “One spouse may be a business owner and is choosing to push some risky tax positions with which the other spouse may not feel comfortable,” Wood says. “The IRS considers both spouses on a joint return to be equally liable for the tax positions taken and both spouses will be on the hook for any taxes and penalties for that given tax year, even if they later separate or divorce.”

Finally, if you’re separating or thinking of separating, Wood says you might consider filing separately for the tax year if it makes financial sense for both or one of you.

Head of Household

Who qualifies: Usually someone who is unmarried with dependents.

“Head of household is one of the most misunderstood filing statuses,” says Mark Puzdrak, owner of Puzdrak CPA, an accounting firm in Austin, Texas.

Someone who files as head of household is generally unmarried with dependents. Puzdrak says there are three qualifications you must meet to be classified as head of household.

1. You were not married on the last day of the year.
2. You paid more than half the cost of keeping up a home for the year.
3. A qualifying person lived with you in that home for more than half the year, except for temporary absences.

Who is a qualifying person? Usually, it will be a minor: your child, stepchild or maybe a foster child. In other words, if you’re a parent who never married or is divorced, and your children live with you most of the time, you’ll probably file as head of household.

That said, you don’t have to be a single parent to file for head of household. You could also be taking care of a brother, sister, grandparent, mother, father or another relative and claiming them as a dependent.

Qualifying Widow(er)

Who qualifies: Someone recently widowed.

Believe it or not, this status isn’t as straightforward as it sounds, either. If you’ve been a widow or widower since 2007 or 2017, for example, you wouldn’t file as a widow or widower. There’s a time limit on how long you can file with this status.

“If your spouse died within the year, you can still file jointly or separately as a married person for that year. After that, if you haven’t remarried and have a dependent child, you can file as a qualifying widow or widower for up to two years,” says Joshua Zimmelman, managing partner of Westwood Tax & Consulting, a virtual tax firm.

There’s one main benefit of this filing status: Filing as a widow or widower allows you to get the same standard deduction and tax rates as married couples, Zimmelman says.

“After two years,” he says, “your status changes to ‘head of household’ or ‘single’ unless you have remarried.”

Other Factors to Consider When Choosing a Filing Status

Keep this advice from tax experts in mind:

Dates matter. You’re filing your taxes for last year and not this current year, and the date to really consider is Dec. 31. Zimmelman puts it this way: “If you are married, you must file as married, even if you were single for 364 days of the year. If you’re married on Dec. 31, you are married on your tax return.”

Likewise, if you divorced on Dec. 31, you are considered divorced for the entire year. You won’t be able to file married jointly for that year.

Choose your filing status carefully. Once you file your taxes, you may be stuck with your filing status for that specific tax year. If you’re married and file jointly, and then a few months later you wanted to make changes to your taxes and file separately, Zimmelman says you won’t be able to change it.

“On the other hand, if you file separate returns and then later realize you should have filed jointly, you can amend your returns to file jointly within three years,” Zimmelman says.

Understand the meaning of “dependent.” That is, understand how the IRS defines dependent. In a nutshell, it’s a qualifying child or a qualifying relative of the taxpayer. Your spouse is not a dependent. To claim adult children, they must be under age 24 at the end of the tax year and unmarried.

Or perhaps you’re a dependent. You’ll need to keep that in mind if you’re filing your taxes.

“While not technically a filing status, whether or not someone else claims you as a dependent affects your own filing status,” Zimmelman says. “To legally be claimed as a dependent by a parent or other qualifying relative, you must be unmarried. If you fit all the necessary criteria of a dependent, you may still need to file your own tax return – based on how much you earned during the year – but you cannot take the standard deduction.”

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TOP BANKING TRENDS TO WATCH IN 2022 AND BEYOND

Over the past two years, digital transformation has reached unprecedented levels in businesses across all industries as organizations pivoted in the face of the pandemic. In 2022, digital transformation will continue to be an umbrella term for innovation strategies and other developments in banking. It will play a crucial role in leading the change in the global economy and will further impact the banking space.

The banking ecosystem is usually shaped, sometimes even disrupted, by a confluence of forces which turn this space into a very dynamic and competitive one. Among these forces, regulations and advances in technology have the greatest impact, leading to competition, which ultimately benefits consumers. Moreover, there are also social implications, such as rising customer expectations, aging population, and the increasing dominance of digital natives (generation Z or “zoomers”). Eventually, all these aspects make banking better and cheaper, undermining traditional business models.

PLATFORMIZATION OF BANKING

Traditionally, banks have offered their own products through their own channels to customers. A full open platform (or marketplace) of financial products and services would open new revenue streams, bring benefits to consumers, and scale through the power of partnerships.

In a report released in September 2021, the European Banking Authority has identified a rapid growth in the use of digital platforms to ‘bridge’ customers and financial institutions. Platformization presents a range of potential opportunities for both EU customers and financial institutions. Some of these opportunities come from the fact that most banks run on outdated IT infrastructures. These were deployed decades ago and were built on monolithic architecture, where databases, user interface, and server applications are managed in one place (hence the so-called legacy system; you can read more on how to modernize your legacy applications in one of our articles). Being open, modular, and scalable is nearly impossible when trying to build new value-adding products and services on top of banks’ most valuable asset, customer data, and further explore the benefits of the platform/marketplace business model.

In order for banks to adopt this model, they need to evolve from a legacy technology stack to more open, interoperable, and scalable architectures. By opening up their proprietary core banking systems to an open source architecture, banks could enable an efficient integration of internal systems with other partners (and their products). This open structure would enable a microservice architecture, allowing banks to build new revenue streams and reposition themselves on the market.

EMBEDDED FINANCE

Using API-driven interfaces to integrate financial capabilities within online environments, or embedded finance, is currently perhaps the most discussed banking trend, even though the idea behind it is not quite new; it’s what superapps or lifestyle apps like Alipay, Grab or WeChat have been doing for quite some time.
Embedded finance is perceived as a threat to incumbent financial institutions, but they can capitalize on this opportunity by creating new distribution channels for their products and services and/or replicate the approach by embedding fintech products into their own digital banking platforms. According to research from J.P. Morgan, software companies that embed payments into their platforms see a 2- to 5-time increase in revenue per customer. Moreover, embedded finance will generate USD 230 billion in revenue by 2025, a 10x increase from USD 22.5 billion in 2020. On the other hand, as more and more fintechs are looking for bank partners to provide banking services, banks can offer a banking-as-a-service solution using an existing licensed secure and regulated infrastructure. The services are delivered through the bank’s API platform or through a third-party platform.

OPEN BANKING, OPEN FINANCE, AND OPEN DATA

According to research conducted by Accenture in 2021, 76% of banks worldwide expect customer adoption and open banking API usage to increase by 50% or more in the next three to five years. The UK is still leading the way in open banking, with almost four million individuals and small businesses active users of open banking-enabled products. Mostly regulatory-driven, this innovative approach was orchestrated by an implementation body, the Open Banking Implementation Entity (OBIE), which acted as a catalyst, bringing regulatory bodies and commercial entities together in building financial solutions. Similar initiatives have emerged in other countries as well, with more to follow in 2022.

In this wave of innovation opened up by the Second Payments Service Directive (PSD2), from the very beginning banks had no financial incentive to share their most valuable asset: customer data. Moving from a compliance process that forced banks to open up customers’ data, with their consent, to third parties to envisaging and exploring this opportunity, the industry is still waiting to see more successful use cases in payment initiation, besides account aggregation. Open Banking hasn’t reached its expected potential yet. In 2 years since coming into effect, fluent APIs, speedy transactions, and hundreds of fintechs using the interfaces to incumbent banks are not there yet.As open banking only involves the sharing of financial data by banks, use cases are limited to products offered by banks (loans, mortgages, savings and checking accounts, etc.). Open Finance is the next step, bringing the global economy closer to Open Data, a data-driven system that will connect finance and technology, allowing consumers to fully own their data and derive benefit from them. Open Data is the ultimate destination of global economies, but legacy systems, the difficulty of accessing information, and different standards from one country/region to another need to be addressed.

MORE INNOVATION OPPORTUNITIES FOR THE PAYMENTS SPACE

According to statistics, the global digital payment market size is expected to grow at a CAGR of 15.2% between 2021-2026. Overall, directly or indirectly impacted by the innovation in the financial services ecosystem, payments will continue to be at the forefront of digital transformation, mostly due to the high increase in ecommerce sales. (Since there’s a lot going on in this space, we’ll approach this topic in a separate article to be published soon.)
Alternative payment methods have proven lately to be on the radar for the entire value chain. Mobile payments, bank transfers, digital wallets, cryptocurrencies, or buy now pay later (BNPL) are some of the alternative payment methods with high growth usage and potential to bring new levels of convenience for consumers and merchants alike. In particular, thanks to the emerging use cases being implemented on open banking rails, customers can pay for online purchases instantly from their bank account rather than using a card-based payment. On the other hand, there are BNPL platforms, which have skyrocketed in the pandemic, such as Klarna, Sezzle or Afterpay. These enable consumers to buy almost anything and then pay it off in split monthly payments, usually interest free. As an unregulated form of credit, BNPL spiked during the pandemic as consumers shifted many purchases to digital channels. Globally, CB Insights projects BNPL purchase volumes to grow as much as 10-15x by 2025.

NEOBANKS WILL CONTINUE TO FIND NEW REVENUE STREAMS

Also known as “tech companies with a banking license”, neobanks rapidly grew a customer base by serving a niched portion of the market really well. At the core of their business, personalization, stellar customer service, and good marketing are key, which make them very appealing to digital natives and underserved segments of the market. For the already established neobanks that managed to accumulate a substantial customer base, moving forward will mean capitalizing on scale and becoming profitable. In 2021, we’ve already seen some investments and acquisitions around mortgages (bunk, Starling), buy now pay later (BNPL) solutions (Revolut, Monzo), or AI (Nubank). Mortgages in particular are an opportunity for digital banks to onboard users for the long-term, thus creating a source of sustainable income.

CLOUD AND MULTI-CLOUD COMPUTING MIGRATION AND ADOPTION

Banks will likely spend more on migrating their platforms to the cloud in 2022. According to a Genpact study, CIOs in the banking industry say that ”re-platforming applications to function in the cloud” helped their companies to adapt over the past year.

On the other hand, a recent survey by Harris Poll and Google Cloud shows that banks are taking steps to mitigate risks from their use of external cloud computing services. The survey of 1,300 leaders in financial services in 10 countries shows that 83% were using the cloud as part of their primary computing infrastructure. Regulators believe that reliance on the same providers could create risk, a multi-cloud strategy proving more optimal. Multi-cloud would allow banks to switch to an alternative provider in case of an outage.

Recently, Microsoft has launched a financial services-specific cloud offering, Microsoft Cloud for Financial Services, which integrates cloud services across Microsoft Azure, Microsoft 365, Dynamics 365, and Power Platform. This service comes with capabilities and customization tailored to the financial services industry. Therefore, addressing industry-specific pain points when it comes to cloud migration could get easier.

CONCLUSION

In the banking space, whether we’re talking about traditional banks, fintechs, or neobanks that offer banking solutions, there’s plenty of room for new opportunities and innovation that brings benefits to consumers and businesses. Eventually, financial services will come with the best of the two worlds: the high level of trust people still place in traditional banks and the unprecedented level of convenience and personalization that fintechs and neobanks bring to the table, all based on the smart use of customer data.

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As companies in the banking sector aim at modernizing applications and benefit from cloud technologies, they need a trusted partner equipped with extensive know-how in planning and migrating existing software platforms to cloud. At Zitec, we are honored to be among the first 20 Microsoft Azure partners globally with demonstrated expertise in migrating software platforms running on Linux and/or MySQL, PostgreSQL, and MariaDB databases to Microsoft Azure.

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9 MISUNDERSTOOD FINTECH TRENDS IMPACTING RETAIL BANKING

In banking, trends and their related buzzwords pop up with increasing rapidity. Not all of them turn out to be impactful, but enough do that banks and credit unions not only have to track them, but — more importantly — grasp their significance.It’s true, what you don’t know can hurt you. And yes, definitions matter.No one wants to look uninformed. So, when terms such as “decentralized finance” and “digital transformation” are thrown around, it’s the rare banker who raises their hand to ask, “What exactly does that mean?”

1. Banking as a Service (BaaS)

A strategy where financial institutions partner with fintechs or non-financial firms to provide financial services to the partner’s customer-base, leveraging the financial institution’s charter.

Banking-as-a-Service, a descendant of Software-as-a-Service and the inclination of vendors to label everything “as-a-service,” is a term we’ve all heard, but few banking executives understand it enough to do anything about it. Only about 10% of financial institutions are currently pursuing a BaaS strategy. The majority are on the fence, according to a Cornerstone Advisors survey.

Think of BaaS as “fintech banking” in which the bank provides white-labeled products or services to customers indirectly through a fintech.

Bankers often worry that BaaS turns them into “dumb pipes.” Guess what, an institution can generate more revenue and profits by being a “dumb pipe” than as a “smart provider,” says Cornerstone. Being a dumb pipe doesn’t seem so bad, after all.

2. Buy Now, Pay Later (BNPL)

A payment mechanism that enables someone to spread their payments for a product or service over a specified period of time for either a fixed fee or a set interest rate.

Wait, BNPL sounds a lot like old-school installment payments but with a fancy new name. Yes, and no. What’s different about BNPL is that the offer is made earlier in the buying cycle and can influence buying behaviors. Instead of booking that trip six months from now. BNPL is the nirvana of instant gratification.

Merchants are all over BNPL since it encourages consumers to buy immediately and buy more. It’s attractive to consumers as well: the percentage of Gen Zers using BNPL grew six-fold between 2019 and 2021, says Cornerstone.

Consumer advocates are also all over BNPL, saying it encourages consumers to take on debt that they can’t afford. There’s truth to that claim: Cornerstone research found that 31% of consumers who use BNPL say their financial health is “dire” or “struggling” versus 20% of those who don’t use BNPL.

Bankers aren’t so crazy about BNPL either since it means less interchange revenue and consumer engagement. Expect financial institutions to push back, probably playing the “it’s-bad-for-consumers” regulatory card.

3. Cryptocurrency

A digital form of payment that can circulate without the need for a central monetary authority. Bitcoin is the best-known example, but is just one of hundreds.

15% of consumers already own some form of cryptocurrency and 11% plan to purchase it in the next year, says Cornerstone. Consumers increasingly see crypto as legit. Banks, not so much. Risk aversion and compliance fears stand in the way.

But consumers would be happy to fill their digital wallets with cryptocurrency from their bank. Of those already holding crypto, 92% say they would definitely or maybe use their bank to invest. More than two thirds (68%) are very interested in Bitcoin-based debit or credit card rewards.

Banks and credit unions can’t ignore cryptocurrency and hope it goes away. It’s time to get educated on the compliance factors and product options.

Falling back on moral excuses that crypto is too risky isn’t going to cut it, says Cornerstone. Do you deny a loan to a customer because they are using the money for a trip to Vegas? Do you refuse to bank a customer because they buy lottery tickets? Crypto is becoming mainstream, and refusing to play is a bad business decision, says Cornerstone.

4. Decentralized Finance (DeFi)

Financial products and services that anyone with an internet connection can access.

Do consumers really want a decentralized financial system? Highly doubtful. Sure, DeFi provides independence, transparency and is global in nature. Some consumers are using DeFi apps (dapps) for peer-to-peer financial transactions, creating non-fungible tokens (NFTs), and for flash loans, which Cornerstone describes as basically decentralized arbitrage.

DeFi isn’t likely to take off, the consultancy maintains. There are liquidity issues and the chance for things to go very, very wrong. Banks can breathe a collective sigh of relief on this one.

5. Digital Transformation

Integration of digital technologies into all areas of a financial institution, fundamentally changing how it operates and delivers value. It’s a culture change that continually challenges the status quo and gets comfortable with failure.

If bankers drank a beer or a whisky for every time someone in a meeting said, “digital transformation,” there would be an acute increase in liver problems. The good news is that Cornerstone predicts that bankers only have to hear about digital transformation for another 18 months or so until a new buzzword takes its place.

But the concept of digital transformation at banking institutions — which is not only real, but vital — will slowly march forward. Cornerstone found that only about one-quarter of financial institutions had embarked on a digital transformation strategy before 2019. Only 36% say they are at least halfway done. Of those:

  • Four out of 10 haven’t even deployed cloud computing or APIs (application programming interfaces).
  • Only about one-quarter have implemented chatbots.
  • Just 14% have deployed machine learning tools.
  • Less than one-third have achieved a 5% improvement in any of nine KPIs.

We’ll be on to our next buzzword before digital transformation is even half-way done at most banks and credit unions.

Delusions of digital transformation aside, here’s how Cornerstone says you’ll know you are digitally transformed. You can:

  • Open checking accounts in five minutes or less.
  • Instantly approve unsecured loan applications through digital channels.
  • Have a holistic view of consumers’ financial lives.
  • Deploy new digital products and services with a digital product factory.

    6. Embedded Finance

    The integration of financial services into non-financial websites, mobile apps, and business processes.

    Embedded finance is an umbrella term for all types of products including payments, lending, banking, and insurance. But the thought of integrating banking services into a provider like Lyft or Chime makes many bankers break out in a cold sweat. Cornerstone encourages banks and credit unions to instead look at non-financial companies as distribution channels that will enable financial institutions to reach a broader range of consumers. Lightyear Capital estimates that embedded finance revenue will grow to nearly $230 billion by 2025.

    Fueling this growth is an interconnected ecosystem of providers like Lemonade and Affirm, enablers like Green Dot and Plaid, and sponsors like Amazon and Uber.

    Cornerstone’s verdict: Capitalizing on these new distribution channels is a wise choice.

    7. Embedded Fintech

    Basically, the reverse of embedded finance, this is the integration of fintech products and services into financial institution’s product sets, websites, mobile applications, and business processes.

    It’s easy to confuse embedded finance with embedded fintech as they are two sides of the same coin. Embedded finance distributes banking services through non-banks while embedded fintech puts fintech products and services into banks.

    Embedded finance may be out of the reach of smaller institutions, but embedded fintech is not since banks and credit unions can use products and services provided by fintechs to create new revenue streams. Cornerstone offers some options:

    • Bill negotiation services: Partner with a fintech like Truebill or Billshark to create new revenue streams and drive consumers back to financial institutions’ bill pay platforms.
    • Subscription services: Partner with a fintech like WalletFI to help consumers manage their dozen or more subscriptions.
    • Data breach and identity protection services: Partner with a fintech like Breach Clarity (part of TransUnion) to analyze data breaches and provide consumers with recommendations on what they should do.

      8. Financial Health

      The ability to manage expenses, prepare for and recover from financial shocks, have minimal debt and build wealth.

      You may wonder why “financial health” makes a list of misunderstood financial terms. It’s because the vast majority of bankers confuse financial health with financial literacy. Financial health is behavioral, integrated and measurable, and will become the basis of competition in banking, notes Cornerstone. Financial institutions need to use technology to help consumers change their financial behaviors and influence their financial decisions.

    • Financial institutions already do a decent job of promoting financial literacy, defined as having the knowledge and skills to make informed decisions. It’s analogous to dieting in that we all know what we should be eating, but changing our behaviors is what’s so dang difficult.

      Expect the financial health fintech space to grow. Cornerstone predicts that an Amazon of financial health — or a Fitbit of banking — will emerge. To be clear, the new financial health is AI- and API-driven. And don’t be surprised if Congress starts requiring financial institutions to monitor and improve consumers’ financial health.

    • 9. Platform Banking

      Plug and play business model that allows multiple providers and consumers to connect, interact, and create and exchange value.

      Bankers think they know platforms. They’ve got a lending platform, an online banking platform, and a mobile banking platform. But that’s not what we’re talking about. A platform is not just a technology construct but a business model as well.

      Becoming a platform is hard, notes Cornerstone, pointing at Amazon as an example. It took Amazon about 20 years before it became a platform. As far as transforming business models, most bankers simply don’t have the appetite for that level of change.

      Financial institutions may not become platforms, but they can collaborate with platforms. There are core integration platforms that allow financial institutions to integrate with third-party systems and analytics platforms that allow financial institutions to use data from multiple sources.

      As an aside, platform banking and open banking are not the same. A bank can pursue a platform strategy and not be open, and an open bank doesn’t need a platform.

      “Open banking” is one of seven other terms covered in the Cornerstone/Nymbus report, “The Definitive Guide to Potentially Misunderstood Fintech Trends and Terms (and What They Mean to the Banking Industry.” This article just covers a fraction of what’s in the 65-page report, which can be accessed here.

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WHAT IS A FINANCE CHARGE?

A finance charge refers to any cost related to borrowing money, obtaining credit, or paying off loan obligations. It is, in short, the cost that an individual, company, or other entity incurs by borrowing money. Any amount that a borrower needs to pay in addition to paying back the actual money borrowed qualifies as a finance charge.

The most common type of finance charge is the amount of interest charged on the amount of money borrowed. However, finance charges also include any other fees related to borrowing, such as late fees, account maintenance fees, or the annual fee charged for holding a credit card.

Summary

  • A finance charge refers to any type of cost that is incurred by borrowing money.
  • Finance charges exist in the form of a percentage fee, such as annual interest, or as a flat fee, such as a transaction fee or account maintenance fee.
  • Consumers with long-term loans – such as an auto loan or mortgage – can significantly reduce the total amount of finance charges in the form of interest by making additional payments to reduce the outstanding balance on the principal loan amount.

  • Understanding Finance Charges

    Banks, credit card companies, and other financial institutions that lend money or extend credit are in business to make a profit. Finance charges are the primary source of income for such business entities. Such charges are assessed against loans, lines of credit, credit cards, and any other type of financing.

    Finance charges may be levied as a percentage amount of any outstanding loan balance. The interest charged for borrowing money is most often a percentage of the amount borrowed. The total amount of interest charged on a large, long-term loan – such as a home mortgage – can add up to a considerable amount, even more than the amount of money borrowed.

    For example, at the end of a 30-year mortgage loan of $132,000, paid off on schedule, carrying a 7% interest rate, the homeowner will have paid $184,000 in interest charges – more than $50,000 more than the $132,000 principal loan amount.

    Other finance charges are assessed as a flat fee. These types of finance charges include things such as annual fees for credit cards, account maintenance fees, late fees charged for making loan or credit card payments past the due date, and account transaction fees. An example of a transaction fee is a fee charged for using an automated teller machine (ATM) that is outside of the bank’s network.

    Transaction fees may also be charged for exceeding the maximum allowable monthly number of transactions in a bank or credit union account. For instance, some checking accounts allow the holder only ten free transactions per month. Every transaction over the ten-transaction monthly limit incurs a transaction fee.

    Finance charges that may be calculated as a percentage of the loan amount or that may be charged as a flat fee include charges such as loan application fees, loan origination fees, and account setup fees.

    The finance charges that a borrower may be subject to depend a great deal on their creditworthiness as determined by the lender. The borrowers’ credit score at the time of financing is usually the primary determinant of the interest rate they will be charged on the money they borrow.

  • How to Save Money on Finance Charges

    As noted in our example of a 30-year mortgage loan above, the finance charges on borrowed money can eventually add up to a sum even greater than the amount of money borrowed. Credit cards with high interest rates can end up costing much more in finance charges than the amount of credit utilized.

    So, how can one save money on finance charges? With credit cards, the easiest way to save money is by paying off the full outstanding balance on the customer’s credit card bill each month. By doing that, the borrower avoids interest charges entirely and only need to pay finance charges such as annual fees. If they’re unable to pay the full balance, they can still save a considerable amount in interest charges by at least paying more than the required minimum payment for each month.

    Similarly, homeowners with mortgage loans or individuals with auto loans can save a lot of money in finance charges by making extra payments on the principal loan amount with each monthly payment. For example, if their mortgage payment is $850 per month, they can send a payment of $1,000 to your lender each month, designating the extra $150 as an “additional payment to the principal loan amount.”

    It not only reduces the outstanding loan balance by more each month – thus, reducing the amount of interest charged in the future – it would also lead to seeing the loan completely paid off much earlier than scheduled.

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CONTACTLESS PAYMENTS IN TRANSPORTATION: EMERGING PAYMENTS TRENDS

THE 2021 PAYMENTS CANADA SUMMIT The SUMMIT is Canada’s premier payments conference. Canada is undergoing a massive transformation in its payments ecosystem. The SUMMIT is the ideal meeting point for the payments community to exchange ideas on the future state of the payments industry. Canada has a leading role to play in evolving the global payments ecosystem, and SUMMIT is the place where we will see this transformation in action and the impact it will have on us as a nation, as an industry, and as individuals.

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