Navigating Financial Hardship in the Coronavirus Era
CreditCards.com's Ted Rossman joins our hosts Sandy Block and Ryan Ermey to discuss what people can do to help mitigate financial hardship during the global pandemic. Also, the pair explains new tax breaks for charitable giving.
Ryan Ermey: If you're among the multitudes of Americans wondering how you're going to pay off your next credit card bill, we're here to help. CreditCards.com industry analyst Ted Rossman joins the show to help folks navigate through financial hardship in our main segment. On today's show, Sandy and I break down new tax breaks for charitable giving and delve into some timely wild pitches. That's all ahead on this episode of Your Money's Worth. Stick around.
Sandy Block: I think you're going to have to start sending me a picture, Ryan. I'm starting to forget what you look like.
Ryan Ermey: Well, I'll tell you what, I just shaved my beard...
Sandy Block: No, you didn't!
Ryan Ermey: ... a day or two ago. It had gotten too... it grows in fast. I was already starting to look like Tom Hanks from "Castaway." So my hair... I usually wear the hair kind of short on the sides and up in back and on top, and it's going to be Elvis here in another week, like very tall.
Sandy Block: I think that would work.
Ryan Ermey: I may just pay a barber to come to my house, but I'll send you a picture, Sandy. We can send each other selfies. That'll be nice.
Sandy Block: Okay, yeah. That's a good idea.
Ryan Ermey: So today on our main segment, we're talking about some advice for a lot of people who are undergoing some financial hardship at the moment. But for people who aren't... and we count ourselves among the lucky group of folks who have been able to continue working remotely throughout this pandemic. A lot of people are certainly interested in what they can do to give back -- and some new legislation built into the CARES Act changes the way that that can be done, right?
Sandy Block: Yeah. The CARES Act, which is the big stimulus package that was signed into law last month, contains an interesting provision. And sort of a little background on this. A couple of years ago when Congress passed this massive tax reform, one of the things they did was double the standard deduction, which means hardly anybody itemizes anymore. That means hardly anybody deducts their charitable contributions. So the CARES Act included this kind of... everything else in the bill is basically supposed to help people who need money, but this is to help people who want to give money. It will allow you, when you file your 2020 tax return, to deduct up to $300 in charitable contributions. It's called an above-the-line deduction. And the shorthand answer to that means you can claim it even if you don't itemize on your tax return. So anybody who gives... and it has to be cash. I don't think anybody has any appreciated securities anymore, but if they do, those don't count. Contributions to a donor-advised fund, which is how some people make large contributions, give, don't count.
Sandy Block: But if you are so inclined to donate to your... and we've talked about this before on the podcast, to donate to your local food bank or another worthy charity -- there are so many out there -- keep good records, because when you file your tax return, you actually will be able to get a tax break for that. And that's really important now because there's a new survey just out from the Better Business Bureau that says that a majority of charities are very concerned that their revenue will drop this year. Some charities have already seen donations drop because fewer people are deducting their contributions. But obviously, whenever there's an economic downturn or a recession, people have less money to give.
Sandy Block: But the other thing the survey found is that 30% of people would like to give more, and I'm sure it's because they've moved by... they're like us. They're fortunate and they want to help others. So if you support a charity, whether it's your animal shelter or food bank or whatever legitimate charity you want to support, again, keep your receipts, keep track of it, because when you file your taxes next year, you'll get a little reward.
Ryan Ermey: Right. So, a couple things: One is that this is for your 2020 taxes, and a lot of people still have delayed filing their 2019 taxes. This would only count toward your 2020 taxes.
Sandy Block: Right. You have until July 15th now to file your 2019 taxes, but this is not a deduction you can take. If you itemize on your 2019 taxes, you can't deduct any of your charitable contributions. This is going to pay off next year when you file your taxes.
Ryan Ermey: And another thing. We've talked about vetting charities before. Charity Navigator is a good site to compare charities and figure out if they're highly rated, if they're allocating their funds in a way that aligns with the kind of organization that you want to give to. In order to get the deduction anyway, you're going to have to be donating to a 501(c)3 charitable organization. They will be able to give you documentation. This isn't going to count if you're donating to your buddy's GoFundMe or whatever.
Sandy Block: Right. And that's a really good point, because there has just been an explosion of GoFundMe campaigns to help restaurant workers, all kinds of people who have lost their jobs. And while you may certainly feel compelled to donate to one of those, unless the GoFundMe drive is for a specific charity, those contributions are not deductible. You also need to have your antenna out for bogus charities. Whenever there is a crisis like we are in now, all kinds of hucksters rise to the occasion. And certainly, we can assume that some of them will try to drum up a fake charity and shake people down that way too. So do your due diligence. Don't think that a GoFundMe contribution is deductible. There's plenty of ways on the internet to check out and make sure a charity is legitimate. As you mentioned, Charity Navigator is a good one.
Ryan Ermey: Yeah, yeah. You say rise. Sink to the occasion is really what these hucksters are doing.
Sandy Block: They're busy.
Ryan Ermey: They sink right down into it. And the last thing that I think bears mentioning here is that for people who still do itemize, there is one other wrinkle in the CARES act when it comes to charitable giving, which is a lifting of the 60% AGI limit for cash donations. What does that mean, Sandy?
Sandy Block: Yeah, this is really interesting. I guess this is for people... I'm not quite sure the background to this. Normally, you cannot donate more than 60% of your adjusted gross income to charity. And I'm not quite sure how many people actually exceed that. But I could imagine perhaps some retired person who lives very modestly might make a very, very large donation maybe to their school so they'll get their name on a building or something like that. Well, the CARES Act lifts that threshold. You can't give more than 100% of your AGI.
Ryan Ermey: No, there is a 100% limit, which...
Sandy Block: You can't give more than all of your AGI away.
Ryan Ermey: You can't take out a credit limit.
Sandy Block: I don't know. I'm not quite sure how that works. But you can give up to 100% of your AGI to a legitimate charity. And again, this is on your 2020 tax returns. So if you are really thinking of going big, 2020 is the year to do it.
Ryan Ermey: So there you have it, folks. Now is the time that if you can give, definitely try to do it. And by the way, we're not discouraging donating to the GoFundMes or anything like that, by any means. I've certainly donated to one, but just know that you won't get the tax deduction if you do. But it's always good to have an incentive to give. And honestly, I think a lot of us are probably incented now more than ever. Coming up, Ted Rossman gives advice for folks facing difficult decisions about credit. Don't go anywhere.
Ryan Ermey: We are back. And with a lot of people going through some financial hardship these days, we welcome Ted Rossman, who is an industry analyst at CreditCards.com, to help navigate you through that. Ted, thank you so much for coming on.
Ted Rossman: Thanks for having me.
Ryan Ermey: What should I do if I maybe lost my job or I lost some hours or what have you and I'm worried about either making my next credit card payment or, because of some insecurity, I'm worried I may not be able to cover it within the next few months?
Ted Rossman: My number-one tip is to speak up. Let your card issuer know that you're having trouble. It's way better to do this proactively rather than falling behind and having them chase you down. If you speak up, you can get into their hardship program. They can potentially rearrange your payment date, lower your interest rate and protect your credit score. That's a really good reason to speak up. Help is available. You need to ask for it.
Sandy Block: So Ted, if my issuer offers some kind of relief, how does that work? Will I have to make up for any deferred or missed payments later? How can I prepare for that, that there might be bigger bills down the road?
Ted Rossman: It depends. The most lenient credit card companies have been Apple Card, American Express and Capital One. Apple Card has been the most lenient. They've stepped up and said that anybody who asks can skip their March and April payments and not be charged additional interest for that. On a case-by-case basis, I've heard that some Amex and Capital One customers have gotten a similar deal. Just about all the other card issuers are offering some sort of help, but it usually does involve interest continuing to accrue. So maybe they let you pay a little bit less now or maybe even nothing at all. It still helps to ask, because you know what's available and you can protect your credit score, but the top of the wish list would be no payment and no interest. That's what you should shoot for.
Ryan Ermey: And if it's the case that you get some kind of compromised version of that, right -- because not everyone's going to give you the full boat necessarily -- how might someone be able to prepare to pay some of the bigger bills that are going to come due later on?
Ted Rossman: I think it's really important to prioritize cash-flow flexibility here. Normally, I'm all about paying down the credit card. I don't want people to pay 15% or 20% or 25% interest, and that still holds. But the thing is, people have to make hard trade-offs now, and I actually think there's a real argument to be had for preserving cash. Something like your stimulus payment, keeping that for spending on necessities, boosting your emergency savings, those are probably better uses than paying down credit card debt if you have limited savings and limited money coming in right now. It's going to depend on your circumstances, but I think flexibility is big here.
Sandy Block: Ted, does it make sense to look for transfer balance deals to reduce your monthly payments to make it more manageable, or should you first do what you earlier suggested and contact your credit card issuer about some kind of relief?
Ted Rossman: Normally, I love 0% balance transfers. The problem nowadays is that they've gotten a lot harder to get even in the past few weeks. Banks are really nervous about the state of the economy, unemployment spiking. They've gotten so much stricter about their lending standards of late. So unless you have a really good credit score, I would say probably 700 minimum and a steady job -- if you don't have those two things, you're probably not going to qualify for a new balance transfer card. There may be a back door in, which might be that an existing card that you already have in your wallet might have one of these promotions. In terms of a new card offer, it's going to be hard to qualify, so that's where I think that asking your card issuer for a break is probably your best option.
Ryan Ermey: And if you do have the chance to possibly get a zero balance transfer, what are some possible pitfalls that you need to watch out for? Because I know we've talked about some of these in the magazine before like, say, retroactive interest or higher interest once the sort of window closes.
Ted Rossman: It's important to know that whenever that balance transfer clock runs out, and it's typically 12 to 21 months, after that you would be charged forward-looking interest, of course. What you need to be aware of on store cards' 0% promotions is that a lot of times those are deferred interest, and that's really sneaky where they can actually go back and charge you retroactive interest from the beginning of the term if you failed to pay it off in full. That's very common on store cards. It's not something that we see very often at all on bank cards like Citi, Chase, Amex and so on. But definitely watch for that on store cards.
Sandy Block: And, Ted, any other advice for people who are having financial difficulties right now, particularly when it comes to paying and prioritizing bills that are coming due?
Ted Rossman: It helps if you ask everybody for a break. So we've talked a lot about credit cards, but the same thing pertains to your mortgage company, your landlord, your car lender. I would speak up on all these things as soon as possible. It's not a sign of weakness. It's actually a really smart, proactive thing to do. And then I think you're going to need to put that priority list together. Normally, credit cards fall further down the list, because it's unsecured debt, and it's not as important as your housing or your food or your medicine.
Ted Rossman: Now for everybody, there's going to be different trade-offs, and some of it will be directed by the breaks you can get or your specific circumstance. Another point in favor of prioritizing your savings rather than using the credit card as the emergency fund is that sometimes in times of distress, card companies will cut credit lines or even cancel cards without warning. So that's another reason I think you should try to keep some cash in the bank rather than relying solely on your cards.
Ryan Ermey: Well, all fabulous advice, Ted. Where can the people find everything that you're working on right now?
Ted Rossman: We have a lot of information at CreditCards.com about responding to the coronavirus pandemic, managing your debt, juggling all these financial priorities, that sort of thing.
Ryan Ermey: Well, fabulous. Go check it out. And of course, we here at Kiplinger have a lot of content like that as well that we'll be putting in the show notes. Ted, thank you again for coming on.
Ted Rossman: My pleasure. Thank you.
Ryan Ermey: If Sandy and I are talking about astrology, you know it's time for our wackiest PR pitches. Come right back.
Ryan Ermey: We are back. And before we go, back to one of our old favorite segments I feel like we haven't done in a while here, Sandy. We've been feeling a little glum, but it's back to wild pitches.
Sandy Block: That's right. And maybe because we're sort of dug in, I've noticed an increase in wild pitches recently, some that are just totally, I wouldn't say wild, so much as tone deaf. Like, about every other day I get a pitch about the exciting developments in new kitchen counters and backsplashes, and I'm just wondering how many people are really focusing on that right now. But we are getting as well pitches related to the fact that most of us are staying home and maybe some ways to deal with that.
Sandy Block: And actually, this was wild but also kind of funny, and I think it really is more relative to you, Ryan, than to me. But the headline says, "Shelter in Place with Superman: Five Things Comic Collectors Can Do Right Now." And basically, the idea is that if you've got piles and piles of comic books, maybe this is a good time to go through them and see if they're worth something. And according to these folks, the huge popularity of superhero movies has raised the value of some comic books. They also note that it's no coincidence that comic books came of age during the Great Depression and World War II when Americans needed an escape from grim reality, and I guess that's still true today.
Ryan Ermey: It's kind of poetic actually.
Sandy Block: So if you have some comics... now, we're actually running a story in June about decluttering that will touch on things to sell. We also have, and we'll put this in the show notes, a slideshow on the website right now titled 15 Safe Ways to Earn Extra Cash in the Age of the Coronavirus. And that includes things like selling used books that might have some value, along with other things like filing for unclaimed property, things like that, redeeming credit card rewards points, which we will also be covering in the June issue, and, of course, collectibles. And now, it would seem, a lot of people are decluttering, going through their stuff. And there are lots of places on the internet where you can find out if your stuff has any value. And surely, all of us can use some extra money right now, so this could be a good use of your time.
Ryan Ermey: And one place, I think, that we've talked about on the show before, is the idea of found money, right? That you should go looking for money that might be missing.
Sandy Block: Yeah. The unclaimed property is a big one. A lot of people have lost track of everything from old 401(k) plans to stock dividends, and there are websites that you can... don't pay anybody to look for that for you. You can do it yourself, and we'll put the link in the show notes. So certainly, that's a good way to do it. And the other thing, another slide show that we have that I think is worth looking at is Money-Smart Ways to Spend Your Time When You're Sheltering, and that won't necessarily make you money but might save you money. We talk about things like strengthening your passwords, checking your credit reports. This is a good time to get your finances in order. So when you do leave the house, go back to work, get back in financial shape, you'll be that much better prepared to deal with whatever comes.
Ryan Ermey: All excellent stuff and all stuff that we will put in the show notes. Now, my pitch is perhaps a little bit more wild, wilder. "With many Americans now off work and twiddling their thumbs, many are wondering how they'll make rent. But it's not time to panic. A side hustle can be your savior," which I love these pitches that take a hard left turn because we're all good so far.
Sandy Block: A side hustle, you bet.
Ryan Ermey: "So which one is right for you? Consulting the stars, experts at PsychicWorld reveal the best side hustle to pick up based on your star sign to ensure pockets don't run dry." And then they give a link to the full study, which is amazing that they call it a study. But they say results include, "Compassionate Cancers should become online tutors in order to help others. The adventurous Aries would make it big as a YouTuber."
Sandy Block: That's me.
Ryan Ermey: "25,000 Americans search for a side hustle every month." I don't know if they're clairvoyant or they used some kind of...
Sandy Block: Why do they have to search? If they're psychic, they should know where it is?
Ryan Ermey: Yeah. And a spokesperson for PsychicWorld highlights her top tips to starting a side hustle. Now, I mean, if you want to talk about a hustle, okay, I went to PsychicWorld, and the psychics that are featured on the home page charge $2 a minute for their services to chat with them. And let me tell you, folks, that $2 a minute is not worth it because no one is psychic. It's not real. I hope I'm not alienating any listeners by saying that psychics are charlatans and fakes, and you should never pay them a dime. No one's psychic. Zero people.
Sandy Block: Normally, we don't call out the wild pitches, but I think, in this case, it's totally warranted. And they knew we were going to do it anyway, right, because they're psychic.
Ryan Ermey: Right. Yeah, exactly. They knew. They knew everything that was going to happen here obviously. Anyway, the point that people should maybe pick up a side hustle right now is, in fact, a good one. I have to give PsychicWorld credit for that, but you don't need clairvoyance to figure out which kind of side hustle might be right for you. We have some content on Kiplinger.com. Bob Niedt, our colleague, has 38 ways, I think, earn extra cash right now. Yeah, 38 Ways to Earn Extra Cash With a Cool Side Hustle. Now these vary, but there are plenty of them that are remote that would work in the era that we're in right now, because obviously you don't want to be out there. You want to be keeping your social distance.
Ryan Ermey: I did also look at our friend Kathy Kristof's website SideHusl.com, S-I-D-E-H-U-S-L, which is a really good compendium of sites that allow you to work remotely, to set up kind of gig work. A couple of things that she has here. You can teach English. You may have to be teaching on Beijing time or what have you, but there's a few. There's VIPKid, which requires a bachelor's degree but no teaching experience. That pays between $14 and $22. Magic Ears requires some teaching experience. It can be informal. Qkids. So there's stuff for that. There's plenty of websites for tutors: Wyzant, Varsity Tutors, Chelsea International Education. Lessonface and TakeLessons are both sites that if you want to teach something like art, dance, drama, music.
Ryan Ermey: So I'll go ahead and put this up in the show notes because there's really quite a lot of stuff. Working Not Working finds positions for digital creatives in advertising, film, web and game design. And Work at Home Vintage Experts connects seasoned executives in insurance, human resources, and accounting. So it's not just people who have kind of crafty or the skills that you generally think of as kind of side hustle stuff. If you're someone who maybe lost their job or is on furlough or whatever, there's still a big market out there for your skills, even if you are highly skilled labor.
Sandy Block: Right. Right. And the great thing about SideHusl and places like that is they will help you find a side hustle that matches your skills, not your sign, which doesn't really seem to apply very well here.
Ryan Ermey: I couldn't have said it better myself, Sandy. That'll do it for this episode of Your Money's Worth. For show notes and more great Kiplinger content on the topics we discussed on today's show, visit Kiplinger.com/links/podcasts. You can stay connected with us on Twitter, Facebook or by emailing us at email@example.com. And if you like the show, please remember to rate, review, and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.
Links and resources mentioned in this episode
- CARES Act Expands Tax Deductions for Charitable Giving
- Donate to Charity and Cut Your Tax Bill
- Giving to Charity When You're on a Budget
- The Pandemic Gives Borrowers a Break on Rates
- 15 Safe Ways to Earn Extra Cash in the Age of the Coronavirus
- 15 Money-Smart Ways to Spend Your Coronavirus Quarantine Time (Now That Sports Are Gone)
- 38 Ways to Earn Extra Cash With a Cool Side Hustle
- SideHusl.com: Remote Jobs for the Coronavirus Era