The Finatical

Week of December 6th, 2022 - Credit Card Rewards, Consumer Spending Slows, FTX Creditors

Finatic

Aditya Bagga

Ksheeraj Sanga

, and 3 others

Dec 06, 2022

Introduction

Many credit cards offer some type of reward for using them, and in this article, we will cover how to take advantage of this. You may accumulate cash back, points, or airline miles by making purchases with a rewards credit card, which you can then use to pay your bill, plan trips, or for other things. Due to this incentive, rewards cards are a wise choice for making some extra money for your regular purchases. Still, credit cards are only a good financial tool when you pay your balance in full every month, or else your credit score could decrease and interest rates for any loans you want will rise.

How Do They Work?

As we covered before, the three main types of credit card rewards are cashback, points, and miles, but there are also other potential rewards depending on the card. These could include crypto, gift cards, or special deals at select stores. So how do you earn credit card rewards? With each kind of card, you receive rewards at a set rate for every dollar you spend. Similar to how cashback gives you a couple of cents for each dollar spent, credit card point systems provide you points for your spending instead of dollars. This also varies for every credit card. For example, travel credit cards will normally give you more points or miles per dollar to spend on travel, such as hotels and flight tickets. Another way to earn points is by signing up for a new credit card. Several credit card companies provide a sign-up reward that enables you to accumulate a lot of points all at once.

Taking Advantage

When you receive credit card rewards, be sure to redeem them as soon as possible. Once you have accumulated enough credit card points to redeem, you don’t want to wait too long to cash out. This is because due to inflation, its value keeps declining. It makes little sense to keep your cashback even if it won't lose too much worth over time. Make the most of its worth by redeeming it right away. Also, the value you receive for your points when redeeming travel rewards depends on how you use them. You receive a larger value per point for expensive trips so reserving your points for more pricey travel is a wise strategy. Using these methods, you can maximize your benefit from your points and rewards.

Financial Trends

U.S. Consumer Spending Growth Slows

According to Bank of America’s CEO, Brian Moynihan, the USA's consumer spending is experiencing a form of “mitigation” in growth, but not an economic decline. The interest rates established by the Federal Reserve are starting to impact both the housing and renting markets, with renters struggling to pay rent as landlords are increasing rent prices. Brian stated that the nation is experiencing a “mitigation” in growth because, “If you raise rates and slow down the economy to fight inflation, the expected result is a drop in consumer spending. It hasn’t happened yet. So it could happen, but not yet”. BofA expects the Fed to hike interest rates by 75 basis points and 50 basis points in the next two meetings for this year.

There are disagreements between economists, politicians, and business leaders on whether the nation is approaching a recession or if it is already in one. The nation’s GDP increased for the first time this year in the third quarter, expanding at a higher expected return of 2.6%, annually. Consumers still possess strong credit, unemployment rates are decreasing, wages are increasing and corporations are financially stable–-even with growth and earnings declining. There are still some risks that are a cause of concern with potential unforeseen events. The good news is that as of right now, these risks are not resulting in behavior changes for companies and consumers yet, as massive layoffs are yet to occur. The underlying structure and quality of credit remain strong for the nation’s economy.

FTX Predicts 1 Million Creditors In Bankruptcy Filing

According to a new bankruptcy filing, beleaguered cryptocurrency exchange FTX has more than 1 million creditors, indicating a massive impact for crypto traders. In these types of cases, debtors are required to make a list of the names and addresses of the top 20 unsecured creditors, which in this case would be the cryptocurrency companies. The debts of people in these cryptocurrency exchanges are so high that the list has increased to the top 50 unsecured creditors. In order to combat this situation, five new independent directors have been appointed at each of the FTX’s main parent companies, with former Delaware district judge, Joseph J. Farnan, who will serve as the lead independent director.

This year in general, cryptocurrency has seen a lot of increase in the creation of crypto firms, such as Celcius and Voyager Digital, failing to contend with a slump in digital asset prices and ensuing liquidity issues. Prior to its economic collapse, FTX offered both amateur and professional investors spot crypto investing paired with complex derivatives trades. At its peak, the cryptocurrency exchange platform was valued by economists and investors at $32 billion with over 1 million users. The company’s failure to keep up with its users has led to the crypto industry declining, as more investors are selling their positions and moving funds off exchanges. FTX turned to Binance to seek some financial relevance, however, the deal fell apart when Binance cited reports of mishandled customer funds along with alleged U.S. government probes into FTX.

Financial Guidance

“If you want to live a happy life, tie it to a goal, not to people or things.” – Albert Einstein

Tying your happiness to other people and material goods is not a safe way to guarantee long-term happiness, as it makes your happiness dependent on things and people that come and go. Instead, tie your happiness to something you want to achieve, a goal for yourself, so that no matter what happens, as long as you can still see that goal, you are still happy.

Term of the Week

Liquidity- Liquidity is the measure of how fast an asset can be converted into cash. As cash is the most important asset, many assets are measured and valued by their ability of how easily it can be converted into cash.