NerdWallet's Smart Money Podcast - Hack or Hoax? Spot Social Media Money Tips That Actually Work

Episode Date: October 2, 2024

Learn to spot risky social media money “hacks” and discover safe, effective financial strategies to follow instead. Are social media money hacks reliable? Are financial influencers trustworthy? Hosts Sean Pyles and Anna Helhoski dive into the world of viral social media money hacks. They break down a recent TikTok trend that encouraged risky and illegal financial behavior, leading to disastrous consequences for some users. They highlight the dangers of following influencer advice blindly and explore how certain tried-and-true financial methods have been rebranded as trendy “hacks,” offering practical tips for distinguishing between solid financial advice and internet gimmicks. Then, Sean and Anna break down the latest money headlines, including inflation rates showing signs of cooling, a major lawsuit filed against Visa by the Department of Justice for antitrust violations, and the FTC’s settlement with Invitation Homes over unfair rental practices. Read NerdWallet’s article on how to compare two options to consolidate debt: a balance transfer credit card and a personal loan. https://www.nerdwallet.com/article/loans/personal-loans/debt-consolidation-credit-card-balance-transfer  In their conversation, the Nerds discuss: money hacks, social media money hacks, viral TikTok trends, personal finance tips, budgeting methods, check fraud, cash stuffing, debt snowball method, no-spend challenges, low-spend challenges, TikTok financial advice, saving strategies, budgeting trends, money saving tips, debt repayment methods, financial literacy, viral money tips, financial trends, money management, financial influencers, saving vs spending, check kiting scam, debt avalanche method, CD ladder strategy, budgeting tips, thrift store flipping, grocery hauls, social media finance, budgeting apps, financial scams, viral finance tips, credit card rewards, personal finance trends, debt consolidation, debt repayment tips, saving challenges, smart spending, and envelope system budgeting. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. We'll go deep into a single topic and then leave you with the latest money headlines. Today, we're talking about social media money hacks and trends. Yep, and there's a shocking twist. Your average influencer might not give the best advice about money, Sean.

Shocking. In early September, a TikTok money hack went viral when it encouraged bank customers to do this. Step one, write and deposit checks for amounts greater than your balance into your bank account. Step two, withdraw the money from ATMs before the check bounced. Yeah, so that two-step money hack was actually check fraud. And it didn't turn out so well for people who did it. The banks ended up charging accounts for the stolen money or putting holds on them. So people ended up with massive negative balances.

Don't do fraud, people. Please do not do fraud, no matter what a social media influencer tells you to do. That being said, there is some decent advice out there that rebrands time-tested methods of budgeting, investing, and saving. A recent NerdWallet survey conducted by the Harris Poll showed how familiar people are with social media money hacks. Half have heard of at least one social media money concept. The trends people have most heard about include grocery hauls, thrift store flipping, savings challenges, girl math, no spending or low spend challenges,

and cash stuffing. Let's boil down some of the popular trends, starting with no spend slash low spend challenges. About 13% of Americans say they've heard of this trend that, most recently, went viral in January on TikTok. It's a pretty self-explanatory challenge to not spend on non-essentials in the first month of the year, think clothing or dining out. This hack is a gamification of probably the most basic concept in personal finance, saving instead of spending. The hope with this particular trend is that people will be more mindful of what they spend on once the challenge ends.

But sometimes people revenge spend to make up for the spending that they didn't do during the challenge. And that's a big no-no. Another money hack trend is called cash stuffing, which about 12% of Americans say they're familiar with. It's pretty much the envelope system of budgeting in which you make a budget for some period of time, like a week or a month,

and create different spending categories. One category could have your monthly expenses like housing, groceries, transportation, and then another would be discretionary spending. You assign a certain amount of the budget to each envelope and stick to it. If you budget $400 a month for groceries, then you take $400 out of a physical envelope or digitally within your bank account. It's a pretty effective method if you can stick to it. The downside is you are using cash or your bank account, so you could miss out on using a credit

card to gain rewards or protect your purchases. Another budgeting hack is tried and true, the snowball method. About one in 10 Americans have said that they've heard of it. You start by listing all of your debts from the smallest balance to the largest. You also write down each debt's minimum payment. From there, you can see how much additional money you can put toward each debt each month. The goal is to pay off one debt at a time, starting with the smallest debt. The point is to build momentum by knocking out the easiest to repay debt first, the one with the smallest balance. But what the snowball method doesn't take into account is interest. So there's another approach that might be a better fit for you if that's what you're

focused on, the debt avalanche method. With that approach, you work toward paying off the debt with the highest interest rate to the lowest. Whichever method you choose, make sure to stick with it. If you need to, consider consolidating your debt into a loan or a balance transfer credit card so you'll get the lowest interest rate on your debt. NerdWallet has a pretty handy article on how to decide whether a balance transfer card or a personal loan might be a better option for you if you are paying off debt, and we'll link to that in today's show notes. The last hack we're going to talk about is a CD ladder. About a tenth of Americans say they've heard of this money hack. A CD, or Certificate of Deposit, guarantees a rate of return that's typically higher than a high-yield savings account,

but it's also federally insured, so there's safety in the investment. But you generally can't get to your CD funds until the deposit matures. Otherwise, you'll pay a penalty. Typically, the higher the rate, the longer the CD will take to mature. So the latter approach combines access to longer-term CDs that have a higher rate of return with shorter-term CDs so you can access your funds more quickly. This is the latter part. Say you invest $1,000 in five CDs that mature after different lengths of time, one year, two year, three year, four year,

and five year. As they mature annually, you can access the funds, which gives you the flexibility to withdraw. But if you can afford it, each time one of the shorter term CDs matures, you reinvest it, plus the interest, in a new five-year CD. After five years, you'll have five five-year CDs. Now, there's no guarantee that your CD rate will beat inflation or give you bigger returns than other savings or investment vehicles. I think the bottom line with all this, Sean, is there are a lot of different hacks out there for your money, and you might hear about it on social media, but it doesn't always make sense for your finances. So always consider the source. And please, again, do not commit fraud. No fraud.

Up next, a few money headlines in the last few days. Sean, we've been talking a lot about inflation recently, especially with the Federal Reserve's decision to start lowering interest rates. And there's another sign that more rate cuts could be coming. Yeah, this is another government stat about what things cost, and it's one of the Fed's favorite indicators. It's called the Personal Consumption Expenditures Index, and that's basically just a mouthful that means prices. And that index, in August, rose 2.2% from a year ago, the slowest inflation growth since 2021. And down from a 2.5% year-over-year reading in July.

As we've been saying for all these numbers, it doesn't necessarily mean prices are going down. It just means that the pace of inflation, the speed of prices going up, is slowing down. And that's why the Fed is starting to bring down interest rates and is likely to keep doing so in the future. If you use credit or debit cards, there's a good chance your wallet has at least one card with the name Visa on it.

Sure, you might have some MasterCard or American Express or Discover Cards too, but Visa is the big daddy. On the debit card side, it processes about 60% of all payments. And now the Justice Department is suing Visa for antitrust behavior in the debit card market. The government says Visa maintains an illegal monopoly over the networks used in debit transactions. The suit says Visa is thwarting the growth of existing competitors and making it difficult for other companies to develop new alternatives to the current debit system. The lawsuit says Visa charges more than $7 billion in fees each year to process transactions. That's on everything from

your groceries to filling up the tank to those cute new boots you got for winter, if you're paying by debit. The suit says Visa does this by imposing, quote, a web of exclusionary agreements on merchants and banks, and also, quoting here, smothers smaller, lower-priced competitors. Essentially, the DOJ is accusing Visa of doing deals with those merchants and banks to make sure other companies can't get in on the action. The suit also says that Visa punished merchants who routed transactions through other card networks. Visa told the industry site Payments.com that the lawsuit was meritless and that it is just one of many competitors in a debit space that is growing, quote, with entrants who are thriving. Here's another government action affecting consumers. This time, it's folks who rent single-family dwellings from a national landlord called Invitation Homes.

The Federal Trade Commission says the company agreed to a $48 million settlement over hidden fees it charged renters. Yeah, this is fees on everything from rental applications to air filters. Renters wouldn't find out about the fees until they got a copy of their lease, sometimes after they signed it. In addition to the fees, the FTC says Invitation Homes wouldn't do promised inspections before people moved in and failed to follow through on what it promised was 24-7 emergency maintenance availability.

On top of all that, the agency says the company systematically withheld renters' security deposits when they moved out, unfairly charging them for normal wear and tear and damage that existed when they moved in. In a statement, Invitation Homes said its disclosure practices are industry-leading. The settlement does not include any admission of wrongdoing. The FTC says the $48 million fine will go toward reimbursing renters. And that's it for this week's money news. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or send us a voice memo at podcast at nerdballot.com. And remember, you can follow the

show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. Today's episode was produced by me and Tess Bigland and edited by Rick VanderKneife. Megan Maurer mixed our audio. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds. you you you