Our friends at Cinch are building new technologies to help folks manage their financial life better. Their new service will be launching this summer and will let you know more about that when it goes live. For now, here's a little from Kerri (a financial expert at Cinch) on what they are up to and some thoughts / tips about credit card debt.
How did Cinch start? What is the story behind it?
Cinch was born from the idea that there is too much financial uncertainty in the world. Money stuff is hard and often messy, and it just shouldn’t be. Technology has made dealing with just about everything else in life easier, and it is time for that to happen to personal finances. We’ve set out to create an entirely new approach to your everyday financial life using smart technology, a fully personalized and truly unbiased point of view, and a firm stance on simplicity. We’ve learned a lot along the way; about the way people make decisions, about the scary lead-generation business, and just how much we could all benefit from something brand new like Cinch. We can’t wait to share the evolution with everyone.
We've written before about Cinch. Can you share how you are evolving?
It’s been a very interesting journey! Our core values have never wavered; we remain firm on taking on a fiduciary position to provide people with the knowledge, guidance, and wherewithal to make the best financial decisions possible. We do not accept advertising and are not paid by the companies, services, or products that we recommend. As it always has been, the heart of the business is grounded in improved financial well-being. What has changed, is the implementation…drastically.
[creativ_pullright colour=”custom” colour_custom=”#adadad” text=”We do not accept advertising and are not paid by the companies, services, or products that we recommend.”]When we first met, Cinch was relying on users to provide the information about their situations and financial products to power our recommendation system. For example, telling us the interest rate on your mortgage, or how much you spend per month, or when you’d like to pay off your credit card debt, and we learned quickly that not only was this tedious and discouraging for users (hence a fail on simplicity) it also put Cinch at risk to provide inaccurate advice, because information could be incorrect or missing (a fiduciary failure). The BillSnap feature helped a little – by sending in a photo of your statement or bill, we at least made it simple to collect all the relevant information for that product and could verify its accuracy, however it still left us exposed to steering you wrong. If you only sent in one credit card statement, we had no way of knowing if you had other debt on other cards and it sent us back on a path of asking lots of difficult questions to get the information we needed.
One of the biggest changes we have made is the way we gather the information about you. Instead of putting the burden on you to come to Cinch, choose a product, and begin manually entering information, we’ve created an on-boarding process that populates almost your entire financial profile through a few simple inputs you know off the top of your head. We leverage existing technology to allow you to link your checking and credit card accounts, as well as your credit report data, so that we can get a comprehensive look at both your current and historical situation, and save you time. Of course, there is some effort required on your end to help us understand things like your preferences and life plans, but we’ve really revamped things to deliver on the notion that it’s Cinch’s job to do the hard work, not yours. That includes expanding the inventory of products and companies we evaluate to make sure we’ve really considered every possible option for you.
Finally, we’ve made real strides in creating extremely sophisticated software, that fully embraces artificial intelligence, machine learning, and deep security.
One of the things you are focusing on at Cinch is helping folks with credit card debt. Can you share one of the things folks may not know about carrying credit card debt?
This seems small, but can be really meaningful – when you are carrying a balance on a credit card and then use that credit card for new purchases, you don’t have any grace period. That means not only are you paying interest on the existing balance, but you are charged interest on any new purchase right away. Even though your monthly payment may be higher than the amount of the new purchases, because of the lack of grace period, your revolving balance may actually be increasing every month.
For example, assume you are carrying a $2,000 balance on a credit card with a 17.99% rate. This month, you spend $230 on the card in new purchases, but it’s okay because you usually make a payment of $250 on the card each month, so you’ll at least cover those expenses and put the rest toward lowering the balance, right? Except when you run the numbers, between the interest charged on the balance and the interest charged on the $230 in purchases, after your $250 payment you’ll actually find that your $2,000 balance has increased by $13.43!
When it’s at all possible, aim to use cash or debit for the new purchase instead of credit. At the very least, try to avoid putting the new purchases you know you can pay off on a credit card with a balance.
Do you have any crazy stats about folks with credit card debt?
It’s pretty crazy to think about just how many people are dealing with, and often struggling with, credit card debt and how difficult it is to truly understand all the nuance of how these products work.
[creativ_pullleft colour=”custom” colour_custom=”#adadad” text=”It’s really a trap disguised as a benefit. And it’s all legal.”]It’s also especially crazy this time of year to see how vulnerable consumers are to sneaky credit card marketing. It’s no secret that credit card companies make money off of customers paying interest on their debt and during this time of year when spending is at its highest, most credit cards offer attractive introductory rewards offers (spend $500 in 90 days and get $100) and longer 0% APR purchase periods. It’s all designed to drive increased spend that for many, will become revolving debt. Then, at the beginning of the year the offers will change to long balance transfer periods to encourage those who have established debt to move it to a card with a 0% interest period, that more often than not runs out before the balance is paid and a high interest rate kicks in. It’s really a trap disguised as a benefit. And it’s all legal. That’s crazy.
How are you seeing folks use new technology to better their finances?
What I see a lot of, including in my own life, is the way technology has allowed more opportunity for data visualization. More than ever before, it’s easy to see clearly how much money you have, your credit score, where and when you spent money, how much debt you have, and so on. While just seeing those numbers doesn’t necessarily propel you into improved financial wellbeing, information is always powerful. It’s just still so confusing what you should do with it.
I think there is a huge opportunity for new technology to take things to the next level, as Cinch has set out to do, and go the extra step of processing the information about where your dollars are going to optimize your entire individual economy, now and as your life changes.
I remember my first car and the glovebox full of MapQuest directions to different places. Remember that awful feeling of missing a step and having to figure out how to get back on the route? Now, I have Waze for that. I wholeheartedly rely on that technology to get me from point A to point B. Not only do I trust Waze to get me there in the best way, but I can’t imagine taking the time to look up directions and print them out or think strategically about what route to take during a certain time of day. I would be lost without that app on my phone.
My dream is for Cinch’s technology to bring that same experience to personal finance leaving you thinking, “How did I ever do this any other way?”
Can you tell us a little bit about yourself / and your expertise?
I’ve been a part of the team at Cinch since the early days and have been close to our product through every stage. One of the best things about working at a startup is the opportunity to wear many hats, so I’m gaining a little expertise in a lot of areas. Prior to Cinch I worked as a financial advisor, working with real people worrying about retirement savings, insurance, and general planning. I’ve also had experience working deeper within the financial services industry, and understand how these products work from the company’s perspective in addition to the customer’s. But at the end of the day, I think my most relevant expertise is that I’m just like everyone else – I don’t have the time or desire to sift through the entire financial universe to make sure I have the exact right thing, especially as my life is rapidly changing. In the last year alone, I have moved, gotten married, and acquired a new vehicle. I know there is a better way to approach these decisions!
Care to add anything else?
We’re launching this summer! Keep an eye out for us!
This post was brought to you by the fine folks at Cinch Financial.