Money Management

With rates topping 5%, CDs are an attractive offer right now. Learn which errors people typically make with CDs. [[{“value”:”

A certificate of deposit (CD) offers you a fixed interest rate in exchange for locking your savings up for a set amount of time. They can be a nifty way to grow your savings, not to mention instrumental in freezing today’s best rates.

But CDs aren’t the most intuitive bank product. Many come with strict terms and conditions, which might trip you up later if you haven’t read them carefully. To help you maximize your CD returns, here are five of the most common CD mistakes people make.

1. Not shopping around

These days, it’s not hard to find a good CD rate. But to find the best CD rates, you may have to do some digging.

As of mid-March, most short-term CDs (think: terms of 12 months or less) have APYs above 5%. Long-term CDs (terms longer than 12 months) have rates above 4.50%. If you come across a CD with a rate lower than those, it’s probably not a good deal. Likewise, if you find CDs with rates higher than those, it’s likely you found a good rate.

The best way to determine if you’re getting the best deal is to compare CDs with the same term. For some perspective on this, you can look at the best CDs on our term pages.

6-month CD12-month CD18-month CD2-year CD3-year CD4-year CD5-year CD

2. Picking the wrong CD term

The CD term is how long it takes for a CD to mature. For example, if you had a 1-year CD, then you would have to wait one year before you could withdraw your principal again. CD terms can range from one week to 10 years or more.

Picking the wrong CD term can mean a few things. For one, it could mean picking a CD term that’s too long. This could force you into a position where you may have to withdraw money before your CD matures, which, as I’ll discuss below, can be costly.

On the flip side, the wrong CD term could mean picking one that’s too short. This might be the case if you have extra savings that you’re not going to use for the next few years, but you play it safe and get a CD that matures quickly. Since banks are likely going to reduce CD rates later this year, your short-term CD might mature at a time when rates are much lower than they are now. In this case, a long-term CD might mean freezing a high rate for a longer period, thus helping you maximize interest growth.

3. Breaking your CD contract

An early withdrawal penalty is the price you pay to gain access to your principal (the money you initially deposited). They can be especially harsh, typically amounting to a fixed period of interest, like six months’ worth. And yes — you can lose money in a CD.

Many short-term CDs have penalties worth three to six months of interest, while long-term CDs can have penalties worth 18 months or more. If you haven’t earned enough interest to cover the penalty, your CD provider will dip into your principal to cover the rest.

One way to prevent yourself from paying early withdrawal penalties is to get a no-penalty CD. As the name suggests, these CDs don’t impose a penalty. If you’re interested, check out the no-penalty CDs on the Raisin platform.

4. Withdrawing interest

Although you can’t withdraw your principal, most banks will let you cash out the interest you earn periodically. Some will even let you set up automatic withdrawals, which transfer the interest to your checking account after it hits your CD account.

The problem with this is that withdrawing interest can reduce your CD’s stated APY. Since most CDs grow by compound interest, less money in your account means less growth overall.

Of course, if you need cash fast to cover an emergency expense, withdrawing interest is a better solution than liquidating your CD account. But if you can help it, leave your interest and principal intact for maximum growth.

5. Setting up auto-renewal

Most banks will automatically renew your CD contract after it matures. Often, you’ll have a grace period, usually a week or so, during which you can withdraw your money and close your CD. If you don’t take action, your bank will set up a new CD contract with an APY that matches the ongoing rate.

That means if rates are down at the time of renewal, your bank could lock you into less-favorable terms.

Banks will typically remind you when your CD is going to mature. But set a reminder for yourself, too. Even if you want another CD, you should still shop around to make sure you’re getting the best rate. And if you don’t want a CD, you can prevent yourself from locking into another term.

Again, CDs are a nifty savings tool that can lock in a generous APY for the length of your term. As long as you avoid the five mistakes above, your CD could help you beat inflation without taking on the risks of other investments. Take a look at some of the best CD rates on the market today and start earning more interest for your savings.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Intuit. The Motley Fool has a disclosure policy.

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Cable TV customers may soon be able to benefit from more transparent pricing. Read on to learn more. [[{“value”:”

Although many consumers have, at this point, cut the cord with cable TV, there are those who continue to pay for it due to the convenience and variety of programming available. But the cost of cable can also constitute a personal finance hit for some people. And what makes matters worse is the way cable companies tend to tack on additional fees on top of their base prices, forcing consumers to pay even more.

Well, not anymore. The FCC is cracking down on cable TV junk fees. And soon, consumers might have a much better sense of the fee they’ll be paying for cable each month.

No more surprises

The concept of junk fees isn’t new. If you’ve ever purchased an event ticket from a service like Ticketmaster, you probably noticed that you were hit with various fees between the time you selected your seat and the time you entered your credit card number at checkout.

New rules have come down the pike to address those junk fees, and now, they’re reaching the cable industry. As part of the aforementioned change, cable companies will now have to publish all-in prices when they advertise their services.

So going forward, cable providers can’t advertise a monthly plan costing $69.99 with an asterisk and small print at the bottom. If the total cost of that service, fees included, is $84.72, that’s the price that needs to be advertised.

It’s estimated that 24% to 33% of the typical consumer’s cable bill can be attributed to junk fees. So this change might help consumers make a more informed decision about signing up for cable or keeping cable.

Is it time to cut the cord with cable?

If you’re a current cable TV customer, you may be wondering if it pays to hop on the cord-cutting bandwagon. And the answer isn’t so simple.

A big reason it can be difficult to cut the cord with cable is that many providers offer internet bundles that make paying for cable more attractive. Or, to put it another way, dumping cable often means then having to pay more for internet service. So it’s important to understand exactly what you’re paying, and what your costs might be if you were to break up a cable/internet or cable/phone/internet bundle.

But let’s assume you’re only paying for cable. At that point, you’ll need to ask yourself whether you really get good use out of all of those channels, and whether there’s a cheaper alternative. If you’re not picky about the content you watch and just need something for evening entertainment, then chances are, the cost of one or two streaming services will be cheaper than a cable package with hundreds of channels.

If you’re pickier about your content, though, then replacing cable with streaming alternatives may not work for you. It can be particularly difficult for sports fans to get access to local games in the absence of cable. So even if you’re paying, say, $89.99 a month for cable and only watch one or two sports channels, if there’s no feasible way to access your games via streaming alternatives, and you can afford the $89.99, then you may want to keep paying it if that’s your go-to entertainment during the week.

All told, it’s good to see that cable companies will now need to be more transparent in their pricing. But it also pays to take a look at your most recent bill and figure out exactly how much you’re spending on cable, and whether there could be a more cost-effective alternative that works for you. But in some cases, there may not be. And so if you can afford cable TV, and you enjoy it, by all means, keep paying for it.

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Capital One buying Discover is not just a big business deal — it could bring real changes for credit card customers like you. See how your wallet might change. [[{“value”:”

If you’re a credit card customer who is worried about the Capital One/Discover merger or curious about what it means for the future of credit cards: Take a deep breath. Relax. Nothing is going to happen yet. You don’t have to do anything or change any accounts.

The deal is not done — it still requires approval from federal government officials. And no one knows for sure when (or how) any changes might happen to the cards in your wallet. But as an average everyday credit card customer, your personal finances still might be affected by the Capital One/Discover merger in the future — hopefully in a good way.

Let’s take a look at a few big reasons why Capital One buying Discover matters for people like you — and a few possible credit card changes to watch for in the next few years.

1. Capital One is keeping the Discover brand

Current Discover customers don’t need to worry: Capital One has already announced that it intends to keep the Discover brand. You can keep using your Discover cards and accounts, and the features you love most are likely to stay.

If any Discover-related changes happen, it might be to Capital One’s debit cards. By buying Discover, Capital One is buying Discover’s payment network — and that means Capital One could potentially offer the same types of cash back rewards as Discover’s debit cards.

2. Visa and Mastercard might offer better deals for credit card customers

Most everyday credit card customers don’t realize this, but every time you swipe your card at a store or pay online, credit card companies are making money. Banks and payment networks are earning a small percentage of the money you just spent — called credit card processing fees.

Currently, Visa and Mastercard are (by far) the two largest payment networks, American Express is the third largest, and Discover is the fourth. By buying Discover, Capital One is intending to use Discover’s underdog payment network to compete against Visa and Mastercard. Over the long term, this could lead to some interesting new deals for credit card customers.

Capital One is planning to move its debit card payments to Discover’s payment network, which might lead to a new logo appearing on your Capital One debit card. And some Capital One cards might stay with Mastercard and Visa, but only if those big payment networks give Capital One a better deal on processing fees.

3. Credit card rewards might get better

Some of the biggest implications of the merger are in how it affects credit card reward points. Capital One has also said that, by owning Discover’s payment network, it might be able to offer interesting new deals and customer experiences in partnership with merchants and retailers.

Capital One could use its new payment network to do some creative things to launch new incentive programs or special offers. For example, what if you could get better-targeted personalized offers or customer loyalty programs from your favorite stores and brands, but all within your Capital One account?

Even if you’re not a Capital One or Discover customer, Capital One’s shakeup of the credit card industry could be good news for you. If Visa and Mastercard have to compete harder to keep banks working with them for credit card payments, this could open up new opportunities for other banks to earn a bit more money on every transaction. And that could mean better credit card rewards for people like you.

Bottom line

The future of credit cards is getting more interesting. Capital One buying Discover has sent a flurry of excitement through the credit card industry, with Visa and Mastercard working to adapt to the potential of new competition. No one knows how soon big changes could come to your wallet. The Capital One/Discover merger — assuming it gets approved by federal regulators — might not close until late 2024 or early 2025. And it could take many months or a few years for Capital One to implement big changes behind the scenes before it starts announcing new products or mailing new rewards credit cards to customers.

But at the moment, there is reason to be hopeful that Capital One buying Discover could be good news for credit card customers. If Capital One can successfully compete against Visa and Mastercard and launch innovative new rewards programs, this could drive other credit card companies to raise their game, too. When credit card companies have to try harder to earn your business and keep people interested in using their cards, that’s often good news for customers like you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Mastercard, Target, and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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Even without kids, it’s possible to cut your tax bill. Here’s how to eke out your fair share of tax savings. [[{“value”:”

Being a couple with no kids has a number of advantages. On a basic level, you can sleep in on a Saturday morning without having to set an alarm for the crack of dawn to shuttle little ones to soccer, gymnastics, and so forth. And you also don’t have to spend your evenings breaking up fights between siblings and entertaining children when you’d rather be kicking back and relaxing after hours of work.

Financially speaking, being kid free also offers a world of benefits. You have an opportunity to pad your savings account because you’re not spending half of your income on child-related expenses.

Now you might assume that being child free puts you at a disadvantage when it comes to taxes. But actually, there are a host of tax breaks kid-free couples can benefit from. Here are some tips for maximizing those.

1. Contribute as much as you can to a traditional retirement plan

When you have kids, expenses like extra food, medication, clothing, and child care can monopolize a fair share of your income. As such, it can be hard to contribute to an IRA or 401(k) plan in a meaningful way.

But if you don’t have kids, you may have a prime opportunity to fund an IRA or 401(k), or even potentially max out, depending on your income. And the more money you put into one of these retirement plans, up to the annual allowable limit, the more of your income you can shelter from taxes.

This year, IRAs max out at $7,000 for savers under age 50 and $8,000 for those 50 and older. With a 401(k), you can put in up to $23,000 if you’re under the age of 50 and up to $30,500 if you’re 50 or older.

So let’s say you’re married with a joint income of $150,000 this year. That puts you in the 22% tax bracket. If you and your spouse put a total of $15,000 into a traditional IRA and/or 401(k) this year, you’ll enjoy $3,300 in tax savings. And while that is a lot to put into an IRA or 401(k), allocating 10% of your combined income for retirement purposes may be doable if you’re not paying for things like daycare.

2. See if there are tax credits you qualify for

It’s true that certain tax credits are designed to ease the burden on parents with kids. But not having kids doesn’t mean there are zero credits available to you.

If your income is lower, you may be eligible for the Earned Income Tax Credit. And if one of you is in school for a graduate degree — something you may have time for in the absence of having kids — then you may be eligible for the Lifetime Learning Credit or the American Opportunity Tax Credit.

3. Set aside pre-tax dollars for healthcare

Just because you don’t have kids doesn’t mean you won’t spend a fair amount of money on healthcare expenses. And it pays to allocate pre-tax dollars for those expenses to shield additional income from the IRS.

If your company offers a flexible spending account, that’s one option to explore, though you’ll usually need to sign up for one of these accounts during your company’s fall open enrollment period. You can also see if you qualify for a health savings account, which may be the case if you’re enrolled in a high-deductible health insurance plan. You can change your health savings account contribution at any time during the year, so it’s not too late to allocate funds for 2024.

You don’t need to be a parent to save money on your taxes. Use these tips to eke out savings and pay the IRS less.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If you’re self-employed, saving for retirement is up to you. But there are some great options. Read on for a breakdown. [[{“value”:”

One of the biggest drawbacks of being self-employed is that you are on your own when it comes to retirement savings. You don’t have the luxury of an employer-sponsored retirement plan, or the matching contributions that are often offered with one.

However, there are some excellent options for retirement savings if you are self-employed. Here’s a rundown of the three main types of accounts self-employed individuals can use to save and invest.

SIMPLE IRA

SIMPLE IRAs (stands for Savings Incentive Match Plan for Employees) are retirement plans designed for businesses with 100 or fewer employees. And self-employed individuals are certainly eligible.

Because you are considered both the employee and employer, you can make both types of contributions to a SIMPLE IRA. As an employee, you can contribute as much as $16,000 or 100% of your earnings, whichever is less, and there’s an additional $3,500 catch-up contribution allowed for those aged 50 and older.

In addition, as the employer, you can match your employee contributions dollar for dollar, up to 3% of your self-employment income.

SEP IRA

A SEP IRA (the SEP stands for Simplified Employee Pension) is another option that is designed for small businesses and self-employed individuals.

There are a couple of key differences from the SIMPLE IRA. First, all SEP IRA contributions are considered to be from the employer, not the employee. Second, the contribution limit is much higher — SEP IRA contributions in 2024 are limited to 25% of your income or $69,000, whichever is lower.

Solo 401(k)

A Solo 401(k), also known as a one-person 401(k), results in the highest contribution limit for many individuals. It has the same $69,000 overall contribution limit as the SEP IRA with two big differences:

First, $23,000 of it is considered an employee contribution, and can be made as long as your income exceeds your contribution. The rest of the limit (up to another $46,000) is considered an employer contribution and can be as high as 25% of compensation.Second, because there are employee contributions, Solo 401(k)s allow catch-up contributions for participants aged 50 and over. For 2024, the catch-up contribution adds $7,500 to the maximum.

Plenty of options

It’s also worth noting that in addition to these three types of accounts, self-employed individuals are eligible to use a traditional or Roth IRA to save. And in many cases, you can use and contribute to one of these in addition to the self-employed retirement accounts discussed earlier. And chances are that you’ll be able to find one of our top-rated brokers that offers the account that best meets your needs.

Additionally, thanks to the SECURE Act 2.0, there are now Roth versions of all three self-employment retirement account types. If you’d prefer to maximize your tax break now, you can open a traditional (pre-tax) version of any of them, but if you’d prefer to enjoy tax-free income after you retire, a Roth account is certainly an option.

Once you’ve deposited money into any of these account types, you can invest it in virtually any stocks, bonds, ETFs, or mutual funds you want. Depending on your brokerage, you may be able to put your investments on autopilot within your account by enrolling in a robo-advisor service.

Which is best for you?

There is no perfect answer for everyone. The best choice for you depends on how much you plan to set aside for retirement, how much self-employment income you have, and how much account maintenance you’d like to do. But one thing is for certain — there are some great options that can help you save and invest for a comfortable retirement and save money on your taxes in the meantime.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Not paying your taxes when you owe money could have very serious financial consequences. Read on to learn more. [[{“value”:”

As of late February, the average tax refund issued by the IRS in 2024 came to $3,213. But what if you’re not due a refund on this year’s taxes? What if you owe the IRS money instead?

There are different reasons why you may end up with a tax bill on your hands this year. A lot of people earned more money in their savings accounts last year than in previous years due to elevated interest rates. So if that happened to you and you took in a lot of interest income, you may now be looking at having to write the IRS a check.

Or maybe you decided to take on a side hustle in 2023 but you forgot to make estimated tax payments on your extra income. That could result in an underpayment on your part.

Having to write the IRS a check during tax season can be a big bummer. But what if you don’t have the money to do so? You may be inclined to ignore the problem and hope it goes away. But if you do, you could end up facing serious financial consequences.

When you blow off your tax debt completely

If you owe the IRS money from 2023 and you don’t submit that sum in full by April 15 — this year’s tax-filing deadline — you’ll face interest and penalties for each month (or partial month) that goes by without paying that debt. Over time, that can add up to a lot of money.

Furthermore, if you don’t make any attempt to pay your tax bill, the IRS will eventually seek to garnish your wages. This doesn’t mean the agency will get to take your entire paycheck, but it may get a portion of it.

Wage garnishment isn’t something that happens right away. It’s not like your paycheck will be garnished on May 1 if you don’t make your tax payment by April 1. Rather, the IRS will send you notices about your overdue bill. Blow them off, and you could end up losing part of your paycheck.

You can pay off your tax debt over time

You may be blowing off your tax bill because you know you don’t have the money to cover it. But that’s not a good idea and could end up worsening your financial situation. A much better bet is to reach out to the IRS and ask to get onto an installment plan, which has you paying off your tax bill over time.

One option you may also be able to look at is an offer in compromise, which allows you to settle your tax debt for less than the full amount you owe. But the IRS tends to be pretty picky about agreeing to a reduction or elimination of one’s tax obligation.

Usually, for this option to work, you’ll need to prove that your tax bill really isn’t payable (such as if you’ve sustained a career-ending injury) or that it will constitute a major financial hardship for you. So it’s really not an option most people should bank on.

It’s not a fun thing to have to pay the IRS money rather than get a refund. But if that’s the situation you’ve landed in, don’t blow off your tax bill and hope the IRS forgets about it. The IRS may have its flaws and limited resources, but it’s very good at recouping money it’s owed. So your best bet is to acknowledge your tax bill and make arrangements to pay it off gradually in a manner that works for you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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