Money Management

Banks are offering serious money for new checking account bonuses. But be prepared for a few possible drawbacks. [[{“value”:”

Some banks and credit unions offer significant bonuses when you open a new checking account. Some of the best bonuses we’ve seen are $300 or more, up to $600. And all you have to do is open a new checking account and meet some minimum standards for how you use the account.

But if you’re thinking about opening a new checking account for a bonus, be careful. This bonus cash is not just free money. If you get checking account bonus money, you need to abide by bank rule fine print and be prepared to pay a little extra on your taxes.

Let’s look at three potential downsides of checking account bonuses — and how you can navigate them.

1. Bank rules often require minimum deposits

Banks aren’t just giving money away for free — there are a few strings attached. By offering new checking account bonuses, banks are trying to find new customers. They want you to deposit cash, keep money in your bank account, and be willing to open a larger banking relationship over time.

With that in mind, be sure to read the fine print of your new checking account bonus offer. For example, some of the best bonuses might require you to:

Make minimum direct deposits of a few thousand dollarsKeep your account open for at least 90 daysMaintain a minimum balance of a few thousand dollars (or more) in your new account or across multiple accounts

If you can’t meet the requirements of your new account, you won’t get the bonus. Make sure you understand the direct deposit rules in particular. Some new account bonuses only require a one-time direct deposit, while others need multiple direct deposits over several months. You might need to switch your payday direct deposits to the new bank account to qualify for the bonus.

2. Bank fees can eat up your bonus

Many of the banks that offer big checking account bonuses also charge monthly account fees. For example, if a bank offers a new account bonus of $300, but charges account maintenance fees of $10 per month, after one year, you’ll have lost $120 to fees. If you’re not careful, bank fees can gobble up nearly half of your bonus money.

Fortunately, there are usually a few easy ways to avoid these monthly account fees. For example, many banks will waive the fee if you make monthly direct deposits or keep a minimum balance in your bank accounts (such as a checking or savings account). Be sure to understand the bank fees and rules before you open your new account.

3. You have to pay taxes on your checking account bonus

New bank account bonuses are not tax-free money. You will have to report this extra cash as income on your tax return. Your bank will send you a 1099-INT form (the same form used to report interest income) that you can use when you file your taxes.

Depending on what tax bracket you’re in, you might want to set aside a bit of cash from your new checking account bonus. For example, if you’re in the 22% marginal tax bracket, a $400 bank account bonus would require you to pay an extra $88 in taxes.

Bottom line

Opening a new checking account for the bonus money can be a good deal, and worth doing. If you’ve been thinking of switching banks, getting a new account bonus can be an extra incentive to sweeten the deal. But make sure you understand the rules, possible account fees, and tax implications. Checking account bonuses are not “free” money. Read the fine print to make sure you keep most of that money in your bank account without losing too much of it to taxes or fees.

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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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Most Americans don’t contribute to a Roth IRA. Read on to find out why this kind of account is a great way to save for retirement. [[{“value”:”

Americans don’t exactly have the best track record for saving money. Unfortunately, many Americans are missing out on an important way to save for retirement by not taking advantage of Roth individual retirement accounts (IRAs).

According to research by the Investment Company Institute, just 24.6% of U.S. households — or 32.3 million — contributed to a Roth IRA in 2022.

That leaves more than 75% of American households missing out on Roth IRA contributions. If you’re one of them, here are a few reasons why Roth IRAs are a great way to save for retirement and how to increase your Roth IRA contributions.

Why Roth IRAs are a great investment choice

For those who do have a Roth IRA, 59.1% make regular contributions, according to Fidelity. Here are a few key reasons why you might want a Roth IRA:

Your money grows tax free: Roth IRAs are a form of tax-advantaged account that you contribute money to for retirement. Once the money goes into a Roth IRA, it grows tax free, meaning you don’t have to pay taxes on the funds you withdraw in retirement. This is in contrast to a traditional IRA, in which you deduct the IRA contributions from your taxable income when you make a contribution but have to pay taxes when you make withdrawals in retirement.You can withdraw contributions without penalty: Let’s assume you contributed $10,000 to your Roth IRA over the past four years. If you want those contributions out of the account for any reason, you could take the full $10,000 out without any penalty. This flexibility is a big perk for many people who want to save for retirement but still want easy access to their money.You can let the money grow as long as you like: Another huge benefit of Roth IRAs is that you don’t have to take what’s called required minimum distributions (RMDs). This means you can let your money grow in the Roth IRA well into your retirement years, unlike a traditional IRA, which requires you to take RMDs after you turn 72.

How to increase your Roth IRA contributions

While having any investment account is a good step toward retirement savings, people with a Roth IRA are more likely to contribute to their accounts than those with a traditional IRA.

If you already have a Roth IRA or you’re planning to open one through a brokerage firm, there are a few simple steps you can take to maximize your contributions, including:

Automate it: Setting up automatic contributions from your checking account is one of the easiest ways to boost your Roth IRA contributions. Putting your retirement savings on autopilot ensures you won’t spend that money on something else.Increase the amount gradually: When you get a raise at work, allocating the extra money (or at least some of it) to your Roth IRA is a good idea. Many experts recommend putting 15% of your income toward retirement. So, when your income goes up, so should your Roth IRA contributions.Make catch-up contributions: If you’re 50 or older, you can make additional annual contributions to your Roth IRA above the annual limit. For example, in 2024, the contribution limit for Roth IRAs is $7,000. But if you’re 50 or older, you can add an additional $1,000 for a maximum of $8,000.

How to set up a Roth IRA

The first thing you need to do to set up a Roth IRA is to determine if you’re eligible. In general, if you’re single and earning income and that income is less than $146,000 in 2024, you can contribute the maximum amount to a Roth IRA. If you’re married and filing jointly, your combined income needs to be less than $230,000 in 2024. You can also find more detailed information about earning limits and eligibility on the IRS website.

You can open a Roth IRA through a brokerage firm or through a bank. You’ll need some personal information like your Social Security number, employer information (if applicable), and personal identification.

Roth IRAs are an excellent way to save for retirement, and it’s a shame many people are missing out on their benefits. A few minutes spent opening an account and automating contributions could go a long way toward building a more secure retirement.

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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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Your money can make money when invested wisely, and you don’t need a lot to start. Here’s how to try your hand at CDs. [[{“value”:”

You don’t need a lot of money to take advantage of CDs (certificates of deposit) to grow your savings. All you need is the right CD — and a bit of money you can do without for a few months. Here are a few tips for getting started.

1. Choose CDs with a low minimum deposit

Some CDs have minimum deposit limits that can put them out of reach if you’re working with a low budget. However, plenty of other CDs have low — or even no — minimum deposit requirements.

Indeed, you could open some of our top CD accounts with just $1 (though that’s not really practical). These types of accounts would be good for someone who wants to dip their toe into CDs with a smaller investment.

If your regular bank requires too high of a deposit, check with a smaller local bank. Alternatively, check your local credit union for its rates on “share certificates.” These operate similarly to a CD, but pay out dividends instead of interest income.

2. Look for promotional CDs with high rates

There is a lot of interest rate uncertainty right now, so you’ll generally find the best APY (annual percentage yield) on short-term 6-month and 12-month CDs. The best rates, though, are often coming from limited-time promotional CDs with even higher rates.

Promotional CDs are essentially like regular CDs, but with higher rates — and odd maturity terms. And I mean “odd” literally; you’ll often see 7- or 11-month CDs instead of the usual 6-month and 12-month CDs.

This can be an important consideration when the CD matures. Normally, when a CD matures, you either withdraw the money or it automatically rolls over into a new CD with the same maturity term.

However, promotional CDs may rollover into a standard CD with a different maturity term (i.e., you may go from a 7-month promotional CD to a 6-month standard CD). Read the terms of a promotional CD carefully so you know what happens when the CD matures.

3. Ladder CDs to preserve access

One way you can capitalize on smaller investments is to ladder your CDs. This is when you have a variety of CDs that mature at regular intervals. When set up correctly, ladders can give you consistent access to a portion of your CD investments.

Generally, CD ladders are set up all at once by investing in CDs of varying lengths:

$250 into a 6-month CD$250 into a 12-month CD$250 into an 18-month CD$250 into a 24-month CD

However, you can also build a CD ladder by investing in CDs of the same maturity, but at different points in the year as you build up your savings:

$250 into a 6-month CD on Jan. 1$250 into a 6-month CD on April 1$250 into a 6-month CD on July 1$250 into a 6-month CD on Oct. 1

The above setup would give you a CD maturing every three months. You could choose any interval you want, though, depending on how often you can afford to invest and/or how staggered you want your maturation dates.

Choose a savings account until you’re ready

Everyone should have a good high-yield savings account for short-term savings, such as your emergency fund. This is also a good place to keep your savings if you aren’t quite ready to invest in CDs. The best high-yield savings accounts have rates comparable to a good CD, so you won’t lose out on too much growth, plus you get constant access to your funds. Just remember that the interest rate isn’t locked in like it is on a CD.

Learning how to invest in CDs can be a useful financial skill, and it doesn’t take a huge budget to begin. Take some of these tips and start saving!

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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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Auto insurance should address many different things that go wrong with a vehicle, but not everything will be paid for. Learn what may not be covered here. [[{“value”:”

Buying auto insurance is very important because anything that goes wrong with a vehicle can quickly lead to expensive bills. No one wants to drain their checking account paying for repairs or a car replacement after an accident, so it makes good sense to pay premiums to buy coverage to transfer those risks to an insurer.

While auto insurance will cover many problems — especially for those with full coverage policies — it’s not necessarily going to pay for every loss in every situation. In fact, drivers should understand a few key things their car insurance company won’t pay for, so they aren’t surprised to be left with these losses when something goes wrong.

Custom parts

Drivers who add after-market parts to their vehicle need to be aware that standard auto insurance policies will typically provide limited or no coverage for these add-ons. This could include:

Fancy stereo equipmentCustom paint jobsAdded chrome or lightsCustom tires or wheelsCustom spoilers

Drivers who spend a lot of money souping up their vehicles should be aware of the fact that an insurer isn’t going to pay extra to repair or replace these optional enhancements — unless the driver has purchased special kinds of coverage. Most insurers allow add-on coverage for modifications, and there are specialized kinds of insurance for classic and collectible cars that drivers can buy.

Motorists will need to get this add-on coverage or choose the special collectible or classic car insurance policies before an accident happens, though. And they’ll need to fully disclose what modifications they’ve made, and read the fine print of the policy to find out the limits on what the insurer will pay out. If a driver waits until an accident happens, it will be too late.

Personal property in the car

Drivers who keep a lot of possessions in their vehicle — especially valuable items — may be upset to discover that there’s no coverage for this property if something goes wrong. If the car is stolen and the stuff goes with it, or if items inside are destroyed in an accident, an auto insurer is typically going to pay nothing at all for it. The insurance only covers the car itself and damage the driver causes to others.

This doesn’t mean all hope is lost, though. If a motorist has renters or homeowners insurance, those policies might pay to repair or replace the personal property that was left in the car and stolen or damaged. Having these kinds of coverage in place is very important to ensure that there’s money available for personal items.

Commercial use

Most personal auto insurance policies do not provide coverage when a vehicle is being used for a business. This means if a driver gets into a crash while using their vehicle for work duties, their personal auto insurance may pay nothing at all.

This can be a huge issue in situations where someone is driving for a food delivery service or for a ride-hailing company. Motorists who plan to do that should get insurance from a carrier that provides rideshare coverage. It can also come up in other situations, such as when a small business owner is transporting equipment in their personal vehicle to a job site.

Drivers who use their car for business use at any time should let their insurer know before something goes wrong, so they can make sure they have the right protections in place.

The full balance due on a car loan

Finally, auto insurance pays only the fair market value of a vehicle if it’s stolen and not recovered or if it’s damaged beyond repair. Often, a driver will have a car loan balance that’s higher than the amount of money their car is worth. This happens because cars lose value quickly and many people take out long-term auto loans and make smaller down payments.

If a car loan balance is higher than the market value of the car, the insurer won’t provide enough money to pay off the full value of the loan unless the driver has gap insurance. This is optional add-on coverage that anyone who has a car loan should seriously consider purchasing.

Knowing what may not be covered is crucial for every motorist because it’s important to put the right added protections in place before a crash or some other incident arises. Otherwise, a motorist could be out a ton of money when it turns out insurance doesn’t pay for everything as expected.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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Many airlines are raising checked bag fees. Your next trip could be more expensive due to fee increases. Discover how to save money on checked bag fees. [[{“value”:”

In addition to charging customers for their airfare, many airlines nickel-and-dime flyers with extra fees. Checked bag fees are one additional cost that could make your next trip more costly. So far in 2024, three airlines have increased checked bag fees.

It’s essential to be aware of fee increases like this so you can budget accordingly. Do you hate paying bag fees? Find out how to avoid this extra cost when flying with your preferred airline.

Several popular airlines have increased checked bag fees

If you fly with American Airlines, JetBlue, or United, you should expect to pay more to check a bag the next time you fly. All three airlines have increased their checked bag fees this year. These additional bag fees apply to most economy-class passengers flying on most routes.

If you have yet to fly with any of these airlines in 2024, you’ll want to review current bag fees to prepare. Unless you’re an elite status flyer or premium ticket passenger who qualifies for free bags, you’ll likely want to adjust your upcoming vacation budget for this additional expense. Otherwise, your bank account may feel turbulence after you take your next trip.

Your rewards credit card could unlock free checked bag perks

Many people use travel credit cards to pay for their travel purchases so they earn rewards. Most general travel rewards credit cards include useful benefits, but these cards lack perks that could save you money on airline fees.

However, there’s another rewards credit card option to explore if you fly often and want to avoid this fee. Adding one of the best airline credit cards to your wallet could help you avoid this additional charge when flying with your favorite carrier.

Airline credit cards are best for those who fly with a specific airline often because most of these cards reward spending with the airline and offer airline-specific rewards. For example, United Airlines loyalists likely won’t benefit from having a Delta-branded card.

But if you’re loyal to one airline and get one of its cards, you may get free checked bag perks. Many airline credit cards offer a free checked bag to cardholders. Some airlines even extend this benefit to companions traveling on the same reservation.

If you’re a solo flyer, you may feel little impact from a fee increase of $5 or $10 for each one-way flight you take. However, those who travel as a family could feel more financial strain. If you travel often, consider whether an airline credit card could provide savings.

Another way to skip bag fees

Don’t want a new credit card? Here’s an alternative: Consider flying with Southwest Airlines the next time you travel. Every ticket includes two free checked bags. You may benefit if you struggle to fit all your travel essentials into a carry-on bag.

Before buying airfare for your next vacation, compare prices and see if Southwest could save you money. Southwest flight prices aren’t displayed on airfare pricing tools like Google Flights. You’ll need to review flight prices directly on the airline’s website.

No matter what airline you fly with, making strategic moves could help you save on travel expenses. Any money saved can be a win for your personal finances.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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