Money Management

Hoping to get a credit limit increase in 2024? See why some credit card limits might be lowered — and learn how to protect your credit score. 

New Federal Reserve data shows that more Americans are having trouble paying their credit card bills. During the pandemic, many Americans were able to save money and pay off credit card debt. But in the past few years of rising prices, “revenge spending,” and depleted savings accounts, some Americans are starting to struggle with credit card delinquency. The percentage of credit card balances that is 30 or more days past due is at its highest level in 10 years.

According to a recent survey from the Federal Reserve Bank of Philadelphia, credit card delinquency rates have increased to above pre-pandemic levels. When people fail to repay their credit cards and let the payments become overdue, that’s a sign of financial stress.

As of the third quarter of 2023 (the most recent data available), here’s approximately how many credit card balances were overdue:

30 or more days past due: 3.2%60 or more days past due: 2.2%90 or more days past due: 1.5%

If your credit card balance is overdue, this can cause a big hit to your credit score. Letting a credit card go into 60- or 90-day delinquency can be a sign of serious trouble in your personal finances. But even if you’re not falling behind on your credit card bills, the fact that so many other American credit card borrowers are struggling could have implications for your credit.

Let’s see what rising credit card delinquencies could mean for your ability to borrow — and how you can keep improving your credit in 2024.

Don’t count on a credit limit increase in 2024

One consequence of higher rates of overdue credit card payments is that the banking system might tighten credit standards. Even if you’re not having financial problems and you’re paying your credit card on time and in full, tighter standards might make it harder for you to get a credit limit increase.

Depending on your credit card company, your credit limit might even be lowered. For example, if you have a credit limit of $10,000, you might get a letter from your bank saying that your limit is being lowered to $8,000. The Fed survey found that “the percentage of accounts receiving a credit line decrease has been climbing.” Getting your credit limit lowered can hurt your credit, because it affects your credit utilization ratio.

To keep your credit limit from being lowered, make sure you pay your bills on time, avoid maxing out your credit cards, and try to keep using every credit card that you have open — inactive credit card accounts will sometimes be closed by the credit card issuer. Keep being a reliable customer for your credit card company, and you’ll be more likely to keep your credit limit.

In a cash crunch? Keep making minimum credit card payments

Even if money is tight, you should always try to keep making minimum payments on your credit cards. It’s better to make a minimum payment, even if it’s only $50 or $25 per month, than to let that credit card balance end up overdue. Accepting more interest charges in the short term by making minimum payments is often better for your personal finances than taking a hit to your credit score from overdue payments.

Don’t panic — keep using credit cards that work for you

The new credit card delinquency survey shows that some Americans are struggling with their personal finances. But that doesn’t mean your credit card is going to get canceled, or you need to worry about losing access to credit. The good news is: most people (almost 97% of credit card balances) are still paying their credit card bills on time.

Credit cards, for many Americans, are a useful tool for personal finances and everyday life. With credit cards, you can make purchases conveniently, do online shopping, cover emergency expenses, and earn valuable credit card rewards. Even if credit standards get a little more strict in 2024, most Americans with decent credit scores will likely be able to keep using credit cards in the ways they want.

But if you want to maximize the benefits of credit cards, make sure you pay your credit card bills on time and in full (if you can). This will help you avoid interest charges, preserve your credit score, and get the most financial benefit from your rewards credit cards.

Bottom line: The percentage of Americans who are falling behind on their credit card bills has increased in recent months. But most Americans are still paying their credit cards on time. Even if credit limits decrease slightly in 2024, people with good credit are likely to continue to enjoy the benefits of credit cards, such as travel reward points, airline credit card frequent flyer miles, and more.

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Buying a dream home could turn into a disaster if you stretch to buy a house or make these other mistakes. Read on for a few red flags to avoid. 

Owning a home is the American Dream. And when you start to buy a house and find your dream property, you may end up feeling as if that dream has come true. And hopefully, it has.

Unfortunately, not every real estate sale works out as well as the buyer was hoping it would. In fact, in some situations, the purchase of a dream home could turn into a major financial and personal disaster. You don’t want that to happen to you, so watch out for these three signs that the home you’ve been dreaming about could turn into a huge nightmare.

1. You’re committing too much of your income to payments

One of the single biggest signs that your home purchase is going to be a huge mistake is if you are committing too much of your monthly income to covering the costs.

Mortgage lenders sometimes allow you to devote up to 50% of your total income to debt, including your housing costs and other payments. But, doing so can be a huge mistake. In fact, ideally you’ll want no more than 28% of your income to go to your property taxes, mortgage, homeowners insurance, and HOA fees. And you want no more than 36% of your total income to go debt payoff including your home loan.

If you have too much money going to cover your housing costs and other debts, you may not have the flexibility you need to save for retirement or big purchases, or to make lifestyle changes like switching jobs. You don’t want to be trapped for 30 years by home payments that are really hard to afford.

2. You don’t understand your mortgage

Not understanding your mortgage is another major red flag. You should have a clear idea of how much your upfront closing costs will be, what fees you’ll pay, what your monthly payments will be, whether your payments could change over time, and how much your total costs will be over the life of the loan. You should also know if you have any prepayment penalties you’ll get stuck with if you decide to pay off your mortgage ahead of schedule. Your mortgage lender is required to provide you with this information, so be sure you read and understand it — and ask questions if you don’t.

If you end up signing up for a mortgage with an adjustable rate and don’t know how high the rate could go, you could find yourself with a payment that’s not affordable. For most people, the best option is a 30-year fixed-rate mortgage that has no prepayment penalties. That way, there will be no surprises and you can confirm your payment will be affordable for the life of the loan.

3. You have a long and unpleasant commute

Finally, the last major red flag that you could end up unhappy in your dream home is if you have a long commute. The average American has a 28-minute commute to and from work, but unfortunately a long commute has been tied to a decrease in overall well-being. Adding 20 minutes to your daily commute is also the equivalent of taking around a 19% annual pay cut.

If you’re committing to buy a home that’s very far from work or loved ones, think very seriously about how this will impact your free time and stress levels, as you may quickly come to regret your choice.

If you spot any of these three signs that your home purchase could turn into a nightmare, you may want to pause before moving forward, because there’s a very big chance you could end up with regrets. It’s worth looking at other loan options and other homes out there that would be more within your price range and that would allow you to avoid the stress of a long drive every day for years to come.

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It’s important to have enough money saved for emergencies. Find out what could go wrong if you don’t have enough in your emergency fund. 

It’s widely agreed among experts that one of the first big financial moves you should make is starting an emergency fund. Before you focus on investing, or paying down debt, save at least $500 to $1,000 for emergencies. Over time, aim for an emergency fund with three to six months of living expenses.

Not everyone does this. Case in point, the median savings account balance is only $1,200 — a far cry from three to six months of living expenses for most people. To be honest, building your emergency savings is a chore, and it’s not the most exciting part of personal finance. It’s understandable why you’d be more interested in saving for a house or investing to grow your money.

That doesn’t mean it’s a good idea. Because when you don’t have enough in your emergency fund, you’re leaving yourself exposed to some serious financial issues.

1. Going into debt to cover emergency expenses

Imagine a worst-case scenario where you lose your job or have an unexpected $5,000 bill. If you have a large emergency fund, you can make a withdrawal to cover your expenses. It’s still not pleasant, but at least you were prepared.

If you don’t have enough money saved, what are you going to do? You need to pay your bills, and that means you’ll need to borrow money from somewhere. That may mean you either:

Run up a balance on credit cards, which have an average interest rate of 21.47%.Get a personal loan — 24-month personal loans have an average interest rate of 12.35%.

Those are high rates, so interest could end up costing you a significant amount.

If you’re in a jam, there are at least 0% intro APR credit cards. Some of them have intro periods of 15 months or longer where you don’t get charged interest. However, you typically need a high credit score to qualify. You’ll also still be going into debt, and after the intro period ends, the 0% APR will shoot up to the card’s normal rate.

2. Not being able to make payments on your accounts

Borrowing money can help you get by in an emergency, but it’s not a long-term solution. In fact, it can make it even harder to recover financially, because you’re adding debt payments to your monthly bills. You’ll need to pay back the money you borrow through loans or credit cards.

Let’s say you’re living paycheck to paycheck. You take home and spend $4,000 per month. Unfortunately, you end up with a $5,000 car repair or hospital bill. To pay that off, you get a 24-month personal loan with a 13% interest rate. You’ve taken care of the immediate issue, but now you have a $238 monthly loan payment.

Hopefully, you’re able to make it work and get all your bills paid. But what can eventually happen is that you’re unable to make your required monthly payments. With credit cards and loans, this likely means getting charged late fees, pushing you even deeper into debt. There’s also another way it can seriously hurt your finances.

3. Damage to your credit score

When you’re unable to make payments on an account, that gets reported on your credit history. It doesn’t happen right away — your account needs to be at least 30 days past due. Once you’re late by 30 days or more, it can cause severe damage to your credit score.

The exact amount varies depending on your credit history before the late payment. For consumers with excellent credit, a single late payment can cause a credit score drop of up to 110 points. It gets worse if your account becomes 60 days and 90 days past due, and if the creditor eventually decides to charge off the account and send it to collections.

If this happens, it can take a long time to rebuild your credit. Late payments and charge-offs stay on your credit file for seven years. It doesn’t take quite that long to get good credit again, but it’s a process that can last multiple years.

A strong emergency fund is a must

An emergency fund is a crucial part of being financially secure. If you don’t have one yet, or if yours doesn’t have at least three months of living expenses, make that a priority for 2024.

Figure out how much you can afford to save for your emergency fund every month. Then, set up automatic transfers to your savings for that amount. Make sure to use a high-yield savings account for your emergency fund, too, so you get a competitive interest rate.

It takes time to build an emergency fund, but you’ll be glad you did. It gives you the peace of mind that you’re ready for anything.

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Did you feel like 2023 was a bad year for your money? Check out why the U.S. economy is getting better — and how to make smart money moves in 2024. 

2023 was a frustrating year for many Americans, with high inflation and rising interest rates. Many people depleted their savings and felt like they were falling behind in their personal finances. Economic experts called this the “vibecession” — even though America was not in a recession, the economy’s “vibes” were bad. People felt like the economy was terrible, even though unemployment was low and people were getting wage increases.

There’s good news for 2024: This vibecession seems to be ending. Many Americans are likely to feel a bit richer in 2024 because of falling prices and a strong job market. Let’s look at a few reasons why the economy could be getting better (and feeling better), and what money moves you can make for your personal finances in 2024.

Is the economy getting better in 2024?

People hate high inflation because it makes them feel poorer. But with the Fed likely to cut interest rates in 2024, there are signs that inflation is getting better. According to analysis from Bloomberg columnist Conor Sen, there are a few reasons why Americans’ economic mood is likely to improve in 2024.

Food has gotten cheaper

One cause for alarm during 2022 and early 2023 was the sky-high price of food at the grocery store. Remember how expensive eggs used to be? Fortunately, food inflation is down near 3%, compared to 11% in 2022.

Gas prices are down

Between June 2022 and December 2023, retail gas prices decreased by about 40%. For Americans who live paycheck to paycheck, high prices at the pump make it harder to have any money left at the end of the month. Lower gas prices will help keep more money in the bank accounts of millions of American families.

Workers are getting paid better

As of December 2023, according to the Bureau of Labor Statistics, the U.S. unemployment rate was 3.7%. Bloomberg’s analysis finds that wages are rising faster than inflation — meaning that many workers will have more money in their pockets and enjoy better buying power. Even if prices are higher, your paycheck is (ideally) getting bigger, too.

The combination of low inflation, low unemployment, and strong wage growth is known as a “Goldilocks economy” or a “soft landing.” When working people can see more take-home pay in their paychecks without losing it to rising prices, that makes it possible for more people to save, invest, and build wealth.

What to do if you’re making more money in 2024

Are you benefiting from a strong economy and the end of the “vibecession”? If you have a good job and your wages have increased, here are a few ideas for some smart financial moves you can make in 2024.

Pay off high-interest debt (like credit card debt)

Many people who have good jobs and good incomes might still be struggling with credit card debt. If you got a pay raise in 2024, or if you are finding some extra cash in your bank account at the end of the month, make a plan to pay off your credit card debt.

One good way to do this could be a balance transfer credit card. If you have a good enough credit score to qualify, you can open a new credit card with a 0% introductory APR and transfer your credit card debt to that new card. This helps you pay off debt faster, at 0% interest for a certain amount of time.

Open a high-yield savings account

Another smart money move in 2024 is to open a high-yield savings account. Ideally, you should have three to six months of living expenses saved in a bank account in case of emergencies. 2024 could be a good year to replenish your emergency savings. And the best high-yield savings accounts are paying over 5.00% APY (as of Jan. 14, 2024).

Save more money for retirement

If you get a pay raise in 2024, you should also try to increase your retirement savings. Put an extra 1% or 2% of your salary into your 401(k) — at the very least, make sure you’re getting the full amount of any 401(k) match that your employer offers.

You can also save money for retirement with a traditional IRA or Roth IRA. Opening an IRA can let you save an extra $7,000 for retirement in 2024, or $8,000 if you’re age 50 or over.

Bottom line: No one can predict the future, and the problems of the “vibecession” could come back. But if you suddenly seem to have more money left over at the end of the month, if you’re getting a pay raise or promotion in 2024, that’s a good sign that the American economy is growing and thriving. Make some smart moves now to take advantage of a healthy economy — and improve your financial wellness.

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If you’re buying a home, certain issues could make the deal difficult. Find out about possible problems that could interfere with taking ownership. 

If you’re buying a house, the last thing you need is to have problems after you’ve found the perfect property and had your offer accepted. After all, it’s stressful enough to even find a home you like and to get a seller to agree to the price and terms you’re interested in.

Unfortunately, there are definitely situations where problems can arise after the papers are signed. In fact, here are three huge problems that could make it impossible — or at least a whole lot harder — for your sale to go through in the end.

1. Inspection issues

When you make an offer to purchase a home, you should pretty much always make that offer conditioned on having a satisfactory home inspection. This is called including an inspection contingency in your offer.

If you have an inspection contingency, you have the right to have a professional inspector come through and take a look at the home. They’ll check for foundation cracks, problems with the roof, HVAC issues, or other concerns that may not be apparent to the naked eye but that could be very costly to fix.

If an inspector finds major problems, like a roof on the verge of needing replacement, you could be looking at an average cost of around $10,000, according to This Old House. And some problems may be even more expensive.

In this situation, you’d probably want to negotiate with the sellers to make repairs or lower the sale price so you can cover the repairs after closing. But if the seller won’t do that, you may want to walk away from the sale and find another house that won’t be a money pit. As long as you made your offer contingent on inspection, you can do that.

2. Liens on a property

Liens on a property are another major issue that could cause huge problems with your sale. A lien is a claim against the title of the house. The title is what shows ownership, and the seller can only transfer the level of ownership they have.

Sometimes, people won’t pay their taxes or homeowners association fees or they’ll get court judgments against them. When that happens, the person or company they owe money to can go to court and get a lien placed on the property. This essentially means they’re claiming they have a right to some of the value of that property because of the debts the owner owes to them.

If there is a lien on a property, it would transfer with the house. The seller couldn’t give you clean title or ownership rights without competing claims attached. Your mortgage lender won’t let you buy a house if you don’t have clean title, and you don’t want to anyway, because you could get stuck paying off the debts.

You’ll likely find out about any liens when a title insurer does a title search. You need to buy title insurance when purchasing a property to protect against surprise claims against the home, but if the title search shows issues, the insurance won’t be available until they are cleared. Plus, the home loan can’t close.

In this situation, you’ll have to hope the seller is able to make payoff arrangements so the sale can move forward.

3. A low appraisal

Finally, the last big issue that could derail your sale is a low appraisal.

If you’re getting financing for the house, your lender is going to cap the percentage you can borrow relative to the home’s value. For example, some lenders allow you to borrow 80% of what a home is worth, and others allow you to borrow 90% or even 97%. But, in most cases, you need to have some home equity (ownership interest) beyond what the bank is loaning you.

The bank doesn’t care what you’re paying for the house — it only cares what it’s worth, so it’ll want you to get an appraisal. Unfortunately, if the appraisal comes in at less than you’re paying, this could be a huge problem.

Say you are paying $400,000 for a house, your lender requires a 10% down payment, and you’re putting $40,000 down. You’d be good to go. But if the appraisal comes back and shows the house is worth $350,000, then you’d have a huge problem. The most the bank would loan you is 90% of $350,000, or $315,000. With your $40,000 down payment, you would be $45,000 short.

If you made an offer contingent upon (conditioned on) a satisfactory appraisal, you could walk away at this point, or could ask the seller to drop the price. If they don’t, you would have to decide if you wanted to put the extra $45,000 down on the home.

It’s easy to see why these problems could cause your home sale to fall through. Unfortunately, there’s not a whole lot you can do to avoid them until after you discover them during the sale process. So just be sure you put the contingencies you need in your offer — and be prepared for the fact a home sale isn’t always going to go perfectly every time.

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

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Does your bank pay near-zero APY? Give your savings a pay raise! Here’s how a savings account could earn you hundreds of dollars in 2024. 

What if I told you that there was one simple decision you could make to stop losing hundreds of dollars a year? But this type of lost money isn’t the same as an extra cost or a pay cut; instead, it’s a loss of extra income that you could be getting. Here’s how to boost your income in 2024, with minimal effort: Open a high-yield savings account.

Let’s look at a few reasons why getting a higher yield on your savings could be a smart, easy way to improve your personal finances in 2024.

Banks are paying higher APYs on savings in 2024

During the past two years of rising interest rates, many banks and credit unions have started to offer higher APYs (annual percentage yields) on savings accounts. The best high-yield savings accounts are paying over 5.00% APY (as of Jan. 14, 2024). But too many Americans are still not moving their money to higher-yielding accounts.

If your savings are only getting the national average APY of 0.46% (as of Jan. 14, 2024), you’re missing out on free money. The typical American has $1,200 in their savings account, according to The Ascent’s research. And $1,200 in a 5.00% APY savings account would earn $60 in one year.

It’s true that $60, or about $5 per month, isn’t a lot of money and might not be worth switching banks for. But if you have more cash in savings than the typical American, if you instead have the recommended three to six months’ expenses in your emergency savings, you could be missing out on significant money.

How much interest can you get with a high-yield savings account?

Some of the biggest U.S. banks offer terrible APYs on savings accounts. Depending on your bank, your savings account might only be getting 0.01% APY! You can do better than that.

Here are a few examples of how much cash your savings can earn in one year if you switch from a near-zero APY to a high-yield savings account:

That’s not a typo: If you have $10,000 in a bank savings account that pays only 0.01% APY, after one year you’ll earn…$1. This means that after inflation, your savings account is losing purchasing power. Leaving your savings in a bank that doesn’t pay yield is effectively like losing money.

Don’t you deserve better than that? That $10,000 of savings would earn you $500 after one year in a high-yield savings account. Why not go get the higher yield on your savings that your money is worth?

Why settling for low-yield savings is a bad money move

Think about it this way: At your job, you always want to try to get paid the most money possible, right? You would never say to your employer, “No thanks boss, I don’t want a pay raise this year. I don’t want extra money. You can keep that money for yourself!” So why would you say that to your bank?

In the job market, you deserve to earn as much money as your skills, talents, and work ethic can command. If your employer isn’t paying you enough, you can switch to another employer that pays better. It’s the same way with banking: Your savings deserve to earn a certain amount of money, based on interest rates. If your bank isn’t paying you enough for your savings, it’s time to consider switching banks.

Bottom line: Many Americans don’t have $500 of emergency savings. If you are living paycheck to paycheck and don’t have much money saved, the amount of APY you get on a savings account is not your highest priority. But if you do have a decent amount of cash sitting in a savings account, it’s time to pay attention to how much (or how little) yield you’re earning from your bank. Depending on your savings account balance, you could be missing out on hundreds of dollars of extra money. Give your savings a “pay raise” — open a high-yield savings account in 2024.

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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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