Money Management

Some Americans don’t do their research before they apply for a credit card. Learn why you don’t want to be one of them. 

I’m the kind of person who finds it difficult to make any kind of financial move without doing my research first. So I was shocked to learn that according to data from Clever Real Estate, almost a third of those surveyed (31%) have opened a new credit card account without learning about the card first.

This isn’t ideal — credit cards are best tailored to your spending and lifestyle, if you want to use them to improve your finances rather than ending up in debt. Here are five questions to ask and answer to be sure a given credit card is right for you.

1. Do I have a high enough credit score?

Before you get your hopes up about applying for a new card, check your credit score. Why? The card issuer will run a hard credit check on you when you apply, and if your credit score isn’t up to snuff, you could find yourself rejected.

Many credit cards target specific credit score ranges, and I hate to be the bearer of bad news, but they usually skew toward consumers with higher (say, 670 and up) credit scores. If your score has seen better days, it doesn’t mean you won’t qualify for any new card — I recommend reviewing The Ascent’s list of the best credit cards for fair credit to find a winner you’re more likely to be approved for.

2. Will the card cost me anything?

Some cards with annual fees are absolutely worth it because of their earning rates or the various perks and benefits they come with. To use myself as an example, one of my favorite credit cards has an annual fee, but it pays beaucoup cash back on groceries, a major line item in my budget. I outearned the annual fee several times over in 2023, which meant I didn’t mind paying that fee for the card. Do the math on the card you’re considering — will your earnings or the card’s other benefits make up for the fee?

If you’re intending to travel abroad with the card, find out if it charges foreign transaction fees. These are often 3% of the purchases you make in other currencies, and this can add a chunk of money to your vacation spending, so it’s best to opt for a card without this fee if you want to take it on an international trip.

3. Are there chances to earn bonus rewards or cash back?

Cash back and rewards credit cards often come with a low earning rate for purchases outside their bonus categories — say, 1% or 1.5%. But you could earn 3% or more in those bonus categories. So it’s worth exploring what those are for a given card to see if they match your regular spending in a notable way — thereby giving you the opportunity to earn a lot back with that card.

Common bonus categories for credit cards include travel purchases, dining, and sometimes more niche spending, like gym memberships or drugstore buys.

4. Will I be able to earn the welcome bonus?

A lot of credit cards come with a sweet welcome bonus for new cardholders, and they typically work by paying out a lump sum of cash back or rewards points if you can spend a certain dollar figure on the card within a set period of time of opening the account. An example is 60,000 bonus points in exchange for spending $4,000 on purchases in the first three months with the card.

Here’s the thing about welcome bonuses, though — if you’re not careful, they could become an excuse to overspend. If you can swing putting $1,333.33 per month on your new credit card to hit the spending target and earn that bonus, awesome. But if your usual credit card spending comes in around $500 or $1,000 a month, stretching to spend more might leave you with a tab you can’t easily pay off in full.

Earning interest on your spending so you can get a welcome bonus likely isn’t worth it — especially since credit card interest rates average around 20%.

5. Am I ready to manage another account?

Finally, before you apply for a new credit card, you need to decide whether you’re up for managing another financial account. For many Americans, adding a new credit card isn’t such a big deal — according to research from The Ascent about credit card usage, only 26% of us have three or more credit cards.

So the odds are good you’re only currently managing one or two credit card accounts, and tacking on another won’t represent a hardship. But if you’re juggling more cards than this, or need to use a spreadsheet to keep track of rewards earned on your credit cards, make sure adding another card to your plate is a good idea.

A new credit card can be a cause for celebration, but only if you’ve done your homework first and made sure the card is a good fit for you and your spending. Answer these questions before you hit that “apply” button.

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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 Target. The Motley Fool has a disclosure policy.

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The median balance on car loans was $15,000 in 2022. Read on to see what you can do to keep your auto loan affordable. 

Most people borrow to buy a car. Taking out an auto loan is often necessary because vehicles are just too expensive to pay cash for in most situations. But, you also don’t want to borrow too much and adversely impact your financial situation.

If you’re wondering where you stand with how much you owe on your car, it can be helpful to look at what your fellow Americans have borrowed for their own vehicles.

This is the average American’s car loan balance

According to the Federal Reserve, the median balance on a vehicle loan was $15,000 in 2022, while the mean balance was $21,000.

These mean and median car loan balances include people who have been paying on their vehicles for a while and who have paid down a good chunk of what they owe. Unfortunately, loan balances are much higher for new borrowers. Edmunds reported that in the last quarter of 2022, the average amount borrowed for a new car was $40,833, while the average amount borrowed for a used car came in at $30,217.

The bad news is, many people buying cars now are borrowing a lot of money, but the good news is that people are paying down what they owe over time. So the average overall loan balance isn’t nearly as high as the amount of debt new borrowers are taking on.

Are you borrowing too much for a vehicle?

The reality is, even owing $15,000 or $21,000 on a car can be a lot of money — especially if you have been making payments on your loan for a while. The monthly payments on a $21,000 car loan at 6.5% (which was the average APR as of Q4 2022) would be $353.01 per month if you took out a six-year, or 72-month loan, and you’d end up paying a total of $4,416.61 in interest over that period.

Now, borrowing to buy a car often isn’t optional, and it can be smart if you need a reliable vehicle to get to work since your car is an investment in the transportation you need to earn a living. But borrowing too much — especially for a luxury car you can’t afford — could make it impossible to successfully manage your personal finances and meet money goals.

To make sure you keep your car loan payments to a reasonable amount, try to keep your payments to less than 10% of your monthly income. Be sure to make a solid down payment — aim for around 10% at a minimum — and try to take out as short a loan as possible so you don’t get stuck paying for your car for many years to come.

Once your car is paid off, you should also try to avoid rushing to get another loan. Keep driving the car that you no longer have payments on for as long as possible, while putting the money you’re saving on a car loan into your savings account. You can use that money to pay for repairs to keep the car on the road or to buy a new one in cash when the time comes. This way, you can have a car loan balance of $0 and won’t have to worry about how your debt compares to that of your peers.

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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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The most important change that policyholders may need to make to a life insurance policy is to update beneficiaries as needed. Find out why. 

Life insurance policies provide crucial protections in case of an untimely death. Without life insurance, surviving dependents could be left wondering how to cover their bills without the deceased person putting income into a shared checking account.

Anyone who is buying life insurance will need to make sure they get the right amount of coverage to fully protect their loved ones left behind — and should consider increasing their policy when taking on new obligations. But, while it’s a good idea to update the amount of the death benefit in appropriate situations, that’s not the most important modification a policyholder may need to make.

There’s one change that is absolutely crucial to make ASAP to avoid major problems that could undermine the entire purpose of life insurance.

This life insurance change should be made right away

The one life insurance modification that everyone needs to make immediately is changing their beneficiaries. This needs to be done right away whenever life circumstances change.

In almost all situations, a life insurance policy will be paid out to whomever is listed as a beneficiary — and the policy will only pay out to those individuals or entities.

It doesn’t matter if a deceased person’s will says something different if they made up a last will and testament. And, with limited exceptions, it doesn’t matter if it is pretty obvious the deceased would have wanted something different. Whoever is designated as beneficiary is typically going to get the funds. This could be a big problem if the policyholder doesn’t change their beneficiary ASAP in many situations.

Say, for example, that a policyholder had life insurance and wanted the death benefit to be split between his children (let’s call them Sam, Tom, and Joe). But, what if another child, Kim, was born and then the policyholder died? If the policy was not changed before the death, Kim would be left out and Sam, Tom, and Joe would get all the funds. Kim would need to hope her brothers were generous enough to share voluntarily or she’d be left without funds she might need.

Not changing a beneficiary immediately could also be a problem if the person named as beneficiary dies and no secondary beneficiaries are named or if a policyholder has a breakup or falling out with the beneficiary. While some states automatically remove a spouse as a beneficiary after a divorce, that’s not the case everywhere — so an ex could end up with the payout from a life insurance policy if the beneficiary wasn’t changed.

Don’t wait to change a beneficiary when appropriate

The minute that a policyholder decides they need a different beneficiary, this change to a life insurance policy should be made right away. No one knows when tragedy will strike, and when it does, it would be a double tragedy if a life insurance policy purchased to provide for loved ones wasn’t paid out to the right people.

Since this can be hard to remember, especially for insurance policies purchased years ago, it’s a good idea to have a system in place to help prompt a review of the beneficiary designation at the right time.

This could be as simple as keeping a Post-it note in a wallet or other visible place saying “remember life insurance beneficiary.” That way, when the new baby is born, or the breakup happens, or the new marriage occurs, or a child is adopted, or the current beneficiary dies, the policyholder won’t forget to immediately change their beneficiary to protect those they love before it’s too late.

Our picks for best life insurance companies

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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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Want to save more money in 2024? Learn how making a few quick choices and small changes can save you over $1,000 in 12 months. 

Saving more money in 2024 is one of the most popular financial New Year’s resolutions. But sometimes, people don’t know where to begin. Saving money can feel overwhelming; if you don’t already have $500 extra a month, what’s the point of saving at all? The truth is, some of the most successful savers start small.

Even with just a few dollars out of each paycheck or by saving a few dollars a month on a few different monthly bills, you can boost your savings account by a meaningful amount by the end of the year.

Let’s look at a few estimates for how much you can save by making just a few easy money moves in 2024.

1. Save money on car insurance

The price of auto insurance has skyrocketed in 2023, and many drivers are looking for ways to save. Here are a few tips for how to save money on car insurance premiums in 2024:

Shop around for price quotes from the best cheap auto insurance companies.Stay with your insurance company but change your policy — such as by bundling home and auto insurance, raising your deductible, or cutting some optional coverages.Consider telematics insurance — by sharing your driving data with your car insurance company, you can get discounts for being a safe driver.

Your exact amount of car insurance discounts will depend on where you live, how you drive, the ages of you and your vehicle, and more. But let’s say you can get a 10% discount on car insurance. If you’ve been paying the national average car insurance premium of $3,017 per year, that means you’d save $302 on car insurance in 2024.

2. Sign up for ads on streaming video subscriptions

In the past few years, many of the most popular streaming video services have been raising their prices. But they’ve also started to offer lower-cost ad-supported subscriptions that can save you money. If you feel like you’re paying too much for streaming TV, and you don’t mind sitting through ads, you can save money on Netflix, Disney+, Hulu, and other streaming video services.

Based on pricing shown as of Jan. 15, 2024, here’s what you can save on streaming services by switching from the highest-priced ad-free plan to a lower-cost plan with ads:

Netflix: Save $16 per month by switching from Premium to Standard with ads.Disney+: Save $6 per month by switching from Disney+ Premium to Disney+ Basic (with ads).Hulu: Save $10 per month by switching from Hulu (No Ads) to Hulu (ad-supported).Max: Save $10 per month by switching from Ultimate Ad Free to With Ads.

If you switch to ads with all four of these streaming services, you’ll save $42 per month — or $504 per year!

3. Switch home internet service (or renegotiate your plan)

In the past few years, your home internet service price might have crept up. The other day, I checked my internet bill and was shocked to see that I’m paying $142 per month for high-speed cable internet! I’m pretty happy with my internet service provider (ISP), and as someone who works from home, internet service is my most important must-have utility. But that still feels expensive.

Fortunately, you don’t have to put up with high prices for home internet. Depending on where you live, there might be other options for home internet that offer lower-priced introductory deals. In my area, there are new fiber internet service providers that are offering faster internet with prices that could save me $50 or more per month! (Maybe I should finally switch…)

If you love your home internet service and don’t want to change, you can call your ISP and ask them to give you a better deal. Home internet is one of many bills you can negotiate. Just because the company has raised its prices doesn’t mean you have to settle for it. If you call to complain about the price, the ISP will often want to keep you as a customer — and might offer you a retention discount.

Not everyone has the right local options to save $50 a month on home internet. But even if you could save half that amount — $25 a month — you’d have an extra $300 per year in your bank account.

Total savings from these three easy moves

If you make all three of these money moves, with the assumptions and estimates laid out above, here’s how much you can save in one year:

When you consider that the typical American savings account is about $1,200, these three simple money moves could help a lot of people double their emergency savings.

Bottom line: You are not helpless against rising prices — you still have choices. You don’t have to keep paying high prices for car insurance, home internet, or video streaming services. By making a few simple changes in your monthly budget, you can unlock significant savings to improve your personal finances 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 positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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After getting married, it’s important to report this life update to your insurer. Here’s why tying the knot matters to a car insurance company. 

Getting married changes some obvious aspects of a couple’s financial life. Obviously, two people have now formed a legal union, so they may have a joint checking account, live in a shared household and split expenses, and be working toward financial goals together.

But aside from the obvious financial implications of getting married, it’s also important to take one other surprising step that many people don’t realize. It’s a step that can result in ongoing financial savings, so it is absolutely worth taking.

Do this after marriage to reduce costs

After getting married, both of the newlyweds should report their change in relationship status to their auto insurer.

Now, a car insurance company may not be first on the list of those who a couple wants to share their exciting news with (for normal people, their insurer probably isn’t even on the list of those who are notified). But the reality is, it is worth a phone call to report that a marriage has taken place.

That’s because auto insurance companies take many factors into account when setting insurance premiums — and marital status is one of them.

A new marriage could mean lower car insurance premiums

Car insurance companies have tons of data on what makes drivers more or less likely to become involved in collisions. And one of the things the data shows is that married people are often less likely to become involved in auto accidents that result in insurance claims.

Because insurers view married people as presenting a reduced risk of making claims that lead to payouts, those who are married rather than single end up generally paying a lower rate for car insurance coverage.

In fact, premiums can be as much as 5% to 6% lower for married people buying full-coverage auto insurance, compared to singles buying the same policy. A full-coverage policy includes liability, collision, and comprehensive coverage to pay for losses to a policyholder’s own vehicle and damage caused to others, and it’s often the right choice for drivers.

A savings of 5% to 6% on auto insurance can provide significant savings. For a driver who was paying around $1,800 a year to cover their car, a 6% reduction in premiums would leave that motorist with $108 extra in their pocket instead of the insurer’s — enough to take their new spouse out for a nice dinner.

Multi-car policies can also be a source of savings

Married couples may also be able to benefit from additional premium price reductions by getting together and buying their coverage from the same insurer to qualify for multi-car or loyalty discounts. So, the savings could be even greater if a newlywed couple informs their insurers of their new relationship status and if the couple compares their options among different insurers than what they came into the relationship with to see which will offer the best rate for them under their current circumstances.

Those who want to benefit from this savings should reach out to their insurance agent or call the insurance company directly ASAP so their data can be updated with the insurer and their policy premiums can be set appropriately to their new risk tolerance upon renewal of the policy. Since marriage often comes with lots of new shared goals, saving money on insurance premiums together could help make accomplishing those objectives easier — so it’s worth the effort.

Our best car insurance companies for 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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Your credit score has a big impact on your finances. Find out if a high credit score is still necessary when you retire. 

For most of your adult life, your credit score is important. It’s a measure of how likely you are to repay the money you borrow. So any time you borrow money, the lender will check your credit score and use that to set your interest rate.

Once you’re retired, you may start wondering if your credit score still matters. Maybe you already have your home paid off, or you have a mortgage with a fixed rate, and you don’t plan to borrow money anymore. And if you already have quality credit cards you like, you might figure you won’t be applying for any new ones.

To be honest, in this situation, your credit score isn’t as important. But that doesn’t mean you should neglect it.

Your credit score still matters after you’ve retired

There are many ways your credit score affects your life, and they don’t all involve borrowing money. That’s why your credit score can still help or hurt you, even if you’re retired and not planning to apply for any more loans or credit cards.

For example, in all but four states, car insurance companies use credit scores when setting rates. It’s not a minor factor, either. Drivers with excellent credit paid an average of $1,947 in annual premiums in 2023, according to research on how credit scores impact car insurance by The Motley Fool Ascent. Drivers with poor credit paid an average of $4,145 — a whopping $2,198 more.

If you drive, you should take care of your credit score. And that’s not all. Here are a few other situations where your credit score will come into play:

Setting up utility services: Utility companies usually run a credit check on new customers. If you don’t have a high credit score, you could be required to pay a security deposit to set up electricity, gas, or water service.Getting phone, cable, and internet service: These companies also normally run a credit check and require a security deposit if your score isn’t high enough.Renting a home: If you need to move at any point, many landlords run a credit check on rental applicants.

And even if you don’t plan to apply for a loan or credit card again, it’s better not to close that door entirely. Your car could break down, and the best way to buy a new one is an auto loan. Or you might find out about a grocery credit card that will earn you lots of cash back on your supermarket spending. If you maintain a high credit score, you’ll likely be able to get approved for credit if you ever need it or want it.

Also, if you already have credit cards you like, keep in mind that these can be canceled if your credit score drops too much. Card issuers monitor their cardholders’ credit scores. If your score drops, you’re considered a greater risk. A card issuer could decide to cancel your card for that reason.

It’s easy to maintain your credit score when you retire

Some aspects of managing your finances get more complicated when you retire. Fortunately, maintaining your credit score isn’t one of them.

The key ingredient in your credit score is your payment history. When you pay on time, it’s good for your credit. The longer you do this, the more it builds a positive payment history. If you’ve been using credit for decades and have consistently paid on time, you’re in an excellent position. All you have to do is continue paying on time, and you shouldn’t have any issues with your credit score.

A few other factors go into your credit score, but they’re not weighed as heavily as your payment history. The only other factor with a large impact is your amounts owed, meaning the amounts you owe on credit cards and loans. As long as you don’t owe too much on your credit cards, this won’t be a problem.

While you don’t need a high credit score when you retire, it’s the safest option. And the habits that will help you maintain your credit, namely paying on time and not borrowing too much, are good financial habits regardless.

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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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