Money Management

Have you heard about the bill in Congress that could end credit card reward points? Learn more about the Credit Card Competition Act. 

There’s a big battle brewing in Washington, D.C. that could change the future for millions of credit card rewards customers. A bill called the Credit Card Competition Act (CCCA) is being considered by Congress, and if it’s passed and signed into law, it could radically transform the landscape of travel rewards credit cards.

Senator Dick Durbin (D-Illinois), one of the sponsors of the Credit Card Competition Act, has described the bill as a way to help consumers and small businesses. “American consumers are worried about inflation and rising prices, and credit card swipe fees are part of the problem,” Senator Durbin wrote.

What is the Credit Card Competition Act? Could it be the end of travel rewards credit cards? Let’s look at what this legislation means for credit card customers — and let’s start with a quick explainer about a topic that most people don’t realize is such a big deal: credit card swipe fees.

Credit card swipe fees: What they are and how they work

Every time you swipe your credit card or use your card to buy something online, the merchant (restaurant, store, ecommerce site, bar, gas station, etc.) has to pay a small fee called a “swipe fee,” also known as a transaction fee or processing fee. These fees are paid to banks and credit card processing networks (like Mastercard and Visa) that work behind the scenes of the financial system.

No one loves paying credit card fees, but they have a purpose. Credit card transaction fees are used to pay for the complex “plumbing” in the back end of the banking system. A lot of technology, effort and oversight is needed to help get credit card transactions approved, move money between banks, and make payments flow quickly, securely, and smoothly. This elaborate processing system handles more than 50 billion credit card payments in the U.S. each year.

Credit card processing fees amount to a small percentage of your total transaction price, and the fee is not paid by the consumer, it’s paid by the merchant. The average credit card processing fee is around about 2.24%. So if you buy a $100 pair of shoes, the price you see on your credit card statement is $100, but the shoe store has to pay $2.24 of that money in swipe fees. Out of that $100 that you pay for your shoes, the shoe store gets $97.76 of revenue.

Consumers don’t usually notice or care about credit card transaction fees, but all those “small” swipe fees add up to a big pile of money. As of 2022, U.S. credit card companies earned $126.4 billion from credit card processing fees. Credit card fees are a necessary cost of doing business; most retailers, restaurants, and small businesses want to give their customers the convenience of paying via credit card. But all those everyday swipe fees can put a dent in profit margins, especially for small businesses.

What is the Credit Card Competition Act trying to accomplish?

Mastercard and Visa, two large credit card processing networks (you’ve seen their logos on the front of your credit or debit cards), control over 80% of the U.S. credit card network market. The Credit Card Competition Act would require America’s largest credit-card issuing banks and financial institutions (with assets over $100 billion) to allow their credit cards to use at least two credit card networks, at least one of which cannot be Mastercard or Visa.

The goal: give merchants more choice for which credit card network to use when processing payments, and create a more level playing field for the smaller credit card networks like Discover and American Express. This competitive pressure could motivate big credit card networks to charge lower fees, leading to lower costs for merchants, which could then pass the savings on to consumers.

Why the Credit Card Competition Act is bad for credit card reward points

Here’s one good thing about credit card transaction fees: they help pay for all those fun credit card rewards programs. If you’ve ever gotten free frequent flyer miles, extra bonus points, a free night at a hotel, or cash back on everyday purchases because of your credit card rewards program, you can thank transaction fees.

Credit card companies use some of the extra cash generated by transaction fees to reward their best customers, and to encourage people to keep swiping those cards. If the Credit Card Competition Act passes, banks might have less money available for credit card rewards — and might stop offering credit card reward points altogether.

There are strong disagreements about whether credit card rewards would totally go away if the CCCA becomes law. A statement from the National Restaurant Association (which supports the CCCA) argues that credit card rewards could still be offered. For example, banks have continued to offer debit card rewards even though similar regulations were passed in 2010 that drove down fees for debit card transactions.

But an editorial from America’s Credit Unions (an opponent of the bill) argues that the CCCA would be a giveaway to big box retailers that would likely not pass on the savings to consumers, that it would wipe out credit card rewards points, that it would make credit card transactions less secure, and that it would raise costs for smaller financial institutions like credit unions. When a similar law was passed in 2010 to cap fees on debit card transactions, it was “a leading cause of the decline in free checking accounts offered by credit unions,” according to America’s Credit Unions.

Bottom line: As of Jan. 10, 2024, the Credit Card Competition Act has not passed Congress. If it does, and is signed into law, there could be big changes coming for credit card reward points.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Mastercard 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.

 Read More 

If you want to spend less on groceries, you may want to consider shopping at Aldi. Find out what strategic moves you can make to save big at Aldi. 

You’re not alone if you’re feeling the impact of rising prices on your wallet. No matter where you shop, a trip to the grocery store is likely much more expensive than a few years ago. But you can make strategic moves to avoid overspending while refilling your fridge with food.

One way to do that is by shopping at discount grocers like Aldi. You don’t need to be intimidated if you’re new to shopping at this retailer. You’ll feel more comfortable the more you do it. To maximize your savings while shopping at Aldi, consider following these tips.

1. Don’t ignore the sales flyer

Like other grocery stores, Aldi has a weekly flyer outlining its sales. You’ll likely receive a paper flyer in your mailbox if you have an Aldi nearby, but you can also view the weekly sales flyer on Aldi’s website or mobile app. Doing this while making your weekly shopping list is an excellent strategy. Extra discounts can result in a less costly grocery bill.

2. Keep competitor prices in mind as you shop

Aldi is known for having low prices — but some items may be cheaper elsewhere. Keeping product pricing for other retailers in your area in mind as you shop can be beneficial. Knowing whether to buy an item at Aldi or another nearby retailer can result in significant savings.

I’ve recently gotten back into the habit of shopping at Aldi, but I also get some of my essentials at Target. I’ve been shocked to learn that many equivalent alternatives are cheaper at Target. I’m learning what items are best to buy at each retailer to avoid overspending.

3. Avoid the name-brand products

For the most part, Aldi stocks its shelves with private-label brands exclusive to the retailer. But you’ll find some name-brand items, too. If you want the best deal possible, avoid the name-brand essentials. You’ll likely find that the private-label offerings are just as good as the name-brand ones, and you’ll waste less money.

4. Limit the seasonal (and impulse) buys

Like any store, Aldi sells seasonal treats that will get your attention. But these items are typically priced higher than other items in the store because they’re new and in demand. Adding impulse buys like this to your cart could result in you overspending. Consider keeping these buys to a minimum if you want to avoid a costly credit card bill.

5. Pay attention to best-by dates

I’ve come home with Aldi essentials a few times only to find the best-by dates were days away. I’ve since learned to check the best-by date before adding an item to my cart. This is especially true with bread items. Sometimes, I must pick a loaf on one of the lower bread racks because the soon-to-expire dates are up top. Paying attention to best-by dates while shopping at Aldi can help you save money by avoiding food waste.

Remember these tips the next time you shop at Aldi so you can keep more money in your bank account. For additional ways to save money, check out our personal finance resources.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

 Read More 

CD investing strategies can help you minimize the risk, while maximizing your returns. Read on to learn how to find the best strategy for you. 

When interest rates are high, it pays to have money to invest. And if you’re willing to lock in an interest rate in exchange for not touching that cash for a given amount of time, you could get guaranteed returns on certificates of deposit (CD) investments. Plus, there are ways to hack these financial products to get the most out of them.

Here are four strategies you may want to consider.

Hack 1: CD ladders

CD laddering is a practice of opening multiple CDs, each with different maturity dates. The goal is to minimize the amount of time that all of that cash is inaccessible, therefore protecting you against the risk of incurring early withdrawal penalties. It also locks you in for specific interest rates, which can be especially useful during a high-rate environment (like now).

For example, let’s say you save $10,000 to invest. You could open a 1-year CD (5.20% APY) and stash $2,000 in there. At the same time, you could put $2,000 in a 2-year CD (4.50% APY), the same amount in a 3-year CD (4.30% APY) and a 4-year CD (4.35% APY) and a 5-year CD (4.15% APY). That way, after that first year, you’d have access to at least $2,000 of your initial investment, plus the returns. At the end of the five-year period, you’d have earned $1,379 in interest, assuming you never reinvest the money in the shorter CDs. And you certainly could keep the ladder going should you choose to.

Hack 2: The barbell strategy

This strategy requires you to purchase short- and long-term CDs, but you’d skip over mid-term maturity dates (think: two to three years.) So, each CD length represents the opposite ends of the barbell. As with laddering, you’d have a portion of your funds available relatively quickly, but you’d still get the benefit of locking in the current CD rates for years to come, maximizing your returns. There’s a bit more risk since you’d be skipping out on those mid-term investments, but the interest earned could make up for that if you are comfortable with the risk.

For example, if you take $5,000 and put it in a 1-year CD that has a 5.20% APY, and put another $5,000 in a 5-year CD with a 4.15% APY. At the end of a five-year period, you’d have earned about $1,387 in interest. Again, that’s assuming that you don’t reinvest the initial CD deposit and interest, which would increase your interest earnings.

Hack 3: The target strategy

Here, you’d spread out the timing of your investing and instead opt for the same maturity dates. So it can be easier for those who don’t already have a large sum of money to invest in multiple CDs, since you’d have time to put that money away. And it lets you get a solid return on that cash, with a mind to a particular date when you might want to use those funds.

For instance, you could put $2,000 away in a 5-year CD this year. Then, next year you could put the same amount into a 4-year CD, and so on. At the end of the five-year period, you’d have your original investments plus the returns.

There can be some risk here: Your money would be tied up for a long time period, though you could opt not to invest in the next CD if you run into financial issues, like an unexpected medical bill. But what’s even more pressing is the potential for rate changes. Right now, rates are high pretty much across the board, which is more favorable for those with lump sums to invest because they can lock in these rates. There’s no way to know how rates will change over time, but you could risk earning less on your investments if rates fall the next time you’re ready to open a CD. Still, it may make sense for those with specific financial expenses on the horizon, as long as the rates outpace inflation.

Hack 4: No-penalty CDs

One of the big drawbacks to CDs is that you’re locking up your money for potentially years, and with most CDs, you’d have to pay a penalty fee to take that money out early. No-penalty CDs remove that problem by letting you withdraw those funds ahead of the maturity date (provided it’s been at least six days since account opening), with the full accrued interest amount. Just be aware that you may have to close the full CD if you ever need even a portion of the funds, and these can come with lower rates.

By combining this hack with other strategies, however, you can build your funds with less risk to your own personal financial security.

CDs can be useful banking products. And when you employ the right strategies, you can both minimize risk and maximize the returns, and make them work for you.

These savings accounts are FDIC insured and could earn you 10x 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 can earn you 10x 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.

 Read More 

Unemployment is projected to move higher this year. Here’s how to get your finances ready no matter what happens. 

There have been positive signs coming from the economy lately. Besides a slight uptick in December, inflation mostly cooled toward the end of 2023.

And, after surging over the past year and a half, interest rates have begun falling a bit and are projected to move lower in 2024.

But there are also indications that more pain could potentially be ahead for Americans. Some experts predict unemployment will rise this year, putting additional pressure on cash-strapped Americans.

Here’s where unemployment is headed and how to get your personal finances in the best shape to prepare for an unexpected financial emergency.

Unemployment will rise

You may have noticed news of recent job cuts. Amazon, Citigroup, and Google have already announced layoffs this year, and some experts believe the labor market will continue softening through 2024.

The nonpartisan Congressional Budget Office (CBO) believes unemployment will rise from its current level of 3.9% and reach 4.4% by the end of this year. The CBO believes the unemployment rate will remain “close to that level” throughout 2025.

The investment firm Morningstar predicts the same 4.4% unemployment rate by the end of this year. Morningstar’s economists think slowing economic growth will contribute to the rise in unemployment, though the firm noted the change will be “quite mild” compared to historical economic slowdowns.

Finally, the brokerage and investment firm Vanguard predicts the unemployment rate could jump by a half percentage point in the first six months of 2024 and will end the year at 4.8%.

While these are just predictions, they indicate that there could be, at the very least, some additional pressure on Americans in the job market.

How to prepare for a challenging job market

No matter what happens, it may be a good time to take a closer look at your finances and evaluate how you would weather a temporary loss in income.

Here are a few ways to prepare for a slowing job market:

Pay down debts: The beginning of the new year is a good time to focus on additional debt you may have accumulated over the holidays. There are many different strategies for paying off debt, but a simple way to get started is to focus on high-interest debt, like credit cards, and pay more than the minimum monthly balance.
Build your emergency savings: If you don’t have a savings account specifically for emergencies, now may be the time to open one. Aim to put $1,000 into the account for a rainy day, but don’t get too hung up on a set amount. Automate small monthly contributions to get any amount into the account to build your savings momentum.
Consider learning a new skill: Gallup data shows workers who learn an additional skill can boost their earning potential by 8.6%. Learning a new skill could make you more valuable in your current job and more marketable to a potential employer.

While there’s no crystal ball to see what will happen in 2024, building more savings, paying down debt, and improving skills are good financial planning ideas. And getting a jump on all three now will put your finances on the right track, no matter what happens with employment numbers this year.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.

 Read More