Money Management

Credit card mistakes can cost you money and damage your credit score. Learn about three to say goodbye to forever in 2024. 

There’s a lot to love about credit cards if you use them wisely. You can get rewarded just for buying stuff you’d need to purchase anyway, and you can build credit by using your card responsibly so other more expensive loans (like a mortgage) will cost less.

Unfortunately, not everyone uses their cards in a way that helps them. There are some common credit card mistakes that could cost you — and that you should leave behind forever by making a few simple changes. Here are the errors you’ll want to say goodbye to for good, along with some tips to make sure you never make those mistakes again.

1. Missing payments

Missing payments is one of the worst credit card mistakes you can make.

Your lender charges you a late fee, which could be as high as $30 for a first late payment and $41 for any additional late payments within six billing cycles. But you could also see your credit score fall by as much as 110 points if you previously had great credit, or by 60 to 80 points if your credit was only OK to begin with.

To make certain you never make the mistake of paying late, choose automatic payments. You can sign into your credit card account online and request to have at least the minimum — and ideally the entire balance — paid on its own every month. This will eliminate the possibility of forgetting to send in your payment.

2. Maxing out your card

You have a credit limit on your credit cards. If you come close to or hit that limit, this is called maxing out your credit cards.

Maxing out your cards could result in around a 50-point drop in your credit score. Of course, when your card is maxed out, you also can’t use it anymore — which means you can’t earn any rewards and you won’t have credit available if you really need it.

You should aim to use 30% or less of your available credit on a regular basis to help your credit score. But even if you have to charge more than that, be absolutely sure you don’t get close to — or go over — your card’s limits.

Keep tabs on how much you’re charging by signing into your account regularly and, when possible, ask your card issuer for a credit line increase. Often, you can do this without a hard credit check, especially if you’ve been a good customer for a while.

If you increase your credit limit, your credit utilization ratio (credit used versus credit available) is easier to keep below that 30% threshold necessary for the best credit score. Say, for example, you had a $1,000 balance and a $2,000 limit. You’d have a 50% card utilization ratio which could hurt your score.

But if you asked your card issuer for a credit line increase and the issuer doubled your available credit to $4,000, you’d have only a 25% utilization ratio — which is a lot better for your credit score.

3. Paying interest at a high rate

The average credit card interest rate is 21.19% as of August 2023, according to the Federal Reserve Bank of St. Louis. If you are carrying a balance on your cards (which means you still owe money after making your monthly payment), you’ll have to pay interest on your debt.

If you’re worried about potentially not being able to pay your bill in full at any time, shop around for credit cards offering a 0% APR on purchases for the first 12 months (or longer). This will give you time to pay down your debt without owing a huge amount of financing charges.

Your best option, though, is to never charge more in a billing cycle than you can pay back in full before you get stuck paying interest. If you truly need to borrow money and a 0% APR offer won’t work for you, look into other options that could be cheaper first, like a ​personal loan.

By avoiding these three mistakes, you can use cards in a smart way to build credit, earn rewards, and positively impact your personal finances — rather than ending up with costly financing charges or a hit to your credit score instead.

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It’s easy to postpone dealing with life insurance. However, here are four reasons you should increase the death benefit on your policy this year. 

Whether you’re flush with cash or carefully tucking money into a savings account each month, you’re probably sticking to a budget of some kind. If that budget includes a life insurance policy, there are a number of reasons you should consider increasing the death benefit (sometimes referred to as “face value”) during 2024. Here are four of them.

1. It’s less expensive this year than it will be next year

Life insurance companies base the cost of a policy on your life expectancy; in other words, how many years you’re statistically expected to live. Let’s say your life expectancy is 85. At age 30, you’re two years closer to the end of your life expectancy than you were at age 28. Therefore, the rate you’ll pay increases.

If you’ve ever considered increasing the face value, it will cost you less this year than it will next year or the year after. For example, a healthy 30-year-old man who purchases a policy with a $500,000 death benefit can expect to pay around $400 per year. By the time he’s age 40, the same policy will cost $600, and that’s if he has remained healthy in the interim.

No matter how old you are right now, increasing the death benefit on your insurance policy this year will save you money and increase your peace of mind. After all, if you die, your beneficiaries will be left with more money.

If you decide to wait until you can afford to increase the face value of your policy, keep in mind that rates are also based on the health of the applicant. If you’re diagnosed with a heart issue, diabetes, or any other serious medical issue, you can expect the rate you’re quoted to shoot up.

Locking down a term life rate this year means never having to pay more for the policy, no matter what happens to you health-wise

2. Life insurance can be used to pay funeral costs

We don’t want to think about our own or consider the death of a loved one. However, it’s part of life. Someone dies, and others are left behind. At its core, carrying life insurance is about taking care of those we leave behind.

Let’s say you’re single and not worried about taking care of a family. Someone is still going to have to pay for your funeral. Even if you’ve told your loved ones that you don’t want a funeral, someone is going to have to pay for your burial or cremation, neither of which is cheap.

Leaving enough life insurance behind to cover those final costs is one of the kindest things you can do for those who care for you.

3. To protect your loved ones with tax-free proceeds

If you’re in a long-term relationship, married, a parent, or even a pet owner, you have someone counting on you. Upping your death benefit means making sure they have what they need when you’re gone.

To determine how much you would like to increase your policy, take into account how much debt you’ll be leaving behind. For example, if you owe money on a car loan or mortgage, you probably want to ensure they’ll be paid off. If you have children, you’ll want to know that the parent left behind will have enough money to keep a roof over their heads and feed them. You’ll likely care whether they can afford to pursue higher education if they desire. And if you have pets, life insurance can be designated to provide for their care.

Let’s say you increase the death benefit on your policy from $300,000 to $400,000. That means that you’re leaving an extra $100,000 behind to help replace your income. It can mean the difference between staying in the family home and having to find a new place to live.

According to the IRS, life insurance proceeds are generally not taxable. Beneficiaries will have to pay taxes on any interest they receive, but not the actual death benefit.

4. To protect your business

If you own a business — large or small — increasing the amount of life insurance you carry can help your beneficiaries keep the business up and running if they so desire. If you’re in business with someone else, it’s not unusual for business partners to name each other as beneficiaries so one can keep the business open if the other dies.

While buying life insurance originally may have involved shopping around, increasing your death benefit is a bit easier. To get the ball rolling, call your original agent and let them know what you want to do. If your policy requires you to undergo another medical exam, insurers typically send someone to your home or office to take care of it.

Chances are, it will take less than one hour to ensure your beneficiaries can live their best life, even after you’re gone.

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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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Buyers are rushing to sign mortgages due to dropping rates. Should you be following in their footsteps? Or should you wait things out? Find out here. 

In 2021, it was possible to sign a 30-year mortgage at a rate of under 3%. But mortgage lenders haven’t offered those record-low rates since.

During the third quarter of 2023, the average 30-year mortgage rate came close to 8% at one point. Thankfully, though, rates have been falling in recent weeks. And as of this writing, the average 30-year mortgage rate is 6.66%. Compare that to 7.79% in late October, and today’s rates look pretty sweet, even though they’re still fairly high based on recent history.

Meanwhile, data from the Mortgage Bankers Association shows that buyers are looking to capitalize on the lower rates that have become available in early 2024. During the first week of the year, mortgage applications increased by 9.9% from a week prior.

If you’re in the market for a new home, you may be eager to capitalize on lower mortgage rates, too. But now may not actually be the best time to submit a home loan application.

Waiting to apply for a mortgage could pay off

It’s true that mortgage rates are more competitive now than they were at several points last year. But rates could fall further as 2024 moves along. So if you don’t have a pressing reason to move early in the year, you may want to wait to apply for a mortgage.

The Federal Reserve is expected to cut interest rates at some point this year if inflation levels continue to recede. Now, the Fed is not in charge of setting mortgage rates. Those are established by lenders individually. However, when the Fed raises or lowers its benchmark interest rate, it tends to impact the cost of consumer borrowing across the board.

Right now, it’s not just mortgages that are still fairly expensive to sign. Personal loans, auto loans, and home equity loans are also more expensive from an interest rate standpoint.

But if the Fed moves forward with rate cuts later on this year, consumers might benefit in the form of cheaper borrowing. So waiting to put a mortgage in place could be a smart move if you can manage to wait.

Also, right now, the U.S. housing market sorely lacks inventory. Listings may not pick up all that much because many homeowners want to hang onto the low mortgage rates they currently have. But if rates continue to fall, inventory could increase, so waiting could mean being privy to more selection.

How low might mortgage rates go in 2024?

It’s hard to know the extent to which mortgage rates have the potential to fall this year. It’s unlikely that the 30-year loan will drop much below the 6% mark, though depending on economic and market conditions, buyers may be pleasantly surprised.

Either way, it pays to do what you can to boost your credit score ahead of your mortgage application, because the higher that number is, the more competitive an interest rate you’re likely to snag on a home loan. You can raise your credit score by paying bills on time, whittling down credit card balances, and making sure your credit report doesn’t contain errors that paint you in a less favorable light.

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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 Federal Reserve opted not to raise interest rates at its last three meetings. Will a surprising inflation report change things? Learn more here. 

Inflation has been making many consumers miserable since 2021. That year, living costs began to surge as consumers found themselves with extra money thanks to generous stimulus policies at a time when there was a limited supply of goods.

At this point, though, many consumers have depleted their stimulus-related cash savings and are having a hard time coping with higher expenses. And given that there’s really no more stimulus aid on the horizon, a lot of people are now in a tough financial spot.

The Federal Reserve has been trying its best to fight inflation. And it’s done a good job of helping it cool by raising interest rates numerous times in 2022 and 2023.

At its last three meetings, though, the Fed opted to hit pause on its interest rate hikes due to the progress made on the inflation front. And the Fed even signaled that rate cuts could be in store for 2024.

But the newest inflation data points to a rise in living costs. And that might get the Fed to change course.

Inflation is on the rise again

In December, annual inflation was measured at 3.4% as per that month’s Consumer Price Index. On a month-to-month basis, inflation rose 0.3%.

Now that rise in inflation is by no means extreme. However, inflation did rise at a faster pace than what economists expected. And if that trend continues in 2024, the Fed may have no choice but to raise rates again rather than cut them, to keep living costs to a manageable level.

How consumers can prepare for interest rate hikes

The problem with interest rate hikes is that they have the potential to make borrowing a lot more expensive. To be clear, it’s not as if the Fed tells lenders how much interest to charge. But when the Fed raises its benchmark interest rate, it becomes more expensive for financial institutions to borrow from each other short term, so that cost tends to get passed onto consumers.

In light of this recent inflation data, you may want to take steps to put yourself in a position where you don’t have to borrow money in a pinch. And to that end, you should do your best to boost your emergency fund, or build one from scratch if you really don’t have much in the way of savings.

A good bet, in fact, is to aim for enough money in the bank to cover three months of essential bills. It may take time to build up that level of cash reserves, but for now, any dollar you manage to save is a dollar you won’t have to borrow.

It’s also a good time to try to pay off any lingering credit card debt you have. If interest rates rise, your existing balance could become more expensive, since credit card debt is generally variable (as opposed to installment loans, which offer the benefit of a fixed interest rate).

It’s too soon to assume that the Fed is going to raise interest rates in 2024. But it’s a good idea to keep that possibility in mind — and prepare for it accordingly.

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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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