Money Management

You can get value from your Costco membership in a lot of ways. But are gift cards enough? Here’s how the numbers work out. 

One of the perhaps lesser-known perks of shopping at Costco is the gift card discounts. Costco has an array of retailer and restaurant gift cards for sale up to 25% off the face value.

This is effectively like getting a 25%-off coupon to some of your favorite places. An easy personal finance win.

If your regular spending already includes some of these brands, then you could come out way ahead by using discounted gift cards to pay. (Discounts of even 10% are better than you’d get with the top rewards credit cards.) In fact, in some cases, you could even justify the cost of a Costco membership in gift card savings alone.

Doing the math

How much you can save will depend on your personal spending — you don’t want to add extra spending just to make use of gift cards. But here are a couple of examples.

Southwest Airlines

Folks who travel on Southwest can have an easy win right here. Costco currently has a $500 e-gift card for Southwest Airlines on sale for $429.99 (through Dec. 25, 2023). That’s a $70 (14%) discount. So even if you subtract a $60 membership, you’re still coming out ahead by $10. And that’s just one purchase.

A note on travel gift cards: In the case above, the 14% discount is a better return than you’d get with most travel rewards cards. However, if you’re thinking about buying travel gift cards, make sure you crunch the numbers to ensure you’re not actually missing out on better credit card rewards. You should also consider if you need your credit card’s travel insurance benefits.

Dinner and a movie

Date night keeps getting more expensive. You can knock at least 20% off the price with gift cards from Costco, though.

Pick up some Fandango cards ($79.99 for four $25 e-gift cards) to cover movie tickets and concessions. Then share a romantic dinner at Buca di Beppo ($74.99 for four $25 e-gift cards through Dec. 24, 2023). If you still have room — and the date is going well — you can head over to Cold Stone Creamery (four $15 e-gift cards for $47.99) for dessert.

By the end of the night, you’ve ideally had a lovely time. You’ve also saved $52. That’s not quite enough gift card savings to pay for a full membership — but it will be by the second date.

Downsides to Costco gift cards

Other than the obvious — the annual membership fee — there are a few other downsides to consider when purchasing Costco gift cards. For one thing, if you want physical cards, you have to shop in-store. Costco.com only sells e-gift cards that are delivered through email.

If you do head to the store, it might not have what you want. Stores tend to keep a more limited array of gift cards than you can find online.

Then there’s the amounts. Most gift cards are like everything else at Costco: bulky. Get ready to buy multiples of any gift card you’re after. This means you really need to make sure you can get full value from the gift cards, since they’ll require a bit of investment upfront.

Other ways of getting discounted gift cards

Though handy, a Costco membership isn’t the only way to get discounted gift cards. You could also get a Sam’s Club membership to buy gift cards!

Alright, that’s half a joke — it’s true, but you don’t really need a membership to anywhere special to get gift cards at a discount. You can find a number of third-party sites that sell gift certificates and cards for less than face value. Some of them are resellers (they buy gift cards at reduced prices from people who just want cash, then resell with a margin), others are using bulk buying or affiliate discounts.

It also pays to check directly with the retailer or restaurant. Many run deals on their gift cards throughout the year, especially around various holidays, offering discounts or bonuses on gift card purchases. Small businesses may also be happy to give you a discount if you’re buying in bulk.

Third-party seller considerations

Some credit card issuers consider gift card purchases to be a “cash-equivalent” or “cash-like” transaction. That means it will be treated as a cash advance.

Credit card cash advances don’t earn purchase rewards. They also typically have a per-transaction fee of 3% to 5% of the total amount. Additionally, cash advances don’t qualify for the interest rate grace period, meaning they start accruing interest right away. That interest rate will likely be higher than your standard purchase APR.

Not every gift card transaction will trigger this kind of response. If you’re buying a gift card or two as part of your grocery store visit, for example, it’s unlikely to be flagged as a gift card purchase. But it’s a lot more likely to get a closer look if you’re buying directly from a gift card resale site.

Also, be mindful of how many gift cards you buy with your credit cards. It could be interpreted as manufactured spending (using credit cards to buy cash-like products just to churn rewards) if you buy a lot of gift cards at once.

Read the fine print of your card’s terms and conditions to find out how the issuer will treat a gift card purchase. You can reach out to your issuer directly with any questions.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

 Read More 

Funding a 401(k) doesn’t always make sense. Read on to see why you may want to pass on your company’s 401(k) in the new year. 

You’ll often hear that it’s smart to save for retirement year after year. Doing so could set you up with a nice nest egg that covers your expenses once you’re no longer working.

If you have access to a 401(k) plan through your job, you may be inclined to sign up for it. That might seem like your easiest route for building a nest egg. But if these things apply to you, then you may want to take a hard pass on that company retirement plan.

1. You don’t have any emergency savings

It’s a noble thing to want to set money aside for your future. But if you don’t have money in a savings account to cover unplanned bills in the present, then your focus should be on building yourself an emergency fund. Without one, you might land in costly credit card debt the next time an unexpected expense, like a home or car repair, arises.

Recent data from SecureSave finds that a whopping 63% of Americans don’t have enough cash in accessible savings to cover an unplanned $500 bill. So if that sounds like you, do yourself a favor and don’t fund your company 401(k).

Instead, take every dollar you’re not spending on essential expenses and put it into a savings account. You can then aim to start funding a 401(k) once you have enough money in the bank to cover a few months’ worth of bills.

2. You’re planning to leave your job as soon as you can

Moving money from a 401(k) into another retirement plan can be a bit of a hassle. In some cases, you may not be able to do a direct rollover, which means you’ll need to have a check mailed to you for your 401(k) balance and you then write a check to your new retirement plan.

When you leave a job, it’s generally a good idea to roll the funds from your old employer’s 401(k) into a new retirement plan — either the 401(k) sponsored by your new employer or an IRA. So if you’ve yet to contribute to your current employer’s retirement plan and hope to leave your job in early 2024, then you might as well hold off on funding that 401(k), especially if there’s no company match.

Remember, you do not have to fund a 401(k) evenly over 12 months. Let’s say you want to save $6,000 for retirement in 2024. That doesn’t mean you have to put $500 a month into a 401(k).

If you get a new job in April, you could put $667 a month into your new employer’s 401(k) over nine months and still meet your savings goal. But that way, you won’t have to deal with getting that money transferred over.

3. Your employer’s plan is crummy

Maybe your company doesn’t offer a match in its 401(k). And maybe that plan charges high administrative fees and has limited investment choices. That’s reason enough not to fund that 401(k) and instead turn to an IRA.

With an IRA, you may be looking at lower administrative fees, and you’ll generally be privy to a wider range of investment options. That could help you avoid investment-specific fees. Also, it could help ensure you’re building an investment portfolio you’re happy with.

One thing you should know about 401(k)s is that they generally do not let you buy individual stocks, whereas IRAs do. If you’re someone who likes to hand-pick your investments, that’s a good reason to choose an IRA. Plus, you’ll have your choice of brokerage firms that offer them.

The option to contribute to an employer 401(k) is certainly convenient. But if any of these reasons apply to you, you may want to steer clear of your employer’s 401(k) in 2024.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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 

If you still have some holiday shopping to do, consider making purchases at places where you get bonus credit card rewards points. Find out why. 

If you’re still shopping for your holiday gifts, chances are good you’re down to the last few people on your list who may be hard to buy for.

The good news is, you may be able to get great presents for these people while also maximizing your credit card rewards. Here’s how you can do it.

Try this trick to get the most credit card rewards possible this holiday season

One great way to get some extra credit card miles, points, or cash back while doing your holiday shopping is to purchase presents at places where you get bonus card rewards — and charge those purchases.

For example, let’s say your credit card offers you 5% back at restaurants. When you’re shopping for people on your holiday list and aren’t sure exactly what to get for them, why not purchase a gift card for a great local restaurant?

You’ll be able to get your bonus 5% back that you wouldn’t get if you purchased the item elsewhere, and your friends can get a great local meal out of it at a place they might otherwise not try. It’s a win-win. This can make a big difference in your rewards balance, too. Let’s say you spend $100 on gifts. If you do it at a place where you get 5% back, that’s $5 for you instead of just $1 in rewards if you bought at a place that didn’t give you a bonus and you earned only 1% instead.

Likewise, gas or grocery gift cards could be a good option if your card happens to offer bonus rewards on these types of purchases. Just check what categories your credit card offers you extra rewards for and focus on getting holiday gifts at those types of locations for anyone you don’t have a specific present in mind for.

Be sure to check your card’s fine print first

While this technique can work really well for most people, you’ll want to check the fine print on your credit cards. Some cards exclude the purchase of gift cards or cash equivalents from bonus rewards. If your credit card is one of them, it should specify this in your cardmember agreement. So you may want to opt to use a different rewards card if you’re hoping to maximize the bonuses you earn with a little strategic holiday shopping.

Often, when cards exclude gift cards, the exclusion doesn’t necessarily apply all that broadly. For example, it may raise a red flag and result in not earning rewards if you buy Visa gift cards — but if you’re charging gift cards at a local restaurant and this just shows up on your card statement as a purchase at that restaurant, the card issuer is going to have no reason to questions that particular purchase. So you’ll most likely get your bonus rewards (at least that’s the way it has worked for me several times in the past).

You’ll also want to be sure you’re able to pay off the purchases you’ve charged on your card in full out of your checking account when the statement comes. If you have to pay interest on the gift cards you’ve bought, this gift idea is very likely to cost more than you’ll earn back from any of the bonus rewards, so this technique could backfire.

As long as your card allows it, though, and you have the funds to pay for the gifts you buy, there’s nothing wrong with letting your card rewards program help guide you when you make your present-purchasing decisions this holiday season.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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.Christy Bieber has positions in Visa. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.

 Read More 

Before taking a road trip, you’ll want to prepare for all of the costs. Here are a few expenses that could make your getaway more expensive. 

A road trip can be an exciting way to vacation. You can travel at your own pace and see incredible sights. Plus, you can save some money by not having to buy plane tickets. But if you’re planning an epic road trip adventure, ensure you don’t forget to budget for costs that could creep up along the way. These extra expenses could quickly deplete your trip funds if you don’t factor them into your vacation budget. But have no fear, I’ll help to prepare you. Here are a few expenses to include in your road trip budget so you don’t feel financial stress.

1. Resort fees

Unfortunately, resort fees (sometimes called destination fees) are becoming more common. These fees are charged in addition to the nightly hotel rate, regardless of whether you use the benefits, like the hotel’s fitness center. In a major city like New York City, these fees can cost $35 or more and are billed daily. That could be an expensive surprise if you don’t plan ahead.

Thanks to a recent crackdown on junk fees, some hotel brands have become more transparent about these fees, so travelers are aware. But it’s still beneficial to review additional fees like this before you book a hotel stay for your next road trip.

2. Tolls

Most people know to set aside money in their high-yield savings account before a road trip to cover gasoline costs. But another forgotten expense you may neglect to save for is road and bridge tolls. Luckily, you can plan your route and estimate toll costs to prepare with mobile apps like Google Maps. If money is tight, you may be able to take an alternate toll-free route.

3. Parking fees

On-site parking fees are another travel cost that may creep up on you. Even if you have no plans to use additional services like valet parking, your hotel may charge you a nightly fee to park your car in their parking lot or garage. Review these fees before you depart for your trip to avoid harming your personal finances. If the rates are too high for your budget, check if nearby lots or garages may allow you to park your vehicle in a safe spot for a cheaper price.

4. Roadtrip snacks

I can’t be the only one who requires quality snacks while on a road trip. If you have the same mindset as me, food and drink costs can make your vacation more expensive. You can plan by setting aside money for these costs. If you’re aiming for an affordable trip, packing a cooler with food and drinks is the way to go. You can stop and get more ice along the way.

5. House and pet-sitting costs

Unless you bring your furry friend along for the ride (with my cat, that would be a nightmare), you’ll want to save up for pet-sitting costs. Dog boarding fees can be sky-high — according to a Rover survey, you could be looking at $45 to $315 for boarding costs, depending on the type of establishment and how long you’ll be away. You might hire a pet sitter to come to your home instead, as this will likely be cheaper. For those without pets, paying someone to check in on your home and grab the mail is another cost that could make your trip more expensive.

Plan for a stress-free vacation

Considering extra road trip expenses like this well before you leave is wise. You want to allow yourself enough time to save for your trip, so you don’t feel financial strain during your travels.

If you’re driving a good distance, it’s also not a bad idea to consider investing in roadside assistance coverage so you can get emergency help if needed. An AAA membership includes many perks, like roadside assistance and travel and insurance discounts.

AAA membership prices vary by location, plan chosen, and number of drivers with coverage, but you can expect to pay at least $50 per year for a base-level membership. The highest-tier membership will likely cost you between $100 and $150.

As you plan for your next adventure, consider paying for your travel purchases using a travel credit card. This way, you’ll earn rewards on your spending. Review our list of the best travel rewards credit cards to learn more about the top features of these credit cards.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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.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 has a disclosure policy.

 Read More