Money Management

Is it finally time for you to move banks? Learn how changing banks can boost your finances. 

It’s easy to fall into certain routines in life and stick with them. You may, for example, be in the habit of stopping at a local coffee shop on the way to work to pick up your morning cup of joe. There may be a recently opened coffee shop in town getting rave reviews. But if you’re used to your go-to shop, you may not even bother setting foot in the new one.

Similarly, once you get used to a certain bank, whether it’s a physical branch or an online bank, it can be hard to make a switch to a new one. With a physical bank, there’s the convenience of having the hours memorized and knowing when lines at the ATM tend to be shortest. With an online bank, there’s the ease of knowing how to use the banking app and being comfortable with it.

But just because you’re used to banking at the same institution doesn’t mean you should stick with it. In fact, almost 50% of respondents to a recent survey by First Tech have considered switching from their current bank or credit union in the last two years. And if these factors apply to you, it may be time to make a move.

1. You’re not getting a great interest rate on your savings

Savings accounts are paying pretty generously these days on the heels of the Federal Reserve’s string of interest rate hikes. But whether interest rates are generally up or down, there’s no reason to get paid less on your money when the option exists to get paid more.

Shop around and see what rates different banks are offering. If another bank can do significantly better, consider making a switch. You should also know that generally speaking, online banks tend to offer more competitive interest rates than physical banks, since they don’t tend to have the same amount of overhead to cover. Many online banks are currently offering yields above 4% (as of December 2023).

2. You’re being charged a lot of fees

Maybe your current bank is charging a monthly maintenance fee for your checking account. Or maybe you’re charged a stop payment fee every time a check of yours gets lost in the mail and needs to be canceled.

You may find plenty of banks that don’t charge these fees, so why continue to deal with them when there may be a better option? Instead, look at different banks and see which ones don’t find every excuse under the sun to take your money.

3. Your bank has lousy customer service

Poor customer service can come in several forms. It could mean having to wait a long time to speak to someone, getting stuck with someone rude on the other end of the line, or being assisted by an incredibly kind soul who’s utterly clueless about how to help you.

If your bank’s customer service is a downright failure, that’s a good reason to make a switch. You don’t want to deal with a hassle every time you need assistance.

Switching banks isn’t hard

You might assume that switching banks will be a painful process, but it’s really not. Once you’ve found a new bank, you can apply for an account, and once it’s opened, you can generally transfer your funds seamlessly.

One thing you may have to spend some time doing is setting up new automatic payments in your new account. But even that’s not such a big deal. You’ll just need to comb through your old bank account statements, make a list of your recurring bills that were on autopilot, and then set them up all over again.

Even if it does end up being a bit of work to switch banks, doing so could benefit you in many ways. So if the above factors apply to you, it may be more than worth it to make that effort.

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Your emergency fund isn’t a good source of money for holiday gifts. Read on to see why. 

The holidays are, for many people, a truly wonderful time of the year. But for others, they can be overwhelmingly stressful. And a big reason boils down to the personal finance hit of buying gifts.

Of course, buying gifts is something you could always say no to. But saying no is easier said than done. How do you easily tell your kids you’re skimping on gifts when their friends are going to be opening box after box on Christmas morning — and potentially posting about it on their social media pages?

If you didn’t manage to sock away much money for gift-giving purposes this holiday season, then you may be thinking of raiding your emergency fund to purchase some at the last minute. In fact, 1 in 12 Americans with an emergency fund says they’ll dip into it this year to complete their holiday shopping, according to a CouponFollow survey. But that’s a mistake you might sorely regret.

Remember what that money is for

An emergency fund should not be treated the same as a general savings account. It’s fine to tap your general savings account for things like vacations, furniture, and holiday expenses.

But your emergency fund should be reserved for — wait for it — emergencies. And if you take a withdrawal for a non-essential purpose, you’ll risk not having enough money left over for when an urgent need arises, like a home or car repair you just don’t have the option to put off.

Now you may be thinking, “But why should I rack up credit card debt when I have money that belongs to me sitting in savings?” And it’s true — you could take, say, $500 out of your savings to avoid a $500 credit card balance you’re forced to carry forward.

But if you raid your emergency fund for holiday gifts, you might avoid debt now only to land in it later on. So at that point, you’re not doing yourself any favors.

Of course, the answer here isn’t to just resort to taking on holiday debt. Instead, it’s to rethink your approach to gift-giving.

Go the more affordable route

You may not have the money to shower your loved ones with gifts during the holidays. But that doesn’t mean your choice is to buy the people you love everything they want or buy them nothing at all. There may be a reasonable middle ground that you can swing financially without raiding your emergency savings.

Think about the things your kids enjoy. If you can’t buy your teen a new gaming system, maybe you could give them money they can save toward one. Or maybe you can buy them a new game for their existing system.

Similarly, your mother and sister might love cashmere. If you can’t swing two sweaters at $140 apiece, find a nice $40 sweater for each of them instead. Or, knit one if you have the skills and time (you’ll probably need to get moving ASAP, but it may be doable).

It’s hard to say no to the pressure to buy gifts for the people you love. But you don’t want to leave yourself with an emergency fund that falls short during an actual emergency. So try to make changes to your approach to holiday spending so you can maintain that protection and avoid debt at the same time.

These savings accounts are FDIC insured and could earn you 11x 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 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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Worried about a larger tax bill this year? Read on to see how billing for your work strategically could save you money on taxes. 

One of the trickiest things about being a freelancer is not getting paid a consistent wage, and not having taxes taken out of your earnings. Rather, if you’re self-employed or own a small business, it’s on you to make estimated tax payments to the IRS every quarter of the year. You’re not allowed to just write the IRS a giant check when you file your tax return, because you’re supposed to be paying taxes on your income as you earn it.

However, there is some leeway if your estimated tax payments aren’t 100% accurate. As long as you’re making them consistently and you end up paying close to the right amount of tax during the year, you can potentially avoid being penalized for an underpayment when you file your tax return.

To be clear, you’ll still owe the full amount of taxes. But if you didn’t quite pay the IRS enough during the year and you send in the difference when you file your tax return, you won’t automatically be looking at a penalty.

Ideally, as a freelancer, your income will increase from one year to the next. If that happened in 2023 compared to 2022 but you didn’t increase your estimated tax payments, you may be looking at owing a bunch of money to the IRS in 2024. And, if your underpayment is significant enough, you may be assessed a penalty. But there’s a move you can make in the coming weeks to potentially avoid that situation.

Be strategic with your billing

When we talk about income for tax purposes, one thing you should know is that it doesn’t matter when you earn money so much as when you’re paid money. With that in mind, if you’re worried about your 2023 tax bill, one thing it pays to do is wait until the very end of December to bill your clients for recent work.

The reason? If you send out invoices on Dec. 31, you’re probably not getting paid on Dec. 31. And as long as you get paid on Jan. 1 or later, that income will count for 2024 purposes, not 2023.

Of course, in that scenario, you risk winding up in a similar boat in 2024. Another option you have is to work with an accountant to increase your estimated tax payments in the new year.

Make sure you have a good accountant in your corner

When you earn a living as a freelancer, your tax situation immediately becomes more complicated. So it’s really important to have a good accountant who can help you manage your tax payments and find ways to keep your tax burden to a minimum.

If you’ve been handling your finances solo, now’s a good time to line up some help for early 2024. If you wait beyond mid-January, you may find that it’s harder to find someone because accountants tend to get busy with tax season from that point through mid-April.

A good accountant can not only help you set up your estimated tax payments, but also advise you on strategic moves that could help minimize your IRS burden. Those could include maximizing a retirement account like an IRA or being strategic with investment losses in a taxable brokerage account.

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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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Will your Vegas vacation result in a tax bill? It could, if you have some good luck. Read on for gambling tax tips. 

Technically speaking, all gambling winnings are taxable. However, not all gambling winnings are legally required to be reported to the IRS. For example, you could walk into a casino, put $20 into a slot machine, win $100, and walk out. The IRS would have no idea and you’d have an $80 tax-free profit.

On the other hand, there are some formal thresholds above which there will be a paper trail. The requirements vary depending on the type of gambling, but if you have a single win that exceeds a certain amount of money, the gaming establishment will collect certain information from you (such as your Social Security number and a copy of your ID) and will issue you a Form W-2G to document the win. And keep in mind, if you receive a tax document in the mail, that usually means the IRS received a copy as well and knows about it.

A quick guide to the various tax documentation requirements

Horse racing or general gaming: If you win $600 or more on a single event, or over 300 times the wager amount, whichever is greater, it is subject to IRS reporting. For example, if you wager $20 on an event and win $800, this would be 40 times the wager amount, which would not trigger a tax form.

Slot machines or bingo: Wins of $1,200 or more are considered “hand pay” jackpots (meaning they are physically paid by an attendant, not by the machine itself), and tax information will be collected. However, this only applies to individual wins. For example, if you win $1,000 on one pull of a slot machine and $400 on the next pull, you can simply cash out the $1,400 even though it exceeds the threshold.

Keno: Wins of $1,500 or more at Keno will trigger the W-2G requirement.

Poker: If you win $5,000 or more at a poker tournament, a W-2G is required.

Table games: In most cases, casinos generally don’t have to issue W-2G forms for table games, regardless of the amount won. Technically, the same “$600 and 300 times the wager” threshold that applies to horse racing applies here, but it’s rare for a single table game win to exceed 300 times a wagered amount. If you win a side bet or progressive jackpot, it could apply.

If the casino takes your information for a win, you can expect to receive a W-2G for the year in which the win took place, and it should arrive around the same time as the rest of your mailed tax documents (usually mid-to-late January).

It’s also worth noting that these rules apply to non-cash prizes as well. For example, if you play a slot machine and win a car, the same tax reporting threshold applies as if the prize was paid in cash.

Tax withholding requirements

You can choose to have taxes withheld if you win less than $5,000 and a W2-G is issued. The gambling establishment is required to withhold taxes if you win $5,000 or more and it triggers a W2-G. The standard withholding amount is 24% from gambling winnings.

Will you actually have to pay tax on your winnings?

The short answer is “it depends.” One important concept to know is that if you itemize deductions on your tax return, you can deduct gambling losses to help offset your winnings. So, if you won $3,000 from a slot machine and lost $1,000 of your winnings at a blackjack table, you’ll only have to report $2,000 in net winnings. Just make sure you can document the losses if you do this — one smart way to do this is to use each casino’s player’s card while you gamble. Not only does this let you accumulate points and earn freebies (comps), but it also keeps track of your play, which can come in handy at tax time.

The bottom line

Gambling winnings are considered taxable income at the federal level, but casinos and other gambling establishments are only required to report winnings that exceed certain thresholds. If you win at a casino and fill out a W2-G form, you’ll have to report your winnings, but you can use any gambling losses to reduce or even eliminate any additional tax burden.

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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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Approximately 4 in 10 Americans have some form of healthcare debt. If you’re facing charges you can’t pay, learn more about your options. 

A lot of personal finance advice falls into the “easier said than done” category, particularly when it comes to managing debt. For example, most people know it can be costly to carry a balance on their credit card. Unfortunately, sometimes that still feels like their only option. Credit cards can be a convenient way to access money quickly.

For example, if you get hit with an unexpected medical bill, you might reach for your card because you don’t know what else to do. If this is your situation, I am sorry you are going through this. The uncertainty and pain of health problems is hard enough without throwing financial stress on top of it all.

Think twice before putting medical bills on your credit card

Rising health costs are an issue for many Americans, both insured and uninsured. According to a 2022 report from KFF, over 40% of Americans have medical or dental debt. Worryingly, 24% said they have medical bills they can’t pay.

If you’re trying to work out how to handle a medical bill and don’t have money in your savings or health savings account, try not to reach straight for the plastic. It is worth exploring other forms of payment. While using your credit card could earn you rewards points, it may also have some unintended consequences.

1. Paying medical bills on a card can impact your credit

In the eyes of the credit rating agencies, not all debt was created equal. For example, unlike other forms of debt such as mortgages or personal loans, your credit card balance can impact your credit utilization ratio. Your utilization ratio is the percentage of the available credit you’re using and is a key factor when calculating your credit score. The ideal is to keep your ratio below 30%. If the limits on your cards add up to $10,000, and your balance is $7,000, you’d have a ratio of 70%.

There’s another consideration here. Recent years have seen big changes in how medical debt is handled on credit reports. The bureaus won’t include certain unpaid medical debts on your credit report at all. This applies to medical collections that are under $500, and or medical collections that are paid or are less than a year old. The Consumer Financial Protection Bureau (CFPB) wants to go even further and remove all medical bills from credit reports.

But these changes and exceptions do not apply to credit card collections, even if the debt came from paying a medical bill.

Actionable takeaway:

If you pay your medical bill with a card, the credit bureaus will categorize it as credit card debt, not medical debt. If you can’t pay it down straight away, this will have a direct impact on your credit score. Moreover, the policies for recording overdue medical payments on your credit report are more favorable when it is a medical debt.

2. There may be a less expensive way to borrow

One of the attractions of a credit card is that you can use it straight away. If you’re trying to deal with the stress of an unexpected health crisis, this can be a big factor. There’ve certainly been points in my life where I used my credit card because it was the easiest route, even though I knew it would cost me more.

If you have the brain space to explore other options, it really could save you money. According to Forbes, average credit card interest had reached almost 30%, as of Dec. 11. In contrast, rates on some of the top personal loans can be less than 10%. Even better? You might be able to negotiate an interest-free payment plan with your medical provider.

Let’s say you need to pay a $1,500 medical bill.

Our credit card interest calculator shows that if you paid it down by $100 a month at a 30% APR, it would take 19 months to pay off and you would pay over $400 in interest.Our personal loan calculator shows that a $100 monthly payment on a personal loan at a 10% APR would see you paying around $100 in interest. You’d have the debt repaid in 16 months.

Actionable takeaway:

There are a few different ways to finance medical expenses. Before you use your credit card to pay a medical bill, look into alternatives with lower interest rates.

Your medical provider may let you pay in installments through a payment plan. Talk to the billing office to see what you can work out. Be sure to check any fees and interest charges.A personal loan may offer more favorable terms, especially if you have a good credit score. You may be able to access the money relatively quickly without too much hassle or paperwork.

3. You might be able to get financial assistance

If you can get help paying the bill, you may not need to borrow money at all. There are a number of assistance programs out there that may be able to help with at least some of the costs of medical care. If you’re not sure where to start, talk to your healthcare provider. You might also see if you can find a patient advocate who could advise you on next steps.

Actionable takeaway:

Ask the hospital if it offers any financial assistance or charity care programs. Find out what the eligibility requirements are and what you need to do to apply. If your medical provider can’t help, see whether you qualify for state or federal assistance. You may also be able to get help elsewhere. Benefits.gov has a comprehensive list of healthcare and medical assistance programs.

4. You might not owe as much as you think you do

Whatever form of payment you use, ask to see an itemized bill and check it carefully. According to KFF, over 40% of people think they’ve found a mistake on a medical or dental bill they received.

On top of which, medical bills can be a bit like marketplaces when you’re on holiday — different people get charged different amounts. Sometimes uninsured patients will pay more than insured ones, so see if you can research the going rate for the service you received.

Actionable takeaway:

Medical bills can be confusing, but don’t assume the details are correct. Check yours, particularly for things like double entries or charges for services you didn’t receive. Even if the information is error free, don’t be afraid to negotiate. One expert told NPR you might be able to get the total down by between 30% and 50%. If you’re looking at a $2,000 bill, that’s between $600 and $1,000.

Treat your credit card as a last resort

Medical bills really can rub salt in the wound of whatever health issues you are facing. It’s understandable to want to resolve the payment quickly, but if you’re able to take a bit longer, it might make life easier further down the road. Not only could you pay less, you could also protect your credit score.

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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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