Money Management

As you finish up your holiday shopping, don’t put yourself at risk for an expensive scam. Find out how to protect yourself from shopping scams this season. 

Unfortunately, scammers are getting more creative with their approaches these days. If you’re not cautious, you may give fraudsters access to your money without realizing it. When shopping for gifts this season, it’s imperative to be alert to potential holiday scams.

Now more than ever, scammers are looking to trick busy shoppers. Here are a few tips to avoid holiday scams that could drain your bank account or drive up your next credit card bill.

1. Don’t click on links

Beware of any links you receive by email or text message, especially if it’s from someone you don’t know or the link or message was sent to you out of the blue. Many scammers use phishing links to collect personal information from unsuspecting people. The link may lead you to what looks like a legitimate website, but it could be a scammer trying to get you to provide your banking or credit card details.

Fake package delivery texts and emails are popular scams that make their rounds during the holidays. These messages look like package delivery updates and include phishing links. If you’re unsure whether a link is legitimate, avoid clicking it. Instead, contact the company directly to get more information.

2. Check company reviews before placing an order

It’s best to stick with well-known, established companies so there’s less risk of you getting scammed. But if you’re considering buying from a brand that isn’t familiar to you, it’s a good idea to do some research first. Search the company name using the word “scam” or “reviews” to see what other shoppers have to say. Doing this can help you avoid losing money.

3. If a deal seems too good to be true…it probably is

Getting a deal on the perfect present for a loved one can feel like a major win. But make sure you’re only considering legitimate deals. If an offer sounds too good to be true, it likely is. For example, if you see a shopping website selling name-brand headphones for $40 instead of their usual $250 price, you can assume it’s likely a scam. Always trust your gut as you shop for holiday gifts.

4. Be cautious when contacting customer service

Whether you need to contact your airline for help rebooking a flight or start a return for a clothing item you purchased online, be sure you’re contacting the official company. Scammers are tricking people by advertising fake customer service phone numbers online. Without realizing it, you might Google the company’s customer service line and end up calling a fake service that wants to charge you a fee to change your flight or process your return.

5. Use a credit card to pay for your shopping purchases

As you shop this holiday season, using credit cards rather than debit cards is best. You’ll have greater fraud protections. If someone acquires your credit card details and makes a purchase you didn’t authorize, you’ll be protected.

Many credit card issuers have $0 fraud liability policies. You won’t get the same level of protection when using cash or debit cards. If you fall victim to fraud, you can contact your credit card company to remove the charge from your account and send you a new credit card.

Another way to protect yourself and stay alert is to carefully review your recent credit card transactions often throughout the busy holiday season. When you do this, you’ll be able to spot unusual transactions quickly so you can report them immediately.

Take extra care to protect yourself

Having your hard-earned money taken from you by a fraudster can be upsetting and stressful. But you can avoid making costly mistakes by being alert to potential scams. This holiday season, as you do your shopping, take extra care. For additional financial tips, check out our free personal finance resources.

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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.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.

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Paying off your personal loan early is usually permitted. Find out how to determine if it’s the right financial move for you. 

When you take out a personal loan, you agree to repay the debt over a set period. Depending on your goals and the lender you choose, you might decide to pay it off over two years, five years, six years, 10 years, or even longer.

When you’ve chosen your payment timeline, your monthly payments will be calculated based on how much it will take to pay off the principal balance, plus interest, over the time period you chose. As long as your payments come out of your bank account on time and as planned, you will be debt-free on the date you chose when you first borrowed.

But what if you want to repay your personal loan early? Is this something you can do?

Are you allowed to repay your personal loan ahead of schedule?

You are always able to pay your loan ahead of schedule, either by making lump sum extra payments or by paying more each month toward your loan so you bring the balance down faster.

However, there could be a catch. Some personal loan lenders charge a prepayment penalty if you pay off your loan early. Depending on the lender, this prepayment penalty could equal:

A flat fee you’re charged if you repay your debt before the end of your scheduled term.A percentage of the unpaid loan balance.Some or all of the interest that your lender will not be earning due to the early loan payoff.

Sometimes, these penalties could add up to hundreds of dollars or more. Say you have $8,000 remaining on a $10,000 personal loan and you come into some money and want to pay it off — but there’s a prepayment penalty equal to 2% of the unpaid loan balance. If you get hit with that 2% on an $8,000 balance, you’ll lose $160 to your lender.

Ideally, when you first take out a personal loan, you’ll read the fine print and make sure your lender doesn’t charge you just for the privilege of paying your debt off ahead of schedule. But if you’ve already taken out your loan and this penalty is in the contract, there’s not much you can do about it.

In that case, you’ll have to see if you still end up saving money after taking the prepayment penalty into account. If you’ll save $600 in interest by paying your loan off early but will lose $160 to a prepayment fee, an early payoff would still make good financial sense.

But if you’ll only end up saving $10 or $20 in interest after taking the penalty into account, you may not want to waste your money paying your loan early — you could invest it instead.

Check the fine print before moving forward

Your personal loan contract should specify what prepayment penalty, if any, applies. Be sure to read the details carefully, or ask your lender, so you can find out if you’ll be hit with a penalty before you pay extra. That way, you can make the best choice for your personal finances.

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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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Close to half of Americans do not have retirement accounts. Find out why that could be a big problem. 

In 2022, 54.3% of Americans reported that they had at least some assets in a retirement account, according to the Federal Reserve. While it’s good news that just over half of Americans have money in a 401(k) or another retirement plan like an IRA, that also means close to half don’t have this type of account to help save for their futures.

Sadly, for those Americans not working on retirement savings, disaster could be on the horizon. Here’s why.

Not having a retirement account could be a major problem

If you don’t have any money in a retirement account, that probably means you aren’t saving for retirement — or, at least, that you aren’t taking advantage of tax breaks designed to help you do so. Either of these scenarios isn’t very good.

See, if you aren’t saving for retirement, you’re going to be in financial trouble when you stop receiving a paycheck. You’ll most likely get Social Security benefits if you worked for at least 10 years in the U.S. (or if you qualify based on being married to someone who has worked for long enough). But Social Security is only designed to replace about 40% of pre-retirement income.

Reducing what you’re bringing into your household by 60% is going to lead to drastic — and most likely unpleasant — changes in your living standards. Most experts recommend trying to replace a minimum of around 70% of what you were earning, and you need to have retirement investments to help you do that since Social Security alone just won’t cut it.

If you’re saving for retirement but not using a retirement plan, you’re missing out on valuable tax breaks that could help make your saving efforts more successful. Several different retirement plans allow you to take a tax deduction when you make contributions, including IRAs and 401(k)s. If you’re in the 22% tax bracket, each $1,000 you put into these accounts (up to annual contribution limits) could save you up to $220 in taxes.

You don’t want to pass up this government help, so you should be putting your retirement savings in one of these plans.

How to get started saving for retirement

The good news is, if you are on track for a retirement disaster because you aren’t investing in a retirement plan, you can get off that track. You just need to start investing today.

If you have a workplace 401(k), you can do that by signing up for the account and arranging to have contributions made out of your paychecks. Talk to HR or your plan administrator to find out how to sign up. Ideally, you should contribute about 10% to 15% of your income, but if you can’t do that, start small with 1% or 2% and work your way up. Your company may match your contributions, which can be a big help, so ask if that’s the case and try to contribute enough to earn the full employer match.

If you don’t have a workplace 401(k), open an IRA at a brokerage firm. Most brokers allow you to sign up online by providing some basic details about your identity. Once you’ve signed up, arrange to have contributions transferred out of your bank account and into your brokerage account on payday. Then, invest the money in something simple like an exchange-traded fund (ETF) that tracks the performance of the stock market (your broker should have screening tools to help you find one).

You can’t afford not to save for retirement, so take these steps now so you don’t end up facing a disaster that’s hard to recover from.

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In this climate, the decision to buy a home can feel huge. Read on for reasons why buying now and refinancing later may not be the best move. 

If you’ve been looking to buy a house, chances are you’ve encountered a few challenges, including low inventory and higher interest rates. Low inventory has driven up the price of homes. Those higher prices, coupled with interest rates over 7%, make it difficult for many to easily afford a house in the current market. But what about getting a mortgage loan now with the intention of refinancing it once the rates drop? Won’t the price of homes just keep increasing?

Here, we examine three reasons why taking the leap into a new home right now may not be in your best financial interest.

1. Marry the house, date the interest rate

According to Realtor.com, “marry the house, date the rate” is a catchphrase that took hold as interest rates began to climb in 2022. The idea behind the phrase is simple: Focus on buying a house now, and prepare to refinance the home when rates drop.

First of all, it’s mortgage lenders, real estate agents, and home sellers who benefit from this approach to home buying. Buyers could be left out in the cold.

Let’s say you get into a bidding war on a home with a $300,000 price tag. You’re determined to win and offer $50,000 over asking. Now you’ve agreed to pay $350,000 for a home that would have easily sold for $250,000 before the pandemic hit and housing inventory collapsed.

You plan to put $70,000 down (20%), meaning all you need to finance is $280,000 ($350,000 – $70,000 = $280,000). You’re excited when the home appraiser comes back with a home value of $300,000. That means the bank will lend you the $280,000 you need to finance the purchase.

As good as this sounds, there are at least two risks associated with paying top dollar (or more) for a home.

You’re married to the price you agreed to pay. While it’s true that you only “date” an interest rate and can refinance at any time, the same is not true of how much you pay for a home. When interest rates drop, you can expect housing inventory to surge, cooling prices in most parts of the country. Since you’re “married” to the home, you’re stuck with the price you paid — even if the value of the property drops.As mentioned above, unless you’re staying in a home for a very long time, you run the risk of owing more than your home is worth if area home values take a dive once the market is flooded with properties for sale.

Bottom line: You can renegotiate your interest rate, but you can never renegotiate how much you pay for a home.

2. There’s a reason interest rates drop

Most of us look back on low interest rates fondly, imagining that rates were low due to an excellent economy. Actually, rock-bottom rates are only considered a necessity when the economy is in trouble and needs help. There was a reason those rates fell so low.

The Federal Reserve is responsible for regulating financial markets, making sure that things don’t get too out of whack. One way it regulates markets is by setting the federal funds rate, the rate at which banks loan money to other banks. The federal funds rate is not the interest rate banks charge customers, but it is the rate banks use when deciding how much to charge. When the federal funds rate is low, so are the interest rates charged by lenders.

Here are three reasons the Fed is likely to drop the federal funds rate:

Inflation falls. The Fed has announced that it wants to see the rate of inflation at 2% or less. While we’re headed in that direction, we’re not quite there yet.Unemployment picks up steam. Unemployment has a natural cooling effect on the economy. People become less willing (or able) to borrow money. Once demand for loans drops, the Fed lowers the federal funds rate, which is followed by lenders lowering their rates. It’s all about luring borrowers back with low interest rates, and it works.People stop spending. Once the public begins to hear about layoffs, they go straight-up Scrooge McDuck and refuse to part with their money. At the same time, those who are still working begin to sock money away in an emergency savings account or other FDIC-insured deposit account. In an effort to get people to spend and stimulate the economy, the Fed lowers rates. This makes car loans, credit cards, and other debts less expensive.

Bottom line: If you’re waiting for rates to drop, don’t forget why they drop. If there’s any chance that your household will be impacted by layoffs or other economic upheaval, you may not be in a position to refinance.

3. How long are you willing to stretch your budget?

If you purchase a home when prices are at their peak and pay a higher interest rate than you’re comfortable paying, chances are your monthly mortgage payment will be high. It’s up to you to determine how long you’ll be comfortable with those payments. Will they cut into other activities, like travel or spending time with friends? Will your mortgage payment make it more difficult to pay other bills or to get out of debt?

Only you can answer those questions. None of us can predict the future, although experts are happy to weigh in on when they believe rates will drop. Until that time, are you cutting your budget too close to the bone, or can you easily cover your new mortgage payment until the time comes to refinance?

There’s an argument to be made for why you might want to buy now and refinance later, but like all big decisions in life, it pays to weigh the pros and cons before making this move.

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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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A buy now, pay later option could help fund your next trip. But keep reading for a few things you should know. 

Taking a vacation is pricey, and with inflation soaring over the past few years, the average cost of a domestic trip — not including airfare — is $1,584 right now. When you add flight costs or the price of paying for other family members to join you, a dream vacation can easily feel out of reach.

High travel costs are causing some Americans to opt for buy now, pay later (BNPL) options when putting their vacations into their online shopping carts. BNPL plans are essentially loans you apply for when booking your travel that allow you to pay for your trip over time.

Many BNPL companies charge interest rates ranging between 7% to 30% for the loan, but some may have lower special offers. As such, using a BNPL to fund your dream vacation may not always be the best option for your personal finances. But if you score a reasonable rate — some can be as low as 0% — there could be a few ways to leverage this option for your dream vacation.

1. Buy your plane tickets

The ticket-purchasing website Alternative Airlines says on its website that you can book flights on more than 650 airlines and use a BNPL service to pay for them.

The website partners with 10 BNPL companies, including PayPal Credit, Affirm, Klarna, and Afterpay, allowing you to make payments on your ticket weekly, bi-weekly, or monthly. Some buy now, pay later companies on the site even offer interest-free payment plans.

2. Book your hotel

Lodging is one of the most expensive parts of any dream vacation, which is why some people choose to pay for it using an installment plan rather than all at once.

There are a couple of different payment methods you can choose from when booking a hotel with BNPL, including a no-interest option through some online travel booking websites. For example, Expedia allows you to reserve some hotel rooms without charging you, and you only pay for the room when you arrive at the hotel.

The company’s Book Now Pay Later option won’t charge you any interest, making it a better option than some BNPL companies. Expedia says that some hotels may also offer free cancellation, which can come in handy if your travel plans unexpectedly change.

Another option for travelers is to book their hotel and pay for it using a buy now, pay later service like Uplift. The company conducted a survey showing that 48% of travelers are likely to use BNPL for hotels, and 43% of travelers upgraded their hotel options and amenities when doing so.

3. Book the full vacation

Nearly all online vacation booking sites offer the option to pay for your full vacation over a series of installments with a BNPL service. This allows you to spread out the cost of a pricey vacation over time, making it easier to manage the large expense.

But it’s good to remember that the more you spend on your vacation, the more you’ll owe, depending on your BNPL interest rate. The Consumer Financial Protection Bureau says BNPL late fees are on the rise too, and that in some cases, late fees can make buy now, pay later payment options more expensive than using a credit card.

It’s worth mentioning that some vacations allow you to pay in installments without charging any interest. Disney is well known for allowing people to book their entire vacation with just $200 down and then spread out payments leading up to the vacation, paying as much as they want for each payment. The last remaining payment is then due 30 days before you arrive at your hotel.

Keep this in mind when using BNPL

While there can be responsible ways to use BNPL to book your dream vacation, pay attention to the details. If you qualify for a 0% interest rate, then it may not be a bad option. But if you have to pay an interest rate, you’re much better off budgeting and saving ahead of time for your vacation.

Also, make sure you’ll be able to make your payments on time to avoid late fees. Your dream vacation will likely cost enough already — there’s no need to add fees on top of it.

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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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: short December 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.

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