Money Management

Apple Wallet might be convenient, but it’s not flawless. Discover this popular digital wallet’s Achilles heel here. 

I’m not going to lie: buying stuff with Apple Pay during the pandemic was a game changer. Contactless pay? Perfect. Don’t have to carry my credit cards around? Great. Two taps and FaceID? Wow — that’s convenient.

But recently I’ve come to realize a major weakness with Apple Wallet and other digital payment platforms. And no — it’s not just a security issue (though that is a concern, too). Instead, it has to do with earning cash back and getting the maximum rewards for my purchases. Here’s what I mean.

Digital wallets sometimes don’t give you bonus points or cash back

Many of my credit cards are designed to give me extra cash back for certain purchases. For example, I have a grocery card that earns more rewards at supermarkets and a dining card that earns more for restaurants, deliveries, and takeout. When I use, say, the dining card at a local restaurant, I expect to earn extra cash back.

When I use the credit card itself to pay, the restaurant is given a code. This code lets the credit card company know it’s a restaurant and thus eligible for my bonus cash back. You would expect the same to happen when you store credit cards in your digital wallet and use them for specific purchases, right?

Well, unfortunately, sometimes it doesn’t.

Digital wallets create a third party between credit card companies and merchants. That means your card issuer won’t receive information about the merchant directly, but rather from the digital wallet. If the digital wallet doesn’t code the merchant correctly, your credit card issuer may not give you bonus cash back.

Check the fine print

In fact, credit card companies are aware of this problem themselves. For instance, take a look at this little fine print from a popular Discover cash back card.

“Purchases made through third-party payment accounts, mobile or wireless card readers, digital wallets or similar technology will not be eligible if the technology does not provide sufficient transaction details for rewards qualification.”

And here’s another example from American Express.

“You may not receive additional points if we receive inaccurate information or are otherwise unable to identify your purchase as eligible for an additional points category. For example, you may not receive additional points when:

A merchant uses a third-party to sell their products or services; orA merchant uses a third-party to process or submit your transaction to us (e.g., using mobile or wireless card readers); orYou choose to make a purchase using a third-party payment account or make a purchase using a mobile or digital wallet.”

Don’t miss those first two bullets. Not only might you miss earning bonus points through digital wallets, but third-party payment processors, like Stripe or Toast, could also send the wrong code to your card issuer.

What can you do if you don’t get the right cash back?

Unfortunately, if you’re set on storing cards in Apple Wallet and making purchases with Apple Pay, there’s no easy solution — you’ll just have to monitor your transactions and make sure you’re getting the right amount of credit card rewards. The same is true if you purchase something using a third-party payment processor: You’ll just have to check that the processor assigned the right code once the charge is approved.

That said, if you catch a purchase earning the wrong cash back percentage, contact the number on the back of your credit card. Many card companies, like American Express, will take a second look and ideally assign your purchase with the right amount of points.

As for me, I’m going to carry my cards around in my physical wallet. Now, I will keep one card in my Apple Wallet — you know, just in case — but it’s a card that earns a flat cash back rate, so I’m not really concerned about it failing to register bonus points. If you can’t go back to the physical wallet, just make sure you’re monitoring your purchases and getting the right cash back. Don’t leave any rewards on the table — you earned ’em, now make sure the credit card company gives them to you.

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

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You may be tempted to borrow for the holidays. Is that a good idea? Read on to find out. 

Although many of us are still putting together last-minute costumes for Halloween and refreshing our candy supplies, the winter holidays will be here before we know it. And that’s apt to be a pretty expensive time of the year.

The average consumer is expected to spend $875 this year on holiday gifts and purchases, according to the National Retail Federation. And if you don’t have that kind of money sitting in your savings, then you might assume that your only choice is to borrow it.

You could charge your holiday purchases on your credit cards and pay them off as you can. But a personal loan might give you a lower interest rate on your debt, so you may be leaning toward that option. Is it a good one, though? That’s questionable.

Now’s not a great time to borrow

The Federal Reserve has been raising interest rates in an effort to cool inflation. Because of that, borrowing has gotten expensive across the board. Everything from a car loan to a home equity loan costs more these days, and personal loans are no exception.

Even if you’re someone with excellent credit, you may find that the rate you’re eligible for on a personal loan is higher than expected. Granted, it may be much lower than what a credit card will charge. But that doesn’t make today’s personal loan rates competitive by any means.

How much might a personal loan cost you in interest? It depends on your loan’s rate, the sum you borrow, and the length of time it takes you to pay that money back.

If you borrow $1,000 at 9% and pay it off over three years, you’ll end up spending about $145 on interest. With a five-year repayment period, you’re looking at about $245 in interest.

Does a personal loan make sense given the amount you’re looking to borrow?

There’s administrative work that goes into putting a personal loan in place. As such, lenders tend to impose borrowing minimums.

If you’re looking to spend somewhere in the vicinity of $875 on holiday purchases, you may not be able to borrow that small a sum with a personal loan. Lenders typically impose larger minimums, such as $2,000, though it may be possible to find a $1,000 personal loan.

However, since most lenders don’t write such small loans, you may be limited with choices. That gives you less leeway for shopping around and finding a competitive rate.

A better solution for paying for holiday purchases

A personal loan might seem like a good idea if you need a modest sum of cash to cover your holiday costs. But a better bet may be to work a side hustle during the holiday season to come up with that money instead.

Any time you borrow money, you run the risk of falling behind on payments and wrecking your credit. And since borrowing rates are expensive these days, you’re going to be looking at a lot of interest no matter what.

Many businesses need more help during the holidays, so if you’re trying to drum up $875 for your purchases, that may be doable if you hold down a side job throughout November and December. That way, you can close out the holidays without the weight of debt dragging you down.

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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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You don’t get any upfront tax breaks when you invest in a Roth IRA. Keep reading to learn about the other benefits these investment accounts offer. 

If you put money into a 401(k) or you open a traditional IRA with a brokerage firm and put money into it, you will not be taxed on the amount you invested in these accounts (as long as you don’t exceed the allowable annual contribution limits).

Being able to make contributions with money you aren’t taxed on provides you a huge financial benefit. If you invest $1,000 and you’re in the 22% tax bracket, you save $220 on your tax bill since you aren’t taxed on that $1,000. You will end up bringing home just $780 less money than you would have if you hadn’t made the contribution. But you’ll have the full $1,000 in your brokerage account working for you.

There’s another type of retirement account that does not offer you the ability to deduct your contributions, though. It’s called a Roth IRA. Since it doesn’t come with an immediate tax benefit, you may be wondering if it’s worth contributing to it. The answer for most people is yes, for three big reasons.

You get to defer your tax break until retirement

While you don’t get to claim a tax deduction for Roth IRA contributions, that does not mean a Roth IRA doesn’t come with tax advantages. It does. They just come later.

See, you get to take money out of your Roth IRA as a retiree and not pay a dime in taxes on it at the time. If you suspect your tax rate may be higher later in life (which is entirely reasonable to think, given that tax rates have hovered at historic lows for years even as the national debt is climbing) then you may want your tax savings later on.

Your Roth IRA could help you avoid being taxed on Social Security benefits

Social Security benefits are taxed only once your countable income exceeds $25,000 as a single filer or $32,000 as a married joint filer.

Your Roth distributions don’t count when determining if Social Security benefits are taxable. Countable income is half your benefits, all taxable income, and some non-taxable income — but not withdrawals from a Roth. Since all your investment income won’t count against you in this calculation, it’s a lot less likely you will be taxed on your retirement benefits.

This means you get even more tax savings. And this benefit will matter to a growing number of people, as the thresholds at which Social Security benefits are taxed is not indexed to inflation. Those $25,000 and $32,000 limits don’t change automatically, even as wages and costs grow. Therefore, more retirees each year are taxed on benefits. If you have a Roth IRA, you likely won’t have to worry about that.

You have more flexibility for withdrawals with a Roth IRA

Finally, if you have a Roth IRA, any contributions you make to it can be withdrawn without penalty at any time — even if you aren’t retired yet. This isn’t the case with traditional IRAs or 401(k) accounts. If you take money out of those before age 59 1/2, you would generally be hit with a 10% tax penalty.

While it isn’t a good idea to make early withdrawals from a retirement account, sometimes it is necessary in a true financial emergency. With a Roth IRA, you have that option without taking a tax hit. Say you need to make a big repair to your home, like adding a new roof — withdrawing from your Roth IRA could mean avoiding taking on debt in the form of a personal loan or credit card charge.

For all of these reasons, you may want to seriously think about putting at least some of your money into a Roth IRA after maxing out any employer match your company provides for 401(k) contributions.

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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.
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If you need money fast, will a personal loan work for you? Find out how quickly the funds can hit your bank account. 

If you need money for a big purchase, home remodel, or for many other purposes, a personal loan is one option to consider. Depending on which lender you select, you can often borrow anywhere from $1,000 to $100,000 using a personal loan, and you will have a set payoff time such as five or seven years.

Unlike when you charge things on a credit card, though, you can’t just have an open-ended personal loan available to you for whenever you need it. You need to apply to borrow a set amount of money that is then distributed to you. So if you need money fast, you may wonder whether a personal loan will work for you.

Here’s what you need to know.

Some personal loans can provide quick funding

The good news is, in many cases, it is entirely possible to get a personal loan in a timely manner. Some lenders can provide funding as fast as the same business day that you apply for a loan and get approved for it.

This is not the case for all loan providers, of course, as some don’t provide instant decisions or offer same-day funding. But there are good options for borrowers who need the cash in their bank account quickly. This can make personal loans a viable solution when you can’t afford to wait.

Be careful when looking for a quick personal loan

While there are many reputable lenders offering speedy funding, you need to be careful because there are also dishonest lenders who try to take advantage of people who are desperate for cash. You’re more likely to stumble upon these types of loan providers if you do a search for same-day personal loans.

Ensure the lender you decide to work with offers a reasonable interest rate and favorable terms with no high upfront origination fees. If you see a lender charging a high rate (above around 15% or so), a lender that promises a loan with no credit check, or a lender that charges an origination fee, you should pause and consider whether this is really the right provider — and keep looking for other lenders.

Lenders typically disclose their funding process, application requirements, origination fees, and interest rates online so you can research these options to make sure you’re being offered a fair deal. You should also get quotes from at least three different lenders to confirm you’re getting the best rate possible.

The good news is, you can go through the process of getting quotes online, so this shouldn’t slow you down if you need same-day funding or want the money in your bank account quickly. And most lenders won’t even need to do a hard inquiry to tell you your rate. So even if you’re in a hurry, take the time to explore your options and find the right loan for you so you don’t end up regretting your borrowing choice.

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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 homestead exemption allows you to save on property taxes. Read on to learn why it’s worth applying for it ASAP. 

If you’ve purchased a new home, there are a lot of things you’ll need to do. For one thing, you’ll have to start making mortgage payments. And you’ll need to sign up for utilities, furnish your home, move your stuff in, and get your kids registered in school.

As you take care of all of these tasks, there’s one other step you absolutely cannot forget. You need to apply for a homestead exemption if you’re eligible for one.

What is a homestead exemption?

Homestead exemptions help homeowners to reduce the cost of their property taxes. Typically, they work by allowing you to have a certain portion of the value of your property not considered in your home’s assessed value. Since your property taxes are calculated by multiplying your property’s assessed value by the millage rate where you live, this reduces the amount you must pay in property tax.

Depending where you live, a homestead exemption may allow you to exempt a flat dollar amount from your home’s value. Or, it may allow you to exempt a percentage of your home’s value. For example, you might get to deduct $10,000 from your home’s assessed value or you might get to exempt 15% of what your home is worth from its assessed value.

Either way, these exemptions can save you quite a bit, depending on the tax rate where you live — although a percentage-based approach provides more benefit to wealthier people with costlier homes. For example, the chart below shows how a homestead exemption might affect your property taxes on a $400,000 home, assuming a 2% tax rate.

As you can see, this exemption can save you a substantial amount of money on your tax bill each year — especially if you are entitled to a percentage-based exemption and you have an expensive home.

How to apply for a homestead exemption

Typically, you can qualify for a homestead exemption only on your primary home and only if you own and live in your house. If you are married, both you and your spouse may be eligible for an exemption. But you can only claim the exemption on one property — your primary residence.

You will need to apply for the exemption with the local taxing authority where you live. You can check with your county or city to find the forms that you will need in order to request this tax savings. For example, for those who live in the city of Philadelphia, you can apply for the exemption online by filling out a simple form.

Generally, this involves providing information such as:

The names of the owners of the propertyThe address of the propertyWhether your property is the primary homeWhether you claim anywhere else as your primary homeWhether you use any portion of the property for business purposes, which could cause you to become ineligible for the homestead exemption

You will have to sign the form as well. Once you have submitted it and the exemption is processed, your tax bill will be reduced if you are approved for the homestead exemption. You’ll want to do this as soon as possible after closing on your mortgage loan and moving in so you don’t end up overpaying on your taxes by not claiming it.

The good news is that once you apply, you should not have to do it again unless your deed changes. Get this task checked off your to-do list ASAP so your property tax bill will be as reasonable as possible for the duration of the time you live in your home.

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Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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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