Money Management

It’s important to buy a home for the right reasons. Read on to see what that means to me. 

An estimated 64% of Americans own homes rather than rent them. And there are plenty of benefits to owning a home. For one thing, you can build equity in an asset that gains value over time. And you may be able to deduct the interest you pay on your mortgage for added tax savings.

But buying a home is a process. You need to save up a down payment, apply with different mortgage lenders, and go through the process of having your finances examined.

Owning a home is an even more complicated process. You need to not only pay your mortgage, but cover a host of other expenses and do the work needed to keep your home standing.

That’s why if you’re going to buy a home, it should be because you really want to. And if you follow misguided advice, you might end up regretting your decision to buy in a very big way.

“Buy a home because it’s a good investment”

As a personal finance writer and homeowner myself, I read a lot about property ownership. And I can’t tell you how many times I’ve seen advice along the lines of “buy a home because it’s a good investment.”

That advice, frankly, makes me want to put my fist through my computer screen (or perhaps something a bit less destructive, but you get the gist). See, I know full well that it takes a lot of work and a lot of money to own a home.

Just last week, I had to dip into my savings account to the tune of about $12,000 to replace my home’s two heating system units. And while I knew they were aging, I was not expecting to have to spend that money this year.

Of course, there are some aspects of home maintenance I can’t just throw money at. When it snows, I have about 24 hours to clear the sidewalk in front of my house per my town’s rules. Good luck trying to get a last-minute snow removal service in during a major storm.

In fact, owning a home often means dropping what you’re doing to tackle some sort of issue. It’s not for the faint of heart.

That’s why my advice to people considering homeownership is to buy if you have a desire to own a home and are willing to do the work. But if you don’t mind renting or prefer it, then rent. There are plenty of other ways you can invest your money that don’t require you to shovel snow.

Stocks could make for a much better investment

During the first quarter of 1993, the median home sale price was $125,000. During the first quarter of 2002, it was $429,000. So someone who bought a median-priced home in 1993 and then sold it 30 years later may have gained $304,000. That’s a nice amount of money.

But let’s back up a second. It’s pretty much impossible to have spent 30 years in a home without spending money on expenses like insurance, property taxes, maintenance, and repairs. So if we factor in $10,000 a year for those things, we’re left with a final gain of…$4,000. Hmm.

Now let’s look at the stock market. And let’s say that instead of putting a 20% down payment on a $125,000 home in 1993, you’d invested that cash ($25,000) in the S&P 500.

Without accounting for reinvested dividends during that time, based on the index’s performance over those 30 years, you would’ve grown your money to $227,500. When we factor in reinvested dividends, that number rises to about $402,000.

Your gain during this period hinges on the scenario you choose. If you take the lower number — $227,500 — you’re looking at a gain of a little more than $200,000 when you subtract your initial $25,000 investment. With the higher number, you’re looking at $377,000. Either way, it’s way more than $4,000.

Oh, and if you’re convinced that my $10,000 estimate for annual upkeep, taxes, and so forth is too high, then go ahead and cut it in half. Even so, you’re still looking at a gain of $154,000 instead of $200,000 and change or more. Also, these gains don’t account for actual work.

It doesn’t take a ton of work to hold stocks in your portfolio. It takes a lot more effort to physically maintain a home.

This isn’t to say that homeownership is a bad thing. It can be a very positive experience, and it can also be lucrative. But don’t buy a home because the internet tells you it’s a good investment. That, frankly, is a bad idea.

Our picks for the best credit cards

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.

 Read More 

Costco’s optical service offers many benefits. Read on to learn more about some that may be less obvious. 

Many people look to Costco to save money on expenses like groceries, cleaning supplies, and paper products. But if you’re someone who wears glasses, then it could pay to make Costco your go-to source for eye exams and new lenses and frames. Here are some of the less-obvious benefits of using Costco Optical.

1. Costco Optical accepts most major vision insurance plans

You’ll often hear that it’s a good idea to buy your glasses at Costco or get your eyes checked there if you don’t have insurance, because you might get to spare more cash for your savings account compared to going elsewhere. But you might spend even less with insurance, since Costco Optical participates with major carriers that include Avesis, VBA, and VSP.

Of course, it’s always a good idea to call your insurer and check your coverage before getting your eyes examined through Costco and buying glasses there. Perhaps you can spend even less on a new pair of glasses by going to a preferred provider, so do that research ahead of time.

2. You can save big by purchasing multiple pairs of glasses

It’s a good idea to have a spare pair of glasses, since you never know when yours might break or get horribly scratched up. When you buy multiple pairs of glasses for the same prescription, you’ll automatically get $30 off additional pairs at Costco Optical.

At this point of the year, you may have an FSA balance you’re trying to spend down. Buying a couple of pairs of glasses at Costco could be your ticket to using up your balance but not going over it.

3. You can try on glasses without leaving the house

Buying glasses online can be tricky, since it’s hard to know what a given frame will look like on your face. Costco has solved that by introducing a virtual try-on. You simply take a video of your face, and from there, you can see what different styles will look like on you so you can order your glasses online if you don’t want to travel to a store.

4. Adjustments to glasses are always free — even for glasses not purchased at Costco

You may reach a point where you need your eyeglasses adjusted, either because they’re loosened or they didn’t really fit right in the first place. Costco Optical will adjust your glasses for free — whether you bought them at Costco or at another store.

If you’re thinking of taking advantage of Costco Optical’s new virtual try-on, the limitation there is not being able to see how your new glasses will feel on your face. So if you find a pair that looks great but doesn’t feel so great, just head in to Costco at your convenience for an adjustment.

5. You can get an eye exam even if you’re not a member

For many people, a Costco membership makes sense. But if it doesn’t pay for you, worry not — you can still get your eyes examined at a nearby Costco and walk away with a prescription. However, only members can buy glasses.

When people think of Costco, the chain’s optical center and services aren’t necessarily the first things that come to mind. But it could pay to make Costco Optical your new source of glasses and vision exams for these benefits alone.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

 Read More 

Many Americans pay avoidable bank fees and it costs them hundreds of dollars a year. Learn how to get around some of these pesky fees with minimal effort. 

There’s an expression in the U.K. that goes, “Look after the pennies and the pounds will look after themselves.” Times have changed, and I don’t think a penny (or a cent) will even buy you a piece of candy these days. Still, the logic is sound. It’s all too easy to spend $0.50 here and $1 there, but before you know it, you’ll have spent $50 with little to show for it.

This year, looking after the pennies has been one of my money mantras — which, in part, means watching out for banking fees and other sneaky charges. Here are three ways banks get you to part with your money, and how to avoid them.

1. Monthly service fees

Many banks charge monthly service fees on their checking and savings accounts. In fairness, banks have to cover costs like staff, rent, and other overheads. But they also use the money you deposit with them to generate revenue. This makes the fee feel less justified — you’re essentially paying for the privilege of letting the bank use your money.

There are a few specific situations where the fee is worth it. For example, years ago, I paid a monthly fee for a checking account that gave me free foreign transactions, travel insurance, and several other benefits. I was working abroad and didn’t have a credit card with those perks. The fee more than paid for itself.

However, in most cases, if you’re paying a monthly fee, it might be time to look for an alternative.

Potential cost:

Fees vary from bank to bank, but a recent MoneyRates survey put the average monthly checking account fee at $13.95. Savings accounts come in at around $5 a month. If you pay for both, you could be looking at over $200 a year.

How you can avoid this fee:

Open a free checking account that doesn’t charge monthly fees, period. Alternatively, you can opt for an account with a waivable fee. Just make sure you understand the requirements and are able to meet them.

To avoid checking account fees, you might need to:

Keep a certain amount of money in your account: If your balance slips below the minimum you may have to pay the fee.Get your paycheck or Social Security deposited into your account: There may be a minimum amount you need to deposit each month to avoid the fee.Hold multiple accounts with the same bank or credit union: In some cases, you wouldn’t need to pay the fee if you have a savings or investment account with that institution.

2. ATM fees

The world may have become increasingly cashless, but we’ve all been in situations where we need ready money and there’s no in-network ATMs nearby. The trouble is that you’ll get charged for being caught short. In a lot of circumstances, you’ll have to pay an out-of-network fee to your bank as well as an additional fee to the ATM operator.

To give you an idea, here are the fees a handful of top banks charge on their basic checking accounts. If you have a premium account or meet certain criteria, several of the banks below will waive the fee and even cover the charge from the ATM owner.

Potential cost:

According to MoneyRates, on average, using an out-of-network ATM will cost $4.55. If you do this twice a month, that will come to around $110 a year.

How you can avoid this fee:

There are a few ways to avoid ATM fees. One is to pick a bank that won’t charge extra for going out of network. Or even better, one that will also reimburse the ATM operator charge. Another is to only use ATMs that are part of your bank’s network. If you withdraw cash often, look for a bank that has a wide network of ATMs, particularly in your area. You might also be able to avoid multiple fees by making larger withdrawals.

ATMs are not the only source of ready dollars. I sometimes deliberately pay for my groceries with a debit card so I can get cash back. I lose out on credit card rewards, but it’s a convenient way to get money. You may also be able to skip physical dollars altogether in many circumstances by using a digital wallet or payment app.

3. Overdraft and non-sufficient fund (NSF) fees

If there’s not enough money in your account to cover a transaction, you might get hit with an overdraft or NSF fee. With an overdraft fee, the bank will allow the payment to go through and charge you. You have to opt in for this service. If your account doesn’t have overdraft protection, the payment will be declined and you may have to pay an NSF fee.

These fees have received a lot of criticism, particularly from the Consumer Financial Protection Bureau (CFPB). One issue is that the fees disproportionately penalize low-income groups. Sadly, repeated fees can cause people who are struggling financially to opt out of the banking system altogether.

As a result, some big banks have significantly reduced their overdraft and NSF fees in recent years. They’ve also introduced more buffers to protect consumers. For example, many banks now limit the number of overdraft/NSF fees you can incur in one day or give you a grace period to get your balance out of the red.

Potential cost:

According to the latest CFPB data, overdraft and NSF fees can range from $10 to $37 depending on the bank. Bank of America is leading the way with no NSF fees and a low $10 overdraft fee. (The CFPB also fined Bank of America earlier this year for overcharging customers with insufficient fund fees.)

Overdraft transfer fees — the charge for automatically transferring money from a linked account — can be as much as $12.50 per transfer. A lot of the top banks have done away with another sneaky fee called an “extended” or “sustained” overdraft fee. But some still charge as much as $25 if your account is overdrawn for five or seven days.

The real sting with these fees is how quickly they can add up. Let’s say there’s an automatic bill payment that overdraws your account. You don’t realize it, and you make two more payments that day. If you’re paying $35 each time, that’s $105 in bank fees in one day. It isn’t hard to see how overdraft and NSF fees generated $7.7 billion for banks in 2022, per the CFPB.

How you can avoid this fee:

Having to pay an overdraft fee when you are already struggling is a bit like rubbing salt in a wound. If you are at risk of overdrawing your account, look for a bank that won’t make matters worse. At the minimum, prioritize banks that don’t charge NSF fees. Beyond that, some banks go further by, say, giving you a grace period to bring your balance back up. Here are some other ways to avoid overdraft fees:

Don’t opt into overdraft protection unless you really need it. If you aren’t sure, or have already opted in, speak to your bank. Many banks have eliminated NSF fees. If you don’t have overdraft protection that means payments that would take you into the red will be declined but wouldn’t rack up charges.Understand your bank’s overdraft/NSF charges. Find out how many times you could be charged an overdraft fee in a single day, whether there is any kind of cushion, and how much you’ll pay if you overdraw your account. You may also be able to link your checking account to another account to automatically cover charges. If you do, find out how much this would cost.Pay attention to your balance. When you’re living paycheck to paycheck, it can be all too easy to accidentally overdraw your account. Use mobile banking to track your balance, and see if you can set up an alert so you know when your balance drops below a certain amount.Build an emergency fund. It’s all very well telling you to transfer money if your checking account is running low, but some of us may not have any funds in reserve. Try to put even a small amount into a savings account each month. Those emergency savings could help you avoid overdraft fees.

Many bank fees are avoidable

Bank fees can cost us hundreds of dollars a year, and in a lot of cases, you don’t have to pay them. That’s money that you could be investing for your retirement or saving for a rainy day. To put that into a very hypothetical and simplified perspective, let’s say you found ways to save $20 a month on bank fees. If you invested that money for 10 years and earned 8% interest, it could add up to around $3,500. My Grandmother was right, those pennies really can add up.

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.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

 Read More 

Not everything is worth booking ahead of time. Read on to learn how paying some costs in advance can save you money and keep you from missing out on experiences. 

Some things on cruises are generally not worth booking in advance. For example, unless you want something very specific, spa treatments are usually easy to book once you’re on board, and often have discounts and specials that are as good or better than anything you can book ahead of time (Tip: This is especially true on port days.). Photo packages are another example of something you can usually wait until you’re on board to worry about.

On the other hand, some activities and packages on cruise ships can potentially save you money and prevent you from missing out on the things you want to do if you book them in advance.

1. Drink packages

Beverage packages are almost always cheaper if you buy them ahead of time. Now, the question of whether you’ll get your money’s worth for a drink package is another question for another article. But if you decide to buy one, it’s wise to do it before you get on the ship.

Just as one example, Carnival’s CHEERS! Package that allows you to get alcoholic beverages (up to 15 per day), as well as bottled water, sodas, and specialty coffees costs $64.95 per day plus an 18% service charge if booked on board. If you buy it on Carnival’s website ahead of time, the per-day rate is $59.95. On a seven-night cruise for two people, this can save $70.

2. Shore excursions

Unlike some of the other costs on this list, shore excursions aren’t usually cheaper if you book them in advance — although there are a few exceptions. For example, if you book certain activities at Royal Caribbean’s private island Perfect Day at Coco Cay, you can usually get a discount for booking in advance.

The real reason to book shore excursions ahead of time is that the more desirable ones tend to sell out well before the cruise, so it’s a good idea to book early. Plus, with shore excursions, you can usually cancel until a few days before the cruise and receive a full refund to your credit card if you change your mind.

3. Travel insurance

I’d strongly suggest buying some sort of travel insurance before you go on a cruise. If you get stranded in port, or if you get sick in a foreign country or on the ship and need to be medically evacuated or go to a hospital, the cost can be enormous.

There are two main choices when it comes to travel insurance. Cruise lines all sell some variation of a “vacation protection plan,” and this will cover medical expenses, as well as if you need to cancel your trip at the last minute for a covered reason. There are also private travel insurance policies that can provide better coverage and good value.

The general guideline is that if you’re just taking one cruise and only plan to travel occasionally and domestically otherwise, buying the cruise line’s protection plan is probably sufficient. But if you’re a frequent traveler — and especially if you plan to take multiple cruises in a year — an annual travel insurance policy could be the best way to go.

4. Specialty dining packages and reservations

There are tons of free food choices on cruise ships. Between the buffets and food in the main dining room, as well as other venues, it’s quite possible to take a cruise and not spend an extra dollar on food.

Having said that, many cruise ships have specialty restaurants, such as steakhouses, sushi joints, and more. These have an extra cost, but may be a little cheaper if you book in advance. But like shore excursions, the biggest reason to book specialty dining reservations in advance is to avoid missing out if they book up.

In addition, some cruise lines offer unlimited dining packages or meal bundles. These can be a great value and are often cheaper (or only available) to buy in advance, and they can sell out in many cases.

5. Internet packages

Some people like to stay connected while at sea, and on many cruise lines, at-sea internet quality has improved dramatically in recent years. For example, Royal Caribbean offers its excellent VOOM Surf and Stream internet package for $30.99 per guest, per day for an upcoming cruise I’ve booked if I buy it on board. Pricing can vary, but a quick look shows that I can buy it for $22.99 per day for this cruise if I pay in advance.

Another tip is that unless you plan to do lots of work, or plan to be on your phone a lot, you may only need one internet package for two travelers. Only one device can be logged on at a time, but it’s usually easy to switch back and forth.

What if prices end up going down?

With many expenses, it’s worth noting that you can typically cancel and rebook at the lower price rather easily. As an example, if you prepay for a drink package and your cruise line runs a Black Friday sale that makes it significantly cheaper, it is usually rather easy to get a refund for the original purchase and rebook at the current price. On the other hand, capacity-limited activities like shore excursions may have their own cancellation policies (although these rarely get cheaper).

Having said that, booking and paying for these five things in advance of your next cruise is generally a good idea to make sure you get the best possible deals and don’t miss out on restaurants and shore excursions you want to try.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 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.The Motley Fool has a disclosure policy.

 Read More 

There are some compelling credit card offers in the market. Is it possible to apply for more than one in a day? Here’s what you need to know. 

There is a high level of competition in the credit card industry, and there are dozens of appealing credit card products available. And while the topic of how many credit cards you need is a separate issue, it’s common for people to wonder whether they can apply for more than one credit card at a time.

The short answer is yes, you can apply for one credit card immediately after applying for another. But there’s a little more to unpack. Here’s what you need to know about the time you might need to wait between credit card applications, and how it could affect your credit score.

How long do you have to wait to apply for another card?

Technically, you don’t have to wait any length of time between credit card applications. If you wanted to, you could apply for a dozen different credit cards on the same day, and if you have a high credit score, you could potentially get approved for all of them.

In practice, there is little reason to fill out credit card applications in massive quantities, but there are some situations where multiple applications in a short time can make sense. For example, when my wife and I bought our first home, I applied for a credit card that was cobranded with my favorite furniture store, as well as a Home Depot credit card, on the same day.

The only limiting factor is likely to be restrictions from each individual credit issuer. For example, multiple sources have found that American Express doesn’t allow more than two card applications within a 90-day period. Capital One is especially restrictive, reportedly limiting customers to one new credit card every six months and no more than two personal credit card accounts open at a time.

Credit score impacts

Regardless of how long you need to wait before applying for another credit card, it’s important to realize how multiple new credit cards can impact your FICO® Score. There are five categories of information that make up your FICO® Score, and opening new credit cards can adversely affect two of them.

First and more obvious, there’s the “new credit” category, which has a 10% weighting in the FICO formula. This considers the number of recently opened accounts on your credit, as well as the number of credit applications (inquiries) you make, regardless of whether a new account was opened. While a single credit inquiry is unlikely to drop your score by more than a few points, several applications in a short time frame can have quite a negative impact.

Second, there’s the “length of credit history” category, with a slightly higher weight of 15%. This category considers several time-related factors, including the ages of your individual accounts, the average age of all of your accounts, and more. And the general rule is that a longer history is better for your credit score. By adding several new credit cards to the mix, your average account age would decrease, thus causing a ding to your credit score.

How long should you wait between credit card applications?

Every situation is different. As mentioned, there could be valid reasons to apply for two or three credit cards in the same day, especially if you achieve a major life milestone like buying a home. But as a general rule, plan ahead and aim to space out your credit card applications as much as you can, while still meeting your financial goals.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 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.American Express is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® has positions in American Express. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More