Money Management

A credit card makes it easy to improve your financial picture. Discover how to improve your odds of qualifying for a good one. 

A credit card is one of the easiest and most accessible ways to build credit, and it’s really no wonder that Americans are such big fans of them. According to credit card research from The Ascent, 80% of us have at least one credit card — and a whopping 13% of us have at least four.

I’m part of that 13% (and I know some of my colleagues here at The Ascent are, too), but this doesn’t mean I apply for every credit card that catches my eye, or that applying for a new card is something I take lightly. Adding a new credit card account can impact your personal finances significantly, after all. If it’s time to add a new card to your wallet, here’s what you can do to ensure you get approval from a credit card issuer.

1. Check your credit score

In personal finance, as in all things, knowledge is power. So before you apply for a new credit card, check your credit score. You might have access to credit score monitoring through a current credit card issuer or your bank. It’s a good idea to stay on top of your credit score (and credit report; more on that below) anyway. But by knowing your score ahead of time, you can ensure you’re applying for a card geared toward your financial situation.

For example, a lot of the best travel rewards cards are designed for consumers with good to excellent credit scores (for FICO® Scores, this is 670–850). Don’t waste your time applying for a card geared toward a much higher score than yours, and conversely, if you have a strong credit score, you’ll find much better perks with a card that’s made for you.

2. Check your credit report

If your credit score comes back lower than you were expecting, or if it’s been a while since you checked your credit report anyway, it’s a good idea to do so. A low credit score can likely be explained by information you’ll find on your credit report.

And you should check the accuracy of what’s there — credit report errors are common, and you can have them removed by the credit bureau, boosting your score. You can get your credit report for free every week for the rest of the year.

3. Assess your current accounts

If you have existing credit card accounts, now is a good time to sign into them and see what’s up. If you are carrying balances, do they represent more than 30% of the credit limit you’ve been given? It’s best to keep your credit utilization ratio below 30% to avoid credit score damage. If you have higher balances than that, it could impact your ability to get approved for new credit.

Also, make sure you don’t owe any money to current creditors — late payments or delinquencies will do you no favors when applying for a new card.

4. See if you prequalify

Some credit companies have prequalification tools, which can be a super handy way to see if it’s worth putting in a full application for a card you want.

In most cases, you’ll just need to provide your name, address, and the last four digits of your Social Security number. In exchange, the card issuer’s website will show you a selection of cards that could be a fit for you and your finances. This could even be a good way to learn about credit cards you hadn’t considered before.

5. Apply sparingly

Finally, if you want the best chance of getting approved for a credit card, you should spread out your applications. Every time you apply for a card, the issuer will use a hard credit check to delve into your financial history, and this can result in the loss of a few credit score points. This is no big deal if it happens occasionally, but if you’re applying for new cards frequently, it can add up.

Plus, a lot of credit card applications in a short period could signal that you’re having trouble managing your money. That could lead credit card issuers to wonder if you’ll be able to pay them back for what you charge on a credit card.

Getting a new credit card can be super exciting — the rewards, the cash back, the welcome bonus! It pays to take these steps along the way if you want the best chance at getting approved.

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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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Payment apps offer a convenient way to send money, but you must take care when using them. Find out how to protect your money when using payment apps. 

Digital payment apps are popular because they’re convenient and easy to use. You’ve probably used at least one payment app to send money to friends and family or to pay for a purchase from a small business. While these mobile apps make it easy to pay others and get paid, it’s essential to protect yourself so you don’t get scammed and give your money to a thief. Below, I’ll outline some recommended best practices to follow when using payment apps.

Don’t keep cash in digital payment apps

When receiving payments through payment apps like Venmo, it’s best to transfer the funds to your bank immediately. Why? Money stored in your mobile payment app isn’t protected like funds kept in a bank account are. That means if something goes wrong, like if the mobile app goes out of business and shuts down, you could lose all the money in your account.

Most bank accounts offer FDIC insurance with protection on up to $250,000 per account, per bank so you can feel confident stashing your cash there. The bank accounts on our best checking accounts list are all FDIC-insured. Don’t treat payment apps like your personal bank account.

Do be cautious of suspicious links

Unfortunately, scammers want to trick people into parting ways with their money. It’s not uncommon for scammers to target unsuspecting people through text messages or email. These messages may include suspicious links, encouraging you to send payment through a website or mobile payment app.

Avoid clicking on any links from people you don’t know because it may direct you to a phishing link intended to steal your private information. If something seems off, trust your gut. If you want to pay someone you know by mobile app, make a payment directly within your favorite payment app — not through a link sent to you by email or text message.

Do protect your accounts

Protecting your online accounts, including mobile payment app accounts like Cash App, is essential. Choose unique passwords that aren’t guessable and set up two-factor authorization to protect yourself and your money better. It’s also recommended that you review payment app transactions and account balances every so often. If you don’t take steps to protect your accounts, it could be easy for a thief to access your online accounts and take your money.

Don’t make payments when connected to public wifi

It’s not a good idea to handle financial transactions, including sending money using one of the best payment apps, while connected to public wifi. Your personal data is at risk when you use unsecured connections. Instead, it’s best to use payment apps when you’re connected to a private, secured internet connection. If not, wait to send money.

Do verify payment details before sending money

Don’t rush to send payments before double-checking the details. If you accidentally send money to the wrong person, you may be unable to reverse the payment and get the money back into your account. It’s best to review all payment details carefully before sending money to someone. This way, the right person receives your money, and you don’t make a costly error you can’t fix.

Take care when using payment apps

Payment apps are a helpful tool that can save time and eliminate the need for cash when paying or collecting money from others. But make sure you use them carefully so your money is safe. For additional money-related 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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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I believe in (legally) paying the IRS as little as possible. Read on to see how I’ve already lowered my tax burden for 2023. 

I’ve been self-employed for several years now, and I can admit that it’s sort of a mixed bag. On the one hand, it’s great to be able to set my own schedule and take on extra work when I have specific bills I need to pay or savings goals I want to meet.

On the other hand, it’s not always so fun to have a variable income. And because I’m self-employed, I’m on the hook for more Social Security taxes than people who work for an employer, since they split that burden evenly.

As such, I try to take advantage of every opportunity to lower my tax bill — legally, of course. Here are three ways I’ve already managed to save money on my 2023 taxes.

1. I’ve contributed to my 401(k)

If you’re not self-employed and don’t have access to an employer-sponsored 401(k), then you generally need to stick to an individual retirement account (IRA) for retirement savings purposes. But because I’m self-employed, I get to contribute to a solo 401(k), which is a 401(k) that I manage myself.

Like a traditional 401(k) offered by an employer, the money I put into my 401(k) goes in tax-free. So if I put in $20,000, that’s $20,000 of income I won’t pay taxes on.

What’s more, one great thing about solo 401(k)s is that they come with higher contribution limits than 401(k)s offered by employers. This year, you can put up to $66,000 into a solo 401(k), as opposed to $22,500 with a regular, employer-sponsored 401(k) if you’re under 50.

In reality, not all self-employed people can contribute $66,000 — partly because they can’t afford to, and also, because your total allowable contribution is calculated as a percentage of your self-employment income. But it’s still nice to have the option.

2. I’ve signed up to max out an HSA

My family gets health insurance through my husband’s job. This year, we’re on a high-deductible health insurance plan. The bad part there is that we have to meet a $3,000 deductible before our insurer will start to pick up the tab for healthcare services. The good part is that our high deductible renders us eligible to fund a health savings account, or HSA.

This year, HSA contributions max out at $7,750 for families and $3,850 for individuals. Because we’ve signed up to max out, we get to shield $7,750 of household income from the IRS.

In addition to that upfront tax break, our HSA also allows us to invest our money tax-free to grow our balance. We can then take withdrawals tax-free to cover medical bills now or in the future.

3. I’ve kept great records of my business-related spending

Because I’m self-employed, I get to deduct expenses I incur in the course of earning money. So things like my internet and phone bill are fair game because they allow me to do my job. I can also deduct the cost of certain subscriptions since they provide me with the data needed to research stories.

But to be clear, I make a point to keep very precise records of my business-related spending. That way, I know exactly how much of a deduction I can take the following year when I file my tax return.

Sometimes, for example, I’ll buy office supplies like paper, notebooks, and pens because I do a lot of note-taking by hand. But I’ll sometimes buy similar supplies for my kids to use for schoolwork. So I need to keep very good records so I know which expenses I’m supposed to be claiming for work purposes and which ones I’m not.

Get the tax breaks you deserve

Filing taxes is an unavoidable part of life, but that doesn’t mean you can’t do your part to lower yours. Even if you’re not self-employed, you may be eligible to claim a tax break by contributing money to a retirement plan. If you don’t have a 401(k) through your job, you can open an IRA independently at pretty much any financial institution.

The same holds true for an HSA. Your plan might qualify if it has a minimum deductible of $1,500 for self-only coverage or $3,000 for family coverage. If you’re eligible to fund an HSA, you don’t have to do so through an employer. You can open an HSA on your own to snag the tax breaks involved.

Now, if you work for an employer, you can’t claim deductions like cellphone service. But if you hold down a side hustle on top of your main job, you can deduct expenses incurred in the course of doing that gig. So if you’re a tutor and you spend money driving to different students’ homes, you can deduct that cost.

It’s important to be honest about your tax situation and pay the IRS what you owe. But there’s absolutely nothing wrong with pursuing as many tax breaks as you’re legally allowed to snag.

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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.

 Read More