Money Management

Medical credit cards can help with an expensive bill, but there are a few details buried in the fine print you should be aware of. Read on to find out more. 

If you’re facing a big medical or dental bill, your provider may suggest applying for a medical credit card. A medical credit card is a credit card that you can only use for healthcare expenses, many of which offer a temporary no-interest period.

The appeal of these credit cards is obvious. A 2022 Kaiser Family Foundation poll found that about 4 in 10 Americans have delayed or skipped medical care due to costs. But there are several pitfalls to be aware of before you apply for a medical credit card.

How medical credit cards work

A medical credit card is a credit card that you can only use for healthcare expenses. As with a traditional credit card, you’ll have a credit limit and a minimum monthly payment. Once you pay down your medical credit card, you can charge up the line of credit again as long as you use it for medical expenses.

Usually, you’ll apply for a medical credit card at a doctor’s office or hospital. You can often receive same-day approval, allowing you to pay for care immediately.

Traditionally, medical credit cards were limited to services health insurance didn’t usually cover, like dental, vision, and hearing services. But medical credit card issuers have expanded their uses. Now, you can often pay for everything from checkups to specialist visits to emergency care.

One reason for the proliferation of medical cards is that issuers focus their marketing efforts on healthcare providers. In the past, providers often allowed patients to pay in zero-interest installments if they couldn’t afford the upfront costs. Medical credit cards are replacing many of these payment plans, though, according to a May 2023 report by the Consumer Financial Protection Bureau (CFPB). If you pay using a medical credit card, your doctor bypasses the collections process and gets paid within a few days.

The downsides of medical credit cards

A medical credit card may be convenient if you don’t want to pay upfront but are confident you can pay off the balance before the no-interest period ends. But there are several reasons medical credit cards can be especially costly.

Deferred interest

Many medical card issuers advertise that you won’t be charged interest if you pay off your balance within a specific timeframe, like six months or 12 months. But that isn’t quite the same as a 0% interest period.

Medical credit cards typically charge deferred interest, which means if you don’t pay off the full balance by the end of the promotional period, you’ll be charged interest retroactively on the entire amount financed.

For example, say you apply for a medical credit card and use it to pay for a $3,000 dental procedure. When the promotional period ends, you still have a $200 balance. You’ll pay interest not just on the $200 remaining but on the entire $3,000 you borrowed. Among customers who wind up incurring interest charges, deferred interest inflated the cost of care by 23% on average, according to the CFPB report.

High APRs

A May 2023 report by the Consumer Financial Protection Bureau found that a typical medical credit card had a 26.99% APR, compared to 16% for an all-purpose credit card. Moreover, many medical credit cards charge a flat APR to all customers, including those with good credit scores.

Fewer protections

Some consumers report difficulty disputing billing errors after paying with a medical credit card. Patients may wind up taking on debt to pay for care that their insurance company should have paid for in the first place.

You’re also afforded certain credit-reporting protections when you have unpaid debt that’s classified as a medical bill. For example, any medical bills under $500 or that are less than a year old won’t appear on your credit reports. But when you pay with any credit card, including a medical credit card, your medical debt loses these protections because it’s classified as credit card debt.

Alternatives to medical credit cards

Facing a major medical expense you can’t afford is a stressful experience. It’s essential to take care of your health, but you also want to consider all options before you charge up a medical credit card. Here are some alternatives:

Ask for a payment plan. Some hospitals are required by law to offer financial assistance or charity care programs. If you’re hospitalized, ask for a copy of the hospital’s financial assistance policy, which it’s required to provide for free. If you’re facing a big bill from a doctor’s office, ask if they’re willing to work out a payment plan with you directly, even if they’re pushing you to apply for a medical credit card instead.Contact your insurer. Before you sign up for a medical credit card, make sure your treatment isn’t covered by health insurance. Even if you’ve already paid for a service that your insurer refused to pay for with a medical credit card, you can still file a dispute if you believe the treatment should have been covered.Use a regular credit card. Some credit cards have 0% APR offers for up to 21 months. Even if you can’t pay off the full balance by the end of the intro period, at least you’ll only pay interest on the remaining balance. With deferred interest, you’ll be retroactively charged interest for the full amount you financed.Take out a personal loan. Personal loans tend to have lower interest rates than credit cards and can usually be used for any purpose, including medical bills.

If you’re insured, start by working with your insurance company and finding out what’s covered. Appeal if you disagree with the decision. Negotiate directly with your doctor or the hospital, if possible, if you’re uninsured or the treatment isn’t covered. Only after you’ve exhausted these options should you consider paying with a credit card or loan.

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Inflation is less rampant now than it was last year. Read on to see why you might still need to work on boosting your savings and adjusting your spending. 

Inflation was a major issue in 2022 — one that drove many Americans into credit card debt and forced them to raid their savings to stay afloat. But inflation has cooled nicely in 2023.

This past July, annual inflation was measured at 3.2%, per the Consumer Price Index. Compare that to July 2022, when annual inflation came in at 8.5%, and we’re clearly in a much better place.

But financial guru Suze Orman insists that consumers should not waste their time focusing on how inflation is being measured. Instead, she says, consumers should focus on their personal savings and finances.

It doesn’t always pay to look at the big picture

Keeping tabs on the Consumer Price Index can give you a sense of what living costs look like on a broad level. But Orman insists that measuring inflation levels isn’t really a good use of the typical consumer’s time. Instead, she says, consumers should look at their own financial pictures and see if there’s a need for changes or improvements.

As Orman says, “It doesn’t matter what eggs cost or what a gallon of gas costs if you don’t have the money to pay for it.”

And she’s right. You might prefer to pay $3.29 for a gallon of gas instead of $3.59. But if you can’t even afford the $3.29, you’re not in a great spot. And that’s something to focus on more so than broad inflation levels.

How to improve your finances

If you’re struggling to cover basic living costs like housing, food, utilities, and transportation, then it may be time to give your spending habits an overhaul. That could mean moving to a less expensive home or trading in a hefty monthly car payment for a smaller one. It might also mean cutting back on some leisure spending.

These are all difficult things to do. And in some cases, there may be a cost involved. You might have to spend $500 to move to a less expensive home. But if that saves you $400 a month in rent for the next year, it may be worth doing.

Now to be clear, you don’t have to go on an expense-cutting spree if you’re generally doing okay financially and occasionally have a tough month when unplanned bills come in. But if you’re struggling to cover your basic expenses month after month, then it may be time for some changes, difficult as those might be to implement.

As Orman says, “You’re okay to spend money if you have the money to spend…if you have an emergency savings account and you don’t have any credit card debt.” But people who are living paycheck to paycheck should aim to rethink their expenses and build up some cash reserves — especially those who have to stress about filling their gas tanks and buying groceries for the week.

In addition to reevaluating your spending, it’s a good idea to build some sort of emergency fund, even if it means starting out with a very small one. You’re better off having $50 or $100 in the bank for an unplanned bill than no money at all.

A good way to build savings is to automate the process by arranging for some money to leave your checking account after each paycheck and land in your savings. If you set that up to happen automatically, you’re less likely to end up not moving money into savings.

And again, if you can only swing $5 per paycheck for savings purposes, so be it. The key is to start somewhere.

Focus on you

Inflation may be cooling off. And that’s apt to impact you personally, because waning inflation can mean cheaper gas, groceries, and electricity.

But ultimately, Orman thinks it’s pretty useless for the typical consumer to track inflation. And she also doesn’t want to see too many people getting caught up in celebrating cooling inflation when their personal financial situations are dire.

So while it’s okay to be happy about the state of inflation now compared to a year ago, it’s even more important to examine your finances. And if you need to make changes to the way you spend and save, try your best to implement those as soon as you can.

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No savings to fall back on? Read on to see why that’s dangerous and what you can do about it. 

Life has a way of surprising people in a less-than-ideal fashion. You might head over to your parking spot to drive to work, only to find that your car suddenly won’t start. Or, you might wake up craving a nice, hot shower only to realize that overnight, your water heater seems to have given up on doing its job.

It’s for reasons like this that it’s so important to have an emergency fund. You just never know when life might throw you a curveball. And if you don’t have savings, you may have no choice but to charge a surprise expense on a credit card and pay off the balance over time, all the while accruing interest and stressing about it along the way.

A recent SecureSave survey found that 63% of Americans could not cover a $500 emergency expense by tapping their savings. So if you fall into that category, it’s important to take steps to build up cash reserves — even if it takes a while to get to a place where you have a solid cushion.

You don’t want debt hanging over your head

Credit card debt — or any type of debt, for that matter — can be expensive and stressful. And when you carry a balance on a credit card forward, you run the risk of accruing lots of interest that only makes your debt harder to pay off.

Case in point: Let’s say you’re forced to charge a $3,000 home repair on a credit card with a 20% APY. If it takes you three years to shed that balance, you’ll end up spending a little more than $1,000 on interest alone. Ouch.

That’s why it’s so important to have some emergency savings on hand. A $3,000 savings account balance may not be doable for you in the near term. But it’s important to save something so smaller expenses don’t immediately drive you into debt.

The easiest way to build cash reserves

Saving money is not an easy thing to do. If it were easier to save, perhaps more Americans would be in a position to cover a $500 unplanned expense with relative ease. But a good way to go from minimal or zero savings to a more robust balance is to put the process on autopilot.

Suze Orman, who co-founded SecureSave, insists that “the best way to save is to automate it.” Orman says that for people who don’t have an emergency savings account through an employer (which is the case for many workers today), a good bet is to set up an automatic transfer from checking to savings every month.

And it doesn’t have to be a massive sum, either. If you can only swing $10 a month now, do that. And if, come January, you get a raise and can then afford $30 a month, ramp up.

“You have to start somewhere,” says Orman. So don’t be discouraged if you’re building up your cash reserves slowly. If you start automating your savings now, you might have $100 in the bank by the end of the year. That’s something to be proud of if you’re starting with $0.

All told, it’s important to put yourself in a position where you can cover the occasional unplanned bill. Automating the process could lead to a much-improved financial picture for you — and a lot less stress to boot.

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Homes are becoming harder for Americans to afford. Read on to see how you can find a home despite these circumstances. 

It’s hardly a secret that buying a home is expensive. But given that U.S. property values are still elevated and that mortgage lenders are charging a small fortune to finance a home purchase, a lot of people are struggling to break into the housing market these days.

Recent data from Black Knight shows that housing affordability is now at its lowest level since 1984. The monthly payment on a typical home in July took up about 38% of a median household’s income, up from 36.8% a month prior. That’s a notable leap in just one month.

If you’re in the market for a home, you may be struggling with sky-high property values and borrowing costs. But here are a few things you can do to land your dream home even in today’s seemingly impossible market.

1. Don’t just buy the first home that seems acceptable

Not only are homes and mortgages expensive, but real estate inventory is extremely limited. As such, you may be inclined to make an offer on the first home you see that actually falls within your budget. That could end up being a mistake, though.

Unless you’re truly in a desperate situation (such as your lease running out with no renewal option and there being no affordable rentals anywhere in your neighborhood), you don’t want to rush through the process of buying a home. And if you go with the first property you can categorize as acceptable, you might end up missing out on another home that has more of the features you want.

Remember, you may not realize what features you really want out of a home until you look around and see what’s out there. So try to be patient when searching for a home, even if that means having to wait a bit longer to purchase a place of your own.

The good news is that mortgage rates aren’t really expected to skyrocket in the coming months, namely because they’re already quite elevated. That doesn’t mean they won’t rise a little. But in the grand scheme of things, it’s not worth rushing the home-buying process to potentially lock in a mortgage at 7.18% instead of 7.28%.

2. Be willing to compromise

We just talked about not jumping on the first suitable home you come across. But you also don’t want to get too picky with details at a time when housing is so expensive and inventory is so limited.

Rather than make a wishlist with 17 line items, divide your preferred home features into two categories — “must have” and “want to have.” Then, aim to keep your “must have” list to four or five items and focus on checking those boxes off when you do your house-hunting.

You’ll of course want to be able to check off as many “want to have” items as you can, too. But if you have five “must haves” and you’re able to get them all from a given home, that should be what matters most.

3. Make sure your can handle your monthly housing costs

A home that offers every single feature on your wishlist that you can’t actually afford isn’t your dream home. You might think it is, but you might soon realize after the fact that it’s far from it.

As a general rule, your predictable monthly housing costs should not exceed 30% of your take-home income (meaning, your paycheck after taxes and deductions). Sure, there’s some leeway with this guidance, such as if you’re moving to an area where you don’t need a car. In that case, spending 35% to 40% of your pay on housing is reasonable because you’re not covering another major expense that most people have to bear.

But for the most part, try to make sure that your monthly mortgage payments, property taxes, homeowners insurance costs, and HOA fees, if they apply to you, are limited to 30% of your pay or less. If you go beyond that point, you might quickly fall behind on housing costs as well as other bills. That could make for a very stressful situation.

Home affordability may be in the pits right now, but that doesn’t mean that finding your ideal home is off the table. It just means you need to be careful with your search, set priorities, and run the numbers carefully to avoid getting in over your head.

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Not a Costco member, but want to shop the best deals? You can shop at Costco.com, but you’ll pay higher prices as a non-member. Find out if you should join. 

There’s a lot of talk about warehouse clubs like Costco. Shoppers like getting a good deal on groceries and household essentials, so they often share their excitement. If you’re wondering if you can shop Costco’s online deals without paying an annual membership fee, the answer is yes. Anyone can shop on the Costco website. But there’s one catch that you should be aware of before you start shopping for the best Costco deals. Here’s what you need to know.

Non-members pay a surcharge

Anyone can shop on Costco’s website — but if you’re not a member, you’ll pay more. Costco imposes a 5% surcharge over the posted prices for non-members. This applies to all purchases, except prescription drugs. The company does this because the annual membership fee helps cover the heavily discounted retail prices you see in-store and online.

If you plan to shop on Costco’s website without becoming a member, you should budget for this additional surcharge. If you’re planning to place a sizable order or shop the Costco website often, you may want to consider whether it’s worthwhile to become a member instead.

So, when does it make sense to pay the membership fee? Costco’s cheapest membership will run you $60 yearly. With that figure in mind, if you plan to spend around (or more than) $1,200, you’ll likely want to pay the membership fee instead because $1,200 in spending with 5% surcharges is $60 in additional fees — which could cover your annual membership fee.

You should also factor in shipping costs. Costco members can order eligible items online and pick them up at their local club. You won’t have that privilege as a non-member, so you’ll also pay shipping fees. That’s another extra cost that will impact your bank account balance.

But even if you don’t plan to spend that much money, joining may be better. Costco notes on its website that online and in-club prices can vary. So, by becoming a member and being able to shop at your local club, you may get better deals. Becoming a member and getting a discount on everyday goods could be a win for your personal finances.

Take advantage of Costco’s 100% satisfaction guarantee

Costco has a risk-free 100% satisfaction guarantee. If you pay the membership fee and are dissatisfied at any time, Costco will cancel your membership and refund the membership fee. This guarantee also extends to many of the products sold by the warehouse club.

For most purchases, except for some exclusions like alcohol (which can’t be returned) and electronics (which have a shortened return period), if you’re dissatisfied with a purchase, you can return the merchandise for a refund. If you decide to become a member, you can feel confident knowing you can return most everyday items if you’re unhappy with a purchase.

Do this to earn rewards when you shop

Whether you shop on the Costco website, in-club, or at another retailer, don’t miss out on the chance to earn valuable rewards. By using one of the best rewards credit cards to pay for everyday purchases, you can get rewarded for shopping. Life is expensive, so any rewards earned can add up and make a difference. Check out our list of the best cash back credit cards to discover how you can earn cash back rewards when you spend money.

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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. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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When you leave a job, you still own your 401(k) money, but finding old accounts can be difficult. Find out how to locate your old 401(k). 

When you leave your job or get laid off, you typically have a long list of to-dos, including switching health insurance plans, returning equipment, and possibly working out the details of any severance pay. One thing that often gets forgotten: figuring out what to do with the money in your former employer’s 401(k).

According to 401(k) rollover firm Capitalize, there were about 29.2 million forgotten 401(k) accounts as of May 2023, representing roughly $1.65 trillion in assets. The number of forgotten 401(k) accounts spiked by about 20% in 2021 and 2022, a period dubbed the Great Resignation because workers were leaving their jobs in record numbers.

Forgetting your old 401(k) is surprisingly easy to do. In this article, we’ll explain how to locate your lost 401(k) money.

What happens to lost 401(k) money?

If you left a job at a company that still exists, your money could still be sitting in your old employer’s 401(k) — we’ll discuss what happens to old 401(k) money if your former employer folded shortly. Most employers let you keep your money in the plan even if you no longer work there if your balance is over $5,000.

But if your balance was less than $5,000, your plan administrator could force you out of the company 401(k). Here’s what happens:

If the balance was between $1,000 and $5,000, the plan administrator can roll over your balance into an individual retirement account (IRA) in your name.If the balance was less than $1,000, the plan administrator can distribute the funds to you directly by cutting you a check. When this happens, a portion of your balance will usually be withheld for the IRS.

If your company closed or filed for bankruptcy, your 401(k) money still belongs to you. Retirement assets are generally protected from creditor claims. You’ll typically receive a notice of plan termination from the plan administrator. But if you don’t take action, the plan administrator could distribute the funds to you.

If your plan administrator makes a distribution to you — either because you had less than $1,000 or the plan was terminated — and it can’t locate you, the money will eventually go to your state’s unclaimed property division. Unfortunately, if your plan makes a distribution and you’re younger than 59 ½, you could owe taxes and a 10% early withdrawal penalty.

Where to find old 401(k) money

You have several options for locating old 401(k) money. If the company still exists, you can start by asking its human resources department for the name of its plan administrator. But if that proves futile or the company is no longer around, here are some resources for searching:

National Association of Unclaimed Property Administrators (NAUPA): The NAUPA maintains a database at missingmoney.com that lets you search for unclaimed property that’s in the hands of all 50 states, the District of Columbia, and Puerto Rico. While you’re searching, you could discover other forgotten money, like old security deposits or bank accounts.National Registry of Unclaimed Retirement Benefits (NRURB): The NRURB database at unclaimedretirementbenefits.com is maintained by PenChecks, a state-chartered retirement distribution service. Some employers register former employees with old 401(k) money if they’ve been unable to locate them.U.S. Department of Labor: The Department of Labor’s Employee Benefits Security Administration allows you to search for a plan that’s been terminated or is in the process of being terminated.

Eventually, it will be simpler to find old 401(k) money. The SECURE Act 2.0, which passed in late 2022, directs the Department of Labor to establish a lost-and-found database for employer-sponsored retirement accounts by the end of 2024.

What to do with your old 401(k)

If you’ve recently left your job or expect to soon, it’s important to determine what to do with your 401(k). Your options are as follows:

Keep the money with your old employer. Check with your plan administrator about whether you’re allowed to keep your money in the company 401(k). Keep in mind, though, that when you have multiple retirement accounts with former employers, it’s easier to lose track of your 401(k).Roll it over into a new employer’s 401(k). If you have a new job lined up, check with the new employer about whether you can roll over your 401(k) into its plan.Roll it over into an IRA. You can roll over your money into an IRA account with the brokerage of your choosing. If you go this route, ask your plan administrator to transfer the money directly to the IRA provider. If it cuts you a check, you’ll need to deposit it into a qualified retirement plan to avoid having it treated as a distribution.Cash out. This is typically the worst option, as you’ll owe taxes and a 10% penalty if you haven’t reached age 59 ½. Plus, you’ll miss out on invaluable compounding time in the market.

Be sure to research your options for your 401(k) immediately after leaving jobs and be on the lookout for any notices from your old company’s plan administrator. Tracking down an old 401(k) can be a serious headache. The sooner you take action, the better.

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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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