Money Management

Starbucks makes billions of dollars from customers who use gift cards to buy drinks. Find out how the coffee chain functions like a bank. 

With more than 36,000 locations worldwide, Starbucks is undeniably a popular coffee chain. If you order coffee here for an occasional treat or as part of your everyday routine, you may use the Starbucks mobile app to place your orders.

The app is simple to use and saves customers time by allowing them to skip waiting in long lines. But one convenient Starbucks app feature makes the brand a lot of money. Learn more about this feature and discover how to use it to your benefit.

Starbucks regulars can earn double the stars by doing this

The Starbucks Rewards program is a free loyalty program available to all customers. Once you become a member, you can earn Starbucks stars when spending money with the brand. If you pay for your Starbucks order with cash, a debit card, or a credit card, you’ll earn 1 star per $1 on eligible purchases.

However, paying with a Starbucks gift card allows you to earn 2 stars for every $1 on eligible purchases. You can purchase and reload gift cards in the app and enable auto-reload capabilities. While you’ll benefit from doing this by earning double the stars, you should consider that you’re essentially lending Starbucks money for free when using this feature.

Since you’ll pay upfront for future purchases when you reload your Starbucks gift card, Starbucks wins by getting more money upfront before you even order your favorite caffeinated beverages. This feature allows Starbucks to operate like a bank, even though it’s a coffee shop.

During a 2023 Q1 earnings call with investors, former CEO Howard Schultz said the coffee chain saw more than $3.3 billion loaded to gift cards in the United States, which set a new record. With that figure in mind, it’s clear many customers are buying and gifting gift cards.

Earn double stars without parting ways with all your cash

If you’re working hard to meet your personal finance goals, it may be best to fund small amounts of money to your Starbucks gift card when reloading. Through the app, you can refill as little as $10. You can add more anytime if you don’t have enough to cover a purchase.

For most people, it likely doesn’t make sense to reload $100 or more at once. That’s because any money loaded onto a gift card is only usable at Starbucks. You may want to start with $10 or $20 refills and keep the rest of your extra cash in a high-yield savings account to earn interest.

Here’s another suggestion: It may be best to skip enabling auto-reloads so you use up all your funds before the next top-up. The last thing you want to feel stressed about is an unexpectedly low bank account balance due to an auto-reload you forgot about.

Should you avoid using this app feature? Probably not. You’ll earn rewards more quickly by loading money to a gift card instead of paying directly for each purchase using a debit card or credit card. But consider how much money you add to your account before rushing to make a large reload. Starbucks is a corporation that already makes bank every time you order food or drinks.

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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 Starbucks. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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When it comes to rising prices, we’re not all on even footing. Here’s what you can do to help handle inflation. 

Over the past two years, Americans have been hit hard by rising prices on everything from new cars to groceries. And with such wide-reaching inflation, it can be easy to think of everyone being similarly affected by the spike. But looking at the underlying data shows some stark divides in the effect of inflation on different groups.

Read on to learn more about how prices aren’t rising evenly across the board — and what to do if your personal finances are more sensitive to inflation.

Renters vs. homeowners

One of the most obvious examples of how the past three years have unequally impacted Americans is the housing market. For renters, this period has seen rent payments rise substantially. Meanwhile, homeowners have been largely insulated from such a spike, and some may be paying less for their mortgage than they were pre-pandemic.

Much of the recent headline-grabbing inflation numbers are related to rents, which play an outsized role in the overall Consumer Price Index calculation. Recent inflation relating to rents didn’t actually peak until March 2023, when it hit over 8%. And when a renter’s monthly payment is renegotiated, typically on an annual basis if not more frequently, their monthly rent could change dramatically from inflation.

Homeowners, on the other hand, are typically locked into a monthly mortgage payment over many years. So even in a period of record inflation, the price of keeping a roof over their heads remains largely the same for those borrowers. In the past few years, some borrowers actually lowered their monthly mortgage payments by refinancing at very low, mid-2020 rates. And while some homeowners are feeling the shackle of so-called golden handcuffs, homeowners have a significant advantage over renters in today’s turbulent economy: the ability to wait it out.

Commuters vs. hybrid and WFH employees

There is another stark divide between those workers who must work on-site and those who can work from home. The evidence suggests that those with a commute have been subject to significantly higher rates of inflation than those who have more workplace flexibility.

Driving to work has become increasingly expensive, with inflation on gasoline hitting just shy of 60% last summer. And those that needed to buy a used car last year could expect to pay about 40% more than in the prior 12 months. When employees are spending so much more just to get to work, the cost of your commute could have a rippling effect throughout your budget.

Those who work a hybrid schedule or are entirely remote can reduce or largely avoid these expenses. Obviously, the monthly cost of gasoline is less for a non-commuter, but there are some other hidden savings. For example, a car driven less often will not need service as frequently, and may not need to be replaced as urgently as a commuter vehicle.

Steps you can take today to better face inflation

Renters, commuters, and many others are facing inflation higher than the CPI print. Fortunately, there are steps that can be taken today to help Americans feel more secure in their financial futures.

First, get back to the basics by building or updating your budget, and tracking how expenses change over time. Next, you may have to get creative. There are ways to lower your rent, including negotiating rates when renewing an old lease or before signing a new one. Commuters might consider carpooling with coworkers, using public transportation, or negotiating for a hybrid work schedule, if possible.

The sting of inflation has not affected all Americans the same. While some may be able to avoid certain expenses or be insulated from rising prices, not everyone has the same luxury. However, a well-thought-out approach to managing expenses can go a long way toward ensuring your family’s financial security.

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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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If you hate the kitchen in your new home, you can remodel. But keep reading to learn which qualities about a home can’t be so easily altered. 

Let’s be honest — owning a home is always an expensive prospect. Not only do you have to fit mortgage payments into your budget, but you also need to worry about keeping up with ongoing maintenance costs, and homeowners insurance and property taxes tend to rise over time.

And these days, the act of buying a house itself is even more costly and stressful than usual, thanks to higher home values and higher mortgage loan rates. As of this writing, the average rate on a 30-year fixed-rate mortgage loan is 6.96%, per Freddie Mac. And according to the St. Louis Fed, the median price of a home sold in the U.S. in the second quarter of this year was $416,100.

If you’re looking at these numbers and feeling despair, you’re surely not alone. And you might be so desperate to get on the property ladder that you’ll settle for just about anything in your price point. Think twice about making an offer on a home that doesn’t meet your needs on the following qualities, however — as they can be either impossible or very expensive to change.

1. The location

Location, location, location. There’s a reason this factor is so important when it comes to real estate. Consider this before you make an offer on a prospective home, because you won’t be able to change it. Is the home in a neighborhood with amenities that are important to you? To use myself as an example, I love to take long daily walks outdoors, and a neighborhood that isn’t safe for pedestrians wouldn’t be a fit for me. I also like having a grocery store just a few minutes away, and needing to drive farther than a few miles would be a deal breaker.

Your needs are likely different from mine. If you have kids, is the house in a good school district? If you work in an office, will you be signing on for a horrible commute if you buy that house? If you want the “bigger picture,” so to speak, of a home’s location, take a page from my colleague Christy’s book and plug the address into Google Maps so you can get a satellite view of it. Genius!

2. The natural light

Next on the list of qualities you can’t change about a home is the amount of natural light it receives. Yes, okay, you can cut down the tree in the side yard if it’s blocking a precious south-facing window and you know you want to keep houseplants in that room. Or if the master bedroom gets a bit too much light in the early morning and you like to sleep in, you might be able to address that with an awning, blackout curtains, or a tall hedge.

But there’s nothing you can do to change the home’s orientation. If you’re able to, it’s worth making a few visits to a home you’re considering buying, at different times of day. This way, you can check out the natural light situation, if it’s important to your enjoyment of the home.

3. The homeowners association

Different people have different opinions about homeowners associations (HOAs), but love them or hate them, a lot of Americans live in one. According to data from This Old House, 74.2 million people lived in an HOA neighborhood as of 2021.

If the home you’re considering is overseen by an HOA, there’s likely nothing you can do to change that fact. So if you’re not okay with having someone snooping on your landscaping or telling you what color you can paint your home or even what kind of pets you can have, you might want to steer clear of houses under HOA governance.

4. The square footage and layout

Finally, you will find it prohibitively expensive to change a home’s square footage and layout. Angi reports that the average cost of building a home addition comes in at just under $50,000. But the cost can range from $4,500 to $150,000, depending on what work needs to be done and how large of an addition you’re hoping to create. That could be a significant percentage of your home’s actual value.

Based on how complicated and costly a project like this can be (think architects, permits, and materials — oh my!), it’s best to just buy a house whose size works for you from the beginning. Similarly, if you don’t like the placement of the rooms inside, you’ll be looking at a nice bite out of your savings account to move walls, wiring, and plumbing.

Luckily, there’s plenty about a home that is easily changed. Hate that 1970s wallpaper or want to finish the basement? Changes like these are within your grasp. For the factors on this list, however, it’s best to steer clear of a home whose location, natural light, HOA status, or size doesn’t work for 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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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Is your credit score lower than you’d like? It’s possible to improve it. Keep reading to learn how one writer added 100 points to hers. 

If you’ve spent any time in the personal finance space (perhaps by hanging out here at The Ascent?), you’ve no doubt read a lot about credit scores. Your credit score has a big impact on your financial life — finance guru Tori Dunlap calls it your “adulting GPA.” This three-digit number tells lenders what kind of borrower you are and whether you can be relied upon to pay back loans, credit cards, and more.

I recently boosted mine by 100 points in just eight months. This is a dramatic jump, to be sure, but just about anyone could take the steps I did and improve their own score, even by just a little bit. Even a modest improvement can help you get lower rates on loans and a greater likelihood of being approved on a credit card application.

Beginning score: 727

My financial life has been a mixed bag. I bought a house I couldn’t afford when I was in my 20s, and it took me several years to get free of that boondoggle with a short sale. But after the credit score hit I took from that, I decided to stay on top of what I could control. Namely, making on-time payments to my creditors. I haven’t made a late payment to any of them in the wake of the house debacle, and as a result, I was managing to keep my credit score in the lower 700s (which is in the “good” range for FICO® Score). This was despite being deeply in debt, too. Payment history makes up the largest percentage of your FICO® Score, accounting for 35%. And if you think about it, that makes sense — if you make your payments on time and in full, that tells lenders you’re good at managing credit. As of July 2022, my FICO® Score stood at 727. I credit this to my stellar payment history as well as maintaining older credit accounts — this was a year before I decided to cancel my oldest credit card. Length of credit history makes up 15% of a FICO® Score.

After eight months: 827

In late 2021, I started looking for a side hustle to help me pay off debt and perhaps start saving money to buy a home. I’m not the kind of person who knows how to do anything halfway, so once I found a side gig, I threw myself into working long hours and rolling my money into debt payoff.

I finished paying off what I owed in October 2022, but it took several months for my FICO® Score to finish growing by 100 points. This makes sense; the three major credit bureaus have different reporting schedules, and in fact, we all have multiple credit scores. FICO® Score is the one used by 90% of lenders, however. As of March 2023, I had reached 827.

Where did that 100 points come from? By this point, I was still maintaining all my old accounts, and I had added just one (which had boosted my total credit limit significantly). Meanwhile, since I had paid off debt, my credit utilization ratio (reflected in 30% of a FICO® Score) had gone down to a tiny percentage. Your credit utilization ratio is the amount of credit you’re using at any given time; it’s recommended that you keep it under 30% to avoid credit score damage. The mix of continued on-time payments, a long credit history, a higher credit limit, and a very low credit utilization ratio gave me a credit score in FICO’s “exceptional” range.

Want to boost your credit score?

If your credit score could use some work, here’s how you can improve it.

If you’re carrying debt month to month like I was, see if you can get some of it paid off. I recognize that not everyone will be able to spend as much time working a second job as I did, but even picking up a casual side hustle or getting a raise at your regular job can help immensely.Commit to making on-time payments. Remember, payment history is 35% of your FICO® Score, so it really, REALLY matters.It’s a good idea to get a copy of your credit report and pick through it for errors. If you spot old delinquent accounts that should’ve fallen off your report, you can dispute them with the credit bureau that issued the report. The same goes for errors, like accounts that were never yours.Apply for new credit sparingly. During the eight-month period where I saw this credit score gain, I applied for exactly one new credit card: a grocery rewards credit card that is now earning me cash back on one of my biggest expenses. Credit cards are a useful financial tool, and it’s worth taking the time to find the right ones for you before you apply.

Take a deep breath, check your credit score (and credit reports), and make a plan to boost it. Your future self will thank 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.The Motley Fool has a disclosure policy.

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