Money Management

Getting a credit card can be a great financial move if you’re in the right place to do so. Here are some signs you may not be ready for a card of your own. 

A credit card can be a great tool. It can be more convenient to pay with a credit card than always having to get cash out of your bank account. You can also earn rewards like miles or cash back when you use your card. And, as you use your card, you can develop a positive payment history. This will help you earn a good credit score.

But not everyone should have a credit card. You need to make sure you’re ready for one before you apply. Before you move forward, look out for these four signs that getting a card isn’t the right move for you.

1. You don’t have your spending under control

If you don’t have good control of your spending, you are not ready to get a credit card. That’s because the risk of getting deeply into debt is too great.

The average credit card interest rate was 20.68% as of July 10, 2023, according to the Federal Reserve. If you cannot pay your balance off in full each month because you overspent on your card, you’ll make each purchase a lot more expensive. You’ll also find yourself struggling more to live within your means in the future once your income is eaten up by credit card payments and high financing charges.

2. You can’t count on yourself to make payments on time

You don’t want to be late paying for your credit card bill because that would be reported to the credit reporting agency and your credit score could take a hit. Even a single late payment could bring your score down by as much as 110 points if you previously had good credit.

You could also find yourself facing late fees and being charged a penalty APR if you don’t pay your credit card on time. This will make your card even costlier.

3. You already have a lot of other debt you’re working on paying down

If you are already working on paying down a lot of debt, you may not want to add another credit card to the mix. Before taking the risk of incurring additional debt, it makes sense to try to repay the debt you already owe. You should be sending extra payments to your current debt, rather than giving yourself a new way to become indebted to a credit card company.

4. You’ll soon be applying for another big loan

Finally, if you are going to be applying for another big loan soon — like a car loan or a mortgage — you shouldn’t be getting a credit card right now. Doing so could hurt your credit score by reducing your account age, which is a key factor when your score is determined. It could also make lenders fear that you are going on a borrowing spree which would make them less likely to approve your loan.

If you have any of these four red flags that suggest you aren’t ready for a credit card, don’t be discouraged. Just keep working on getting your finances under control or paying down your existing debt and revisit the issue once that’s done to see if it’s a better time to apply for credit.

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It’s important to find the right home for your college savings. Read on to see if you’re overlooking one helpful account. 

If your goal is to save enough money to be able to cover your kids’ college expenses, then you’d better start socking funds away at an early age. Given that the average cost of tuition has risen to $10,423 for in-state residents at public colleges, according to U.S. News & World Report, you may find that paying for college requires more money than you’d expect. (And let’s not even get started on tuition for private colleges and universities, which is way more than what state schools charge.)

In fact, given what some colleges cost today, saving for that milestone just isn’t enough. It’s important you invest your college savings to grow your money into a larger sum.

But data from Vanguard reveals that most parents are missing out on a very helpful college savings tool. And if you’re missing out, too, then you could be making a big mistake.

What can a 529 plan do for you?

You could invest your college savings in a traditional brokerage account. That way, your money won’t be restricted in any way. You can contribute as much as you want year after year, and if your kids opt out of attending college, you won’t have to worry about what to do with your money. But a better bet may be to save for college in a 529 plan for one big reason.

With a 529 plan, you don’t get a federal tax break on the money you put in (though some states offer their own incentives). However, money in a 529 gets to grow tax-free, and withdrawals are tax-free as long as that money is used to pay for qualified education expenses. (And to be clear, you don’t have to use that money just for college. You can pay for private school when your kids are younger as well.)

So, let’s say you contribute $5,000 a year to a 529 plan over 18 years for a total of $90,000. If your investments do well, your account might have a value of $200,000 by the time your kids are set to attend college. Only you won’t have to pay taxes on that $110,000 gain if you use all of that money to cover tuition.

Of course, that’s a big “if.” When you fund a 529 plan, you run the risk of ending up with excess money in your account. And taking withdrawals from a 529 for non-education purposes could result in you getting penalized on the gains portion of your account.

But the good news is that 529 plans allow you to switch beneficiaries without penalty. So if you have one child who opts out of college, you can always use the money you’ve saved for them for a different child. You can also roll a limited amount of money from a 529 plan into a Roth IRA without penalty starting in 2024.

Consider a 529 plan

A 529 plan certainly isn’t your only option when it comes to investing for college. But it’s an option worth considering due to the tax benefits involved.

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Investors and analysts eagerly await the Federal Reserve’s decision at its July meeting. Will the Fed raise rates for the 11th time? Read on for our take. 

All 106 economists polled by Reuters agree that the U.S. Federal Reserve will increase interest rates by 25 basis points to the 5.25%-5.50% range on July 26. The majority of economists believe this anticipated increase will mark the end of the current tightening cycle.

Economy is still strong

The economy has proven to be strong and unemployment remains at historically low levels, surprising analysts and investors alike.

Inflation is decreasing, with the Consumer Price Index (CPI) declining from 4.0% in May to 3.0% in June. This has led experts on Wall Street to believe that inflation could be controlled in the near future, sparking speculation about potential rate cuts by the end of 2023.

However, Fed Chair Jerome Powell and other central bank officials have emphasized the need for further tightening, despite their recent decision to pause rate hikes at the June meeting.

The ongoing discussion revolves around whether further rate increases are necessary to maintain the trend of decreasing inflation or if taking extra measures could have adverse effects on the economy.

How high will rates go?

While all 11 voting members of the Fed agreed unanimously to pause on hiking rates in June, the minutes from the meeting reveal that certain officials advocated for a quarter-point rate hike or expressed their willingness to support such a proposal.

In fact, some signaled that they might raise rates twice more this year, beginning as soon as this month. The most recent projections from the Federal Open Market Committee, which sets policies for the central bank, indicate that the benchmark overnight interest rate will likely reach a peak of 5.50% to 5.75%. However, only 19 out of 106 economists surveyed by Reuters believe it will actually reach this range.

The belief that the Federal Reserve is nearing the end of its cycle of raising interest rates has caused the value of the dollar to decline against other major currencies, reaching its lowest point in over a year. Powell has stated that future decisions will be made on a meeting-by-meeting basis.

High interest rates are impacting consumers

The Fed has increased the benchmark rate by 5 percentage points over a span of 14 months, making it the most substantial pace of increases in 40 years. As a result of the rate hikes, mortgage rates have surged, resulting in a drastic decline in home sales. The average rate for a 30-year mortgage has almost doubled, rising from 3.8% in March 2022 to 6.78% currently, per Freddie Mac. The National Association of Realtors found that the sales of existing homes have dropped by almost 20% compared to last year.

Credit card interest rates have also experienced a significant increase, averaging over 20% nationwide, up from 16.3% before the Federal Reserve’s rate hikes. Auto loans have become more expensive as well, as the average rate on a five-year loan increased from 5% in early 2020 to 7.81% in the first quarter of 2023.

The Federal Reserve is closely monitoring inflation and the global economy, which will definitely influence its future decision-making. This balancing act involves addressing persistent high inflation while preventing an economic downturn. As new economic data becomes available, the Fed will continue to assess the situation and determine the best course of action for the remainder of the year.

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Interest rate hikes are bad for borrowers but good for savers. Read on to learn more. 

The Federal Reserve has been intent on helping cool inflation. Higher living costs have been wreaking havoc on consumers for more than two years now, and a lot of people have seen their credit card debt rise and their savings shrink as a result.

To help ease inflation, the Federal Reserve opted to raise interest rates 10 times beginning in March of 2022. It then decided to pause that practice last month, giving consumers looking to borrow money some relief.

But will the Fed’s rate hike pause hurt savers? Not necessarily.

How rising interest rates impact consumers

The Fed is not tasked with setting consumer interest rates directly. Rather, it oversees the federal funds rate, which is what banks charge each other for short-term loans.

But when the Fed raises its benchmark interest rate, lenders tend to follow suit by charging higher interest rates on consumer borrowing products like auto loans, personal loans, and home equity loans. So all told, borrowing has gotten very expensive over the past year in the wake of the Fed’s actions.

The fact that the Fed paused interest rate hikes in June means that in the very near term, the cost of borrowing may not rise so much. But that also means that savings account rates may not rise.

While rate hikes are a bad thing for consumers looking to borrow money, they’re a good thing for people with money in the bank. So for the time being, savings account rates might hold steady rather than rise.

But it’s also important to realize that the Fed’s decision to pause rate hikes isn’t necessarily bad news for savers, either. The Fed didn’t cut rates — it simply left them flat. So that shouldn’t cause banks to lower rates anytime soon.

Are more rate hikes in store, or is the Fed finally done?

It’s hard to know what the Fed will do about rate hikes when it sits down to meet later in July, or at other points later on in 2023. Some financial experts think we’re due for more rate hikes despite the progress that’s been made on fighting inflation. Others think the Fed might opt to let things be for a while and not raise rates anytime soon.

Ultimately, we’ll have to wait for the central bank to convene and make a decision. But the good news for savers is that the Fed is not expected to cut rates anytime soon, so current savings account rates should at least hold steady for a bit if they don’t rise. And given that banks are paying a fairly generous amount of interest these days, that’s hardly something to get upset over.

Of course, anyone who’s worried about rate cuts could consider locking in a certificate of deposit, or CD. That guarantees the same interest rate for a preset period of time. However, it also means potentially losing out on a higher interest rate should the Fed raise rates again in 2023. So anyone looking into this option should think about the pros and the cons.

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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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Want a more hassle-free life? Read on to see how Amazon could come to your rescue on the cheap. 

We all have to deal with our share of inconveniences in life, whether it’s traffic on the way to the office or a massive backup at the school pick-up line. But why deal with inconveniences when there may be a solution in the form of a low-cost Amazon purchase? Here are a few items that could improve your life for under $50, so you won’t have to raid your savings to buy them.

1. Rechargeable electric hand warmers

You’re on the soccer field cheering your kids on when a fellow parent asks to exchange phone numbers. You try to reach for your cell, only you can’t, because you lost feeling in your fingers 30 minutes ago.

Enter a pair of hand warmers, like this set of rechargeable ones from Amazon. For $16.97, you can warm your hands for up to 10 hours and simply recharge ahead of your child’s next early-morning soccer game at the cold end of the season.

2. Leak-proof water bottles

It’s common for kids to bring a water bottle to school so they’re not constantly asking for the hall pass to grab a drink from the fountain in the hall (which, let’s face it, may or may not be working). But it’s also pretty common for kids’ water bottles to spill in their backpacks on the way home from school, leaving you, as a parent, to deal with the soggy mess and explain to the teacher why your child’s homework sheet has disintegrated.

A better idea is to get your kids water bottles that actually don’t leak, and these Contigo bottles should do the trick. They come with a spill-proof lid and leak-proof technology to help you and your children avoid a mess. You can grab a two-pack on Amazon for $13.25.

3. A collapsible microwave cover

Sometimes, kids get hungry and take matters into their own hands by attempting to heat up dinner on their own. That’s a great thing in theory, except for when they cause an explosive mess in the microwave.

A modest investment in a microwave cover could help you avoid that. Amazon has this model on sale for $12.44. It’s collapsible so it won’t take up too much room in your cabinet, and it’s easy to wash.

4. A clear backpack

You’re waiting in line to enter a stadium for a big concert or sporting event when you’re stopped at the bag check line. Ten minutes later, after all of the contents of your backpack have been removed, you’re given the green light, but you’ve held up the line and are feeling awkward about it.

That’s a scenario you may be able to avoid with a clear backpack, and Amazon is selling this one for just $11.99. It’s large enough to fit a good number of personal items without being bulky, and it could save you a major hassle the next time you’re gearing up to attend an event with bag restrictions.

5. A cold brew coffee maker

If you’re someone who needs their morning caffeine fix, then you may be a big fan of cold brew. But you may not necessarily be a big fan of having to wait for 15 minutes at the Starbucks drive-thru to pick up a cold brew on the way to work. And you may not love the expensive credit card charge that ensues every time you do that.

Enter this at-home cold brew maker. For just $27.99, you can brew your own supply on the weekend and have enough to last you for days. This model features a two-quart pitcher and a filter that’s easy to clean.

These are just a handful of items you might find on Amazon that could spare you some sort of hassle or make life less difficult. It pays to make a list of the things you feel could improve your life, since you may be surprised at how affordable some of them are. And if not, well, that’s what holiday wish lists are for.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Starbucks. The Motley Fool has a disclosure policy.

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You don’t have to go off budget to buy your child a new pair of glasses. Find out how to score BOGO youth prescription glasses at Sam’s Club. 

Believe it or not, it’s almost back-to-school season. In addition to purchasing school supplies, you may need to get your kids new prescription glasses. A Sam’s Club membership could help you save money on this essential expense. The warehouse club is running a buy one, get one promotion on kids’ prescription glasses through Aug. 20. Find out what you need to know about this deal so you can get your kiddo new glasses before the new school year begins.

Don’t miss this BOGO youth eyewear deal at Sam’s Club

As you prepare for the upcoming school year, you may need to get your child a new pair of glasses if they now need to wear glasses or their prescription has recently changed. New glasses can be expensive — but a Sam’s Club membership could unlock significant savings.

Sam’s Club has a buy one, get one free youth prescription eyewear deal from July 26 through Aug. 20. When you buy a complete pair of youth prescription glasses at Sam’s Club between those dates, you can get a second pair of prescription youth glasses (up to a $59 value) for free. This offer is available in-store only.

Since kids tend to lose or break things often, having a back-up pair of glasses is not a bad idea. You can keep more money in your checking account by getting a free pair at your local club. In addition to selling prescription glasses and contacts, Sam’s Club offers vision exams for a fee.

Eye exam costs vary by location and whether you have vision insurance. But to give you an idea of pricing, a study by All About Vision found the average cost customers paid for an eye exam without insurance at Sam’s Club was $61. That’s an affordable price for an eye exam.

While you don’t need a Sam’s Club membership to schedule an eye exam at Sam’s Club, you must have a membership to purchase optical products like prescription glasses and contact lenses. If your child is due for new glasses, don’t miss out on this money-saving deal.

Other ways to save on back-to-school expenses

Before the summer break ends, you’ll want to stock up on necessary back-to-school supplies for your child or teen. Luckily, Sam’s Club sells various essentials on your kid’s shopping list.

Here are a few items you can buy at a discounted price at your local club:

NotebooksPencilsCrayonsSticky notesLunch boxesBackpacksClothes

Before you finalize your back-to-school shopping, you may want to check your local club to see what essentials are available to compare prices and get the best deal. Buying school supplies and other everyday essentials at a warehouse club like Sam’s Club can make it easier to continue working on your personal finance goals, thanks to the affordable prices.

If you’re trying to decide whether a Sam’s Club membership is a good investment for your family, review some of the little-known perks of a Sam’s Club membership to learn more about the benefits of joining. Many families find a membership to be well worth the cost.

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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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