Money Management

Some people don’t even make their minimum credit card payments. Read on to see why one writer sometimes pays more than she has to. 

The tricky thing about credit card debt is that it can quickly get out of hand. In fact, TransUnion reports that as of the first quarter of the year, U.S. credit card balances totaled $917 billion. That’s a 19.2% increase from a year prior.

Now a big reason why credit card debt tends to spiral is that some people only make their minimum monthly credit card payments each month, thereby allowing interest to accrue against them and causing their total balances to grow. But I make a point to pay my entire statement balance each month to avoid having to pay interest on my credit cards. That way, I get all of the benefits of using credit cards, like reward points and cash back, without losing money along the way,

But sometimes, I’ll go beyond paying my statement balance and send my credit card company extra money. Here’s why.

When I want to ease the financial pressure for the following month

If you use credit cards regularly, you may notice that sometimes, your statement balance is not the same number as your current balance. You may, for example, have a statement balance of $2,400 and a current balance of $2,700. The statement balance is what you owe that month, whereas the current balance represents the total amount you owe (your statement balance plus any charges you have made since the statement period ended).

In that situation, if you only pay $2,400, you won’t accrue interest on the remaining $300. That’s because that $300 won’t be due until the following month. But sometimes, I’ll pay my current balance rather than just pay my statement balance so that I can chip away at part of the next month’s balance ahead of schedule.

Why do I do this? It might seem like I’m just giving extra money to my credit card company before I need to. And to be fair, that is what I’m doing. But, I’m doing it for my benefit — to have a smaller balance the following month.

This isn’t a strategy I use all the time. But I’ll sometimes use it if I anticipate a lot of spending in the coming month and don’t want a massive bill to deal with at once.

For example, let’s say I have a statement balance of $2,000 and a current balance of $2,500, but I know that I’m planning travel for the following month that’s apt to result in a higher bill than usual. I might try to knock out that extra $500 ahead of time so I’m dealing with a more manageable bill four weeks later.

A move I find helpful

Given that some people struggle to make their minimum credit card payments each month, paying extra may not be an option for everyone. And it may not even make sense for your financial situation.

But for my mental well-being, it sometimes works to my benefit to pay more than my credit card statement balance. So while I don’t do it every month, I do it when I feel it will work in my favor.

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Costco is a great place for bulk food buys. But did you know you could also purchase travel packages? Learn why one member keeps traveling with Costco. 

Costco has a lot of fans here at The Ascent, and for good reason. Not only can you buy food in bulk and get a sweet deal on a casket(!), but you can even book travel. We recently collected testimonials from people who have used Costco’s travel service, and found a few enthusiastic vacationers who raved about it. My colleague Mary Henderson has in fact taken four Costco Travel vacations, and is keen to take more. There’s a few reasons for this — let’s take a look at Mary’s trips and why she keeps returning to Costco Travel.

Four Costco vacations — so far

Since 2015, Mary has been on four trips booked through Costco Travel. Here’s a breakdown:

August 2015: A package tour consisting of 15 days and 14 nights in Paris, Athens, Santorini, and Mykonos.June 2018: A five-day Carnival cruise leaving from Miami and visiting Grand Cayman and Nassau in the Bahamas.August 2022: An eight-day Royal Caribbean cruise leaving from Galveston, Texas and visiting Cozumel, Jamaica, and Grand Cayman.June 2023: A package tour for eight days at an all-inclusive resort in Playa del Carmen, Mexico.

Why has Mary booked so many trips through Costco? Here are a few reasons.

Reason No. 1: The savings

This kind of travel isn’t cheap — the cost of flights, ground/sea transportation, hotel rooms, and food can all add up to a big hit to your checking account. But Costco vacation packages come with lower prices for some of these expenses. For example, Mary noted that her trip to Playa del Carmen would have cost about $800 more for the resort stay if she’d opted to build a trip from scratch. And the 2014 trip to Paris and a few Greek destinations was bargain-priced at less than $2,000, due to political issues and a lack of people who wanted to travel there. Her Bahamas cruise in 2018 came with a bigger stateroom for $300 less than booking a smaller room would have cost through Carnival cruise line.

Reason No. 2: The help with logistical planning

International travel also often comes with a lot of moving pieces, as you’ve got to coordinate your flights with ground and sometimes sea transportation, alongside hotel check-ins, excursion departures, and more. It’s a lot of plates to keep spinning, and luckily, Costco Travel excels at it. As Mary said, “Costco Travel makes everything seamless — if a flight is canceled or delayed, someone is working behind the scenes to make sure that the other pieces — like ground transportation when you land — fall into place.”

And she got firsthand experience with this when she traveled to Europe in 2015. The first leg flight (to Paris) was canceled after boarding, and before the plane even got back to the airport, she had been rebooked. Costco Travel’s staff know that it’s crucial that travelers get to their destinations on time, as otherwise it’ll disrupt the entire trip. That kind of service is definitely worth the charge on your favorite travel credit card.

Reason No. 3: The experiences

If you like to travel, it’s likely because you get to see and do things you wouldn’t be able to at home. Costco Travel made it easy for Mary to have some incredible experiences. Her trip to Playa del Carmen included an excursion to check out Mexican cenotes (which are naturally occurring water-filled sinkholes; there are over 10,000 of them in the Yucatan Peninsula). Getting to see beautiful natural wonders can make an incredible vacation even better.

Cruise vacations are especially notable for including fun shore excursions along the way, and with the money Mary saved by booking her family’s Royal Caribbean cruise through Costco, she was able to swing the cost of an excursion to Stingray City in the Cayman Islands, where her then-6-year-old son got to hold a stingray bigger than he was!

Access to Costco Travel is a great perk that comes with your membership. You get upfront pricing, the peace of mind that comes from working with a team of travel experts, and can even earn 2% back on your costs if you’re an Executive member. For all these reasons, it’s well worth booking your next vacation through Costco.

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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 positions in and recommends Costco Wholesale. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.

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Credit reports contain information about years of your credit history. Take a look at what else you’ll find in a credit report. 

Reading all the official records and data listed in your credit report can feel overwhelming. But knowing what you can expect to see can make the process a little less stressful.

To help you understand what’s in a credit report, we’ve listed the main sections with explanations. You can get a free copy of your credit report annually from each of the credit reporting agencies — Experian, Equifax, and TransUnion — and the Consumer Financial Protection Bureau recommends looking at it at least once per year.

It’s worth mentioning upfront that the agencies typically don’t include your credit score in their reports. While each agency’s report may differ slightly, below is a list of the main sections and what they mean.

1. Your personal information

This section will include your name, history of addresses you’ve provided to lenders, date of birth, and phone number. You may also see your spouse listed here or the names of co-applicants on your accounts.

A list of current and former employers will also be in this section. If you’ve made any personal statements, including if you initiated a security freeze, included a consumer-initiated statement, or added power of attorney, these details may also be included in this section.

2. Account information

Next, you’ll find a long list of current and former credit accounts, their account numbers, and the type of the account. These may include credit card accounts, mortgages, student loans, vehicle loans, etc. Each credit reporting agency decides which accounts are listed on the report.

This section will also include when you opened each account, the original loan amount, and how much money you owe. It will also list your monthly payment amount, credit limit, the highest balance you’ve had on that account, and how long the loan term is, if applicable.

The accounts will also have a line identifying your responsibility for the account, including whether it’s an individual account, if you’re a cosigner, or if you’re listed as an authorized user.

3. Status of your accounts

The account status may include opened, paid, closed, transferred, or foreclosed statuses, and — if a payment is currently late — a number indicating how many days late the payment is.

According to Experian, accounts can be sent to collections three to six months after a loan defaults.

4. Payment history

Under each account, you’ll also see detailed information about the account’s payment history. The payment history may include several years of your monthly payments, according to Experian, and will show the status of the account.

For example, if you have a mortgage and pay it as agreed every month, there will be a line that says the account is open and whether or not there have been any late payments.

Each credit bureau uses a different system indicating whether the account is paid regularly. For example, my Experian credit report has check marks each month that a payment met the agreed-upon terms, while TransUnion put an “OK” in the month of those same payments.

5. Lender comments and borrower statements

This section may include a”statement of dispute,” a “statement of explanation,” or comments made by a lender.

You can submit a statement of dispute for an error on your credit report. A statement of explanation is when a borrower writes an explanation for why they may have a negative payment history on an account, such as during a time of financial hardship.

6. Creditor contact information

Each account listed on the credit report will have contact information for the lender. This information will include an address and phone number.

7. Debts sent to collections

If an account is very delinquent, it may be turned over to your lender’s internal collection department or sold to a collection agency. If the account is sold to a collection agency, it may appear on your credit report as a separate account.

According to TransUnion, collections stay on your credit report for seven years, even after they’ve been paid. The only exception is in New York, where a collection is listed on a credit report for five years.

8. Bankruptcies

Bankruptcies are listed on a credit report and generally stay there for seven to 10 years. A Chapter 7 bankruptcy, which is a bankruptcy in which the borrower doesn’t have to repay any debt owed, stays on the report for 10 years.

A Chapter 11 bankruptcy, in which the borrower has to pay back a portion of their debts, stays on a credit report for seven years.

9. Credit inquiries

All credit reports will list hard and soft inquiries on your credit. Hard inquiries are made when you apply for credit or financing. For example, applying for a new credit card may result in a hard inquiry.

Soft inquiries are when a company checks your credit report so it can send you pre-approved offers or when current creditors do a periodic check of your report, according to Experian.

10. Unpaid alimony and child support

Equifax notes that unpaid child support and alimony may be listed on a credit report. Unpaid alimony and child support payments may remain on a credit report for up to seven years.

11. Summary of rights

This is a list of your rights under the Fair Credit Reporting Act and any rights you may have based on your state. This section also typically includes a list of consumer protection agencies.

While it can be intimidating to read through your credit report, looking at it regularly will help you identify incorrect information and give you a clear picture of how potential lenders may view your creditworthiness.

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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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Life insurance companies offer many add-ons for policyholders. Read on to learn about a few that are worth buying. 

Life insurance coverage is one of the most important types of insurance a person can buy. Surviving family members do not need to be left with an empty bank account when coping with the death of someone they loved who provided them with financial support. A death benefit can help those survivors maintain their quality of life, so they don’t couple financial devastation with emotional devastation.

When buying life insurance, consumers need to decide exactly what kinds of protection to purchase. Specifically, it will be important to determine what riders, if any, should be added on to a standard life insurance policy. To help make that choice, here are a few life insurance add-ons that could be worth paying higher premiums for.

1. Guaranteed insurability

There may come a time in a policyholder’s life when they want or need to buy additional insurance. Say, for example, a new baby has arrived and more money would be needed to care for the child in the event of a parent’s death. Unfortunately, if the policyholder’s health has changed, getting additional coverage may not be possible.

That’s where a guaranteed insurability rider comes in. This would allow the policyholder to buy more coverage during a set period without having to go through underwriting again. Usually, these riders only allow guaranteed insurability until a certain age — but they could still be well worth buying for anyone who anticipates major future life changes that will alter their coverage needs.

2. Accelerated death benefit

Being diagnosed with a terminal illness can come with a host of expenses and can also often result in a loss of income when medical issues make continuing to work impossible. An accelerated death benefit rider could prevent serious financial stress at a time when a policyholder’s health should be their primary concern.

With an accelerated death benefit rider, the covered policyholder can access a portion of their death benefit before passing away. While this will reduce the payout surviving beneficiaries get after a death, it still may be well worth accessing the money early when faced with a serious medical issue and, likely, high medical bills needed to address it.

3. Waiver of premiums

Life insurance premiums aren’t terribly expensive for those who buy term life insurance. But, there’s still a monthly cost to be paid in order to keep a policy active and avoid a coverage lapse.

Unfortunately, sometimes when a person becomes disabled or sick, paying for life insurance becomes a burden. That’s where a waiver of premium rider comes in. This type of add-on would allow a policyholder to stop making payments while still keeping coverage if they have a qualifying disability that interferes with their ability to work.

The situations in which premiums can be waived vary by life insurer, so it’s important to understand the details. But, this rider can definitely be worth paying for to ensure an illness doesn’t lead to a loss of coverage when it’s needed most.

Each of these riders won’t add much to the cost of life insurance, but they can offer invaluable protection and ensure surviving family members are cared for financially in their time of tragedy.

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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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Budgeting apps like Wally can make it easier to manage your money, but do you know how they use your information? Find out what to check for before you sign up. 

When it comes to managing money, budgeting apps are powerful tools. They can help us to keep track of our goals, understand where our money goes, and make informed decisions about spending. The Wally App goes even further. Dubbing itself the “world’s first GPT-powered personal finance app,” it uses artificial intelligence to give context to our finances.

But before you connect your bank accounts to any app, AI or otherwise, it’s important to know how that app will store and protect your data.

Is the Wally App safe?

The Wally website says it takes security very seriously. According to its privacy policy, it only collects information to improve the product and it won’t sell user information to any third parties. All the same, it’s understandable if you’re hesitating to share your banking data with an app that’s powered by artificial intelligence.

After all, the headlines have been full of scary AI stories, particularly in terms of privacy. There are concerns that AI apps can swallow and use huge swathes of data, but won’t necessarily respect confidentiality. To that point, Wally stresses the app won’t keep any data you provide. “Wally uses your data to provide you with relevant responses and within 30 days, it’s completely deleted,” says the site. It also says the info won’t be shared with employees, advertisers, financial institutions, or other organizations.

That doesn’t mean that Wally won’t use the information you give it. It says it uses anonymized data to generate user insights and also for research purposes. Anonymizing data means removing details that could identify you personally. For example, it says it might be able to tell you that you spend more on dining out than people who are similar to you. It might also use the information to uncover wider insights such as people’s water bills in a particular state.

There are also stories about AI hallucinations — essentially generating false information — which could be concerning when it comes to helping you manage your money. I asked how I might invest $1,000 and the answers it gave, such as buying stocks or bonds, were pretty sound. But it is very early days for this technology. I’m not sure I would 100% trust any advice an AI bot gave me, though it can be useful alongside human intelligence.

How safe are budgeting apps?

Whether it is Wally or another financial app, here are some of the security features to check for — and how Wally stacks up.

WallyGPT: Bottom line

All in all, WallyGPT checks a lot of boxes security wise. Nonetheless, it would be safer if it had user-level security measures in place. I’d also like the app to show me its privacy policy before I enter my email address or connect my bank account. In fairness, it is available on the website, and you can read it on the app once you’ve gotten through the set-up pages. But by that point, you may already have shared a lot of your information. There’s also no active opt-in checkbox: The policy says by using the app, you’re automatically consenting to its privacy policy. It isn’t a deal breaker, but a more active and accessible agreement would help to build trust.

There’s a lot we don’t know about how artificial intelligence will change our lives, and there’s no harm in being cautious about what data you want to share. Before you install the WallyGPT app, take the time to read its privacy policy. It is important you understand and are comfortable with what the app might do with your information.

On a broader note, good personal security practices matter with any budgeting app. Use different passwords for each app/site, and keep your antivirus protection updated. Be careful about clicking on links in any messages, especially if you don’t recognize the sender. Installing the most secure budgeting app in the world won’t make much difference if your password is 12345Password and your cellphone is riddled with malware.

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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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Suze Orman believes owning your own home outright should be a key financial goal. But, is her advice actually correct? Read on to find out. 

According to Suze Orman, “One of the greatest forms of financial independence is truly owning your own home outright.” Orman believes you should focus on paying off your mortgage before you retire — even making that your No. 1 goal as long as you plan to remain in your home.

Orman listed several reasons why she believes owning a home mortgage free is so important. Here’s what they are, along with some advice on whether you should listen to Orman and make mortgage payoff a primary financial objective.

1. You’ll always have a home you can live in once you’ve paid off your mortgage

Orman explained on her podcast that once you have paid off your mortgage, you will have a home you can live in without a housing payment. As she said, this is true even if your home declines in value.

That is accurate. But, you can’t assume your housing costs will disappear just because you have no home loan. You’ll still have property taxes, insurance costs, and home maintenance expenses to pay. So, while your housing costs will undoubtedly be lower, having a paid-off mortgage isn’t going to guarantee you will be able to stay in your home forever.

2. You could lose money if you invest it in the stock market

Orman also warned that while she’s heard people say to invest in the stock market instead of paying off a home loan, the reality is that there’s the potential to lose money if you do that.

She gave an example of a situation where someone came into $1 million in 2008 and asked what to do with it. She advised paying off the home, and said she received tons of mail saying this was bad advice because the money could be invested at a better return.

Orman said that she ended up being correct, because the real estate market collapsed and the stock market plummeted and the person who she advised would likely have lost money in the market and seen the value of their real estate decline.

While this may have been true on a temporary basis, the stock market has since recovered from the 2008 crash as has the real estate market. If you had opened a brokerage account and invested in the S&P 500 in 2007 and you reinvested all dividends through to 2023, you’d have made an average annual return of more than 9.24% annually. That is almost assuredly a better rate of return than you would have gotten had you paid off your mortgage in 2007 as she advised. Your return on investment (ROI) from early mortgage payoff is just the interest saved.

3. Your home could go down in value and you might not be able to pay off your home loan

Orman also indicated that she felt it would be better to pay off your home loan because of the chances that your house could go down in value and you might not be able to. She said that might have happened to the person she advised to pay off their mortgage in 2008.

Of course, if you made a reasonable down payment on your home — like 10% to 20% — and steadily made payments on your home for several years before you considered selling, the real estate market would need to decline substantially to end up underwater.

Even if you do end up owing more than your home is worth, this is really only an issue if you sell it. Much like the stock market, you won’t lock in any loss (or gain) on a home until you sell it. As long as you can afford your monthly mortgage payments, you wouldn’t really need to worry about this.

4. You’ll feel more secure if you own your home outright

Finally, Orman said that owning a home is a great form of financial independence because you’ll feel more secure if you don’t have a home loan. This indeed is true for many people.

The reality is, you typically should pay off your 30-year mortgage on time, rather than refinancing multiple times. For most people, paying off a mortgage early isn’t the right choice. You’re likely better off investing and earning a better ROI than you’d get from paying your loan down ahead of schedule. You’ll end up with a higher net worth and hopefully will have enough invested over time that you could pay off your remaining loan balance in retirement if you need to do so.

So, while homeownership can make you more secure — especially if you have a paid-off home — so can paying your mortgage as planned (rather than early) and investing to build a large nest egg.

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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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