Money Management

Carrying a credit card balance would make it harder for me to live within my means for the future. Here’s why I simply won’t do it. 

I love using a credit card to buy just about everything. I have a great rewards card and I earn tons of cash back that I’m able to invest to help me grow my brokerage account balance. I also appreciate the purchase protections that my card provides me.

Although I charge everything I can on my credit cards, I will absolutely never carry a credit card balance. And there’s one key reason why that’s the case.

I won’t carry a credit card balance for this simple reason

The big reason why I am unwilling to carry a credit card balance is that I don’t want to commit my future self to paying for things I am enjoying today. Especially since, with credit cards charging an average interest rate of 20.68% as of July 10, 2023, I would be forcing my future self to pay an inflated price for the goods and services I am using now.

I know that in the future, I may have other plans for my money. I may want to go on vacations, buy things for my kids, or even dine out at fancy restaurants. And if I have set myself up to be forced to make high payments for the things I’m enjoying today, I may not be able to do those things.

It simply does not make sense to me to cut off future opportunities by delaying the bill for what I’m buying today. Especially because I don’t know what my life will look like in the future. The payments could become a burden that makes it impossible to live within my means and traps me in a cycle of debt and that is simply not a risk I am willing to take.

Here’s how I avoid carrying a credit card balance

Since I am committed not to carrying a credit card balance, there are a few things I do to make sure that doesn’t happen.

First, I keep tabs on what I’m spending. I don’t have a super detailed budget anymore because I found that frustrating, but I instead keep my fixed expenses to 50% of my income and my discretionary spending to 30%, while saving the remaining 20%.

Since I charge some fixed expenses to my card as well as some discretionary spending, I know roughly how big my card balance should be each month in order to stay within my limits. I sign into my online account a few times a week to make sure I’m not getting close to that limit. If I am, I start to make some cuts and am a lot more careful with my spending.

The other thing I do is set up automatic payments for my full card balance. Each month, the entire amount I owe comes out of my checking account so there’s no chance I’ll carry a balance. Since I keep tabs on my card spending and have a little cash cushion in my checking account, I can do this without worrying about overdrafting.

These techniques enable me to reap all the benefits of using a credit card — without those pesky interest rate charges that could limit my future opportunities.

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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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Avid readers will likely get their money’s worth from a Kindle Unlimited subscription. Find out why one writer thinks the $11.99-a-month cost is more than worth it. 

I’m a bookworm. I’ve been that way since I was a child. And while it was initially difficult to give up the idea of a warm, solid book to hold in my hands and flip the pages of while reading, I’ve eventually come over to the side of digital books and e-readers.

Do I miss that new book smell? Sure. But my Kindle Unlimited membership offers enough benefits that I’m willing to give up that small piece of nostalgia in exchange for a whole new world of reading at a fraction of the cost of physical books.

Here are four reasons why my Kindle Unlimited membership is totally worth its current price of $11.99 per month.

1. Traditional books are expensive

If you’re buying retail, you can expect to pay between $9.99 and $18.99 on average for a paperback chapter book, according to the American Books Writer blog. Personally, I read an average of seven to 10 books per month, so even on the low end of that estimate, I’d be looking at spending between $69.93 and $99.90 per month if I were purchasing my reading material new at retail stores. In comparison, the $11.99 I spend per month for my Kindle Unlimited membership is a steal! And by using a cash back credit card to pay the monthly subscription fee, I’m earning rewards back on my spending on top of having access to a huge digital catalog of books.

That same American Books Writer blog states that the standard price for ebooks is $3.99 (while you can expect to spend significantly more for new releases and popular titles). At that standard price, I’d still be paying more purchasing my ebooks individually than I’d pay for my Kindle Unlimited membership for anything beyond three titles per month. So with my average rate of reading of seven to 10 books per month, my Kindle Unlimited membership once again proves more than worth the cost.

2. Unbeatable selection

Kindle Unlimited offers over 4 million titles, including thousands of audiobooks and magazine subscriptions. You’ll find best sellers such as the highly-sought-after Colleen Hoover romance novels that are front and center on the shelves of your local bookstores and airport shops, popular series, and classic literature. Whether you prefer fiction, nonfiction, how-to guides, or even recipe books, you’re sure to find plenty to suit your tastes in the Kindle Unlimited library. I’ve already read more than 50 titles just this year, and haven’t even come close to running out of reading material. And with new titles released all the time, I can’t imagine ever having that issue.

3. No due dates!

We’ve all been there — you check out some books from the library, but life happens and you simply get too busy to read them before the time comes to return them. So you wind up either returning your books unread, or you pay a fine to keep them past their due date. With Kindle Unlimited, you’ll never run into that problem. Once you download a title, it’s yours for however long you want it! It doesn’t expire or disappear from your library after an allotted time (although you can “return” it at any time to make room for more downloads). You can read at your leisure without worrying about due dates or the pressure of getting something read before you start racking up fines. You can’t beat that.

4. No special device required

If you’re worried about having to purchase a separate device, like one of Kindle’s popular e-readers, to use your membership, don’t be! Sure, you could invest a modest sum in an e-reader for yourself, if you so choose, but it’s in no way required. I read books for months just on my iPhone screen before finally upgrading, and I got along just fine. All you need to do is download the free Kindle app on your chosen electronic device, be it your cellphone or trusty tablet, and you can read your downloads from anywhere at any time. An internet connection is required to download books, but once a download is complete, you can read even without a wifi connection, making it the perfect option for being a passenger during a road trip, train and bus commutes, or on long flights.

Try it for yourself

If I haven’t convinced you that a Kindle Unlimited membership is worth its $11.99-a-month price tag, you can try it free for 30 days to see for yourself. As long as you cancel before the trial period is up, you won’t be charged for a membership. If you aren’t an avid reader and only make it through a couple books (or less) a month, you may decide that the extra monthly subscription cost just doesn’t fit into your personal finance budget right now.

If you’re already a member of Amazon Prime, you may want to skip the added monthly cost and stick to the Prime Reading library instead. It offers just a fraction of the selection, with “over a thousand, books, magazines, comics, Kindle Singles, and more,” but it’s one of many included benefits with your Prime membership. You’ll likely find plenty there to pique your interest if you’re only the occasional reader.

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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. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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The dust has settled on last year’s crypto platform collapses. Find out why a Fed report says large investors are partly to blame. 

After the highs of 2020 and 2021, the crypto industry fell down to earth with a nasty bump last year. Not only did the crashes decimate investors’ portfolios, but some investors lost everything when their crypto platforms collapsed. Now that the dust has somewhat settled, we’re learning more about what caused those platform failures — and how they might have been avoided.

A recent report from the Federal Reserve Bank of Chicago analyzed the bankruptcy filings of FTX, Celsius, Voyager Digital, and Genesis. In particular, it looked at withdrawals from the platforms in the 90 days before their bankruptcy declarations. The report highlighted one striking aspect of the crypto runs: The biggest investors were the quickest to withdraw their assets. Not only did this contribute to the platforms’ downfalls, it also meant big investors were able to recover more of their assets than smaller ones.

How big crypto investors contributed to crypto runs

Bank runs (and crypto runs) happen when large numbers of customers get spooked and try to withdraw their funds en masse. A lot of financial institutions only keep a limited amount of money in liquid assets, so as fear snowballs into panic, a run can quickly cause a collapse or bankruptcy.

The Fed’s analysis of last year’s crypto platform collapses illustrates exactly this behavior. For example, it shows that 37% of customer funds were withdrawn from FTX in the five days before the platform declared bankruptcy. Indeed, it says almost all of the withdrawals took place in the final two days of FTX’s operations. “In response to negative shocks, customers had an incentive to run in order to avoid taking losses that would be borne by others,” it says.

The researchers were also able to pinpoint the types of investors who got out quickly and, in doing so, contributed to the runs. “The runs were spearheaded by customers with large holdings, some of which were sophisticated institutional customers,” it says. For example, it estimates that accounts of over $1 million accounted for 35% of all the Celsius withdrawals.

Can large investors really tank a crypto platform?

Investors with over $500,000 or $1 million saw the warning signs and reacted quickly. The trouble is that in the scenario of a bank run, when large investors start to withdraw their assets, it’s like pouring oil on a fire. Large investors can also have an outsized influence on crypto prices. So-called crypto “whales” can impact the market through their activity, enabled, in part, by limited levels of crypto regulation.

However, the huge investors are only part of the problem. The Fed report says that, in their efforts to generate high returns, the now-bankrupt platforms didn’t keep big enough liquidity buffers. It also points out that, largely speaking, cryptocurrency platforms are not covered by FDIC insurance or SIPC insurance. Some top cryptocurrency exchanges have third-party insurance and some keep dollar deposits in FDIC protected accounts. But in most cases, unlike banks and brokerages, if your crypto exchange fails, there’s no guarantee you’ll get your money back.

In addition, the platforms were not transparent about the dangers involved. “Crypto-asset activities are sometimes described as unregulated,” it says. “It may be more accurate to describe many crypto-asset firms as attempting to avoid the existing regulatory system.” Those regulations would have demanded the platforms tell customers how risky their activities were.

Finally, several key figures have since been charged with fraud or making false statements. FTX’s Samuel Bankman-Fried faces charges of securities fraud, wire fraud, and campaign finance violations. In addition to the fraud charges, the systems in place were disturbingly lacking. John J. Ray, the new CEO who’s overseeing the bankruptcy proceedings, wrote, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Ultimately, those large investors may have been first to flee the sinking ships, and likely made them sink more quickly, but they were not the ones taking what the Fed labels “excessive risks” with customer money.

Bottom line

Cryptocurrency investing is risky. In addition to the price volatility and uncertainty about how the industry will develop, it is hard for investors to be sure about what cryptocurrency platforms are doing with their funds. Sure, some exchanges are transparent and honest. And regulators are trying to crack down on those with questionable practices. But if you aren’t going to keep your assets in a crypto wallet that you control, it’s important to do your due diligence on the platform you’re using.

Plus, if you want to invest in a high-risk asset like crypto, make sure it only accounts for a small percentage of your portfolio. Open an account with a top stock broker and build a diversified portfolio with a mix of asset types and risk exposure. That way, if your crypto investments don’t achieve everything you’d hoped, it will be a hiccup rather than a complete engine failure.

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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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The Fed’s latest platform could give you access to cash faster. Read on to learn more. 

It’s an unfortunate thing that many Americans live paycheck to paycheck with no money in savings to fall back on. As such, when they’re due to get paid, they want that money to hit their checking accounts as quickly as possible.

But sometimes, there can be a lag in transferring money, especially when funds are moving from one bank to another. The Federal Reserve, however, is hoping that soon won’t be a problem.

The central bank has introduced a new real-time payment system called FedNow. And its goal is to give individual consumers and small business owners alike quicker access to the funds they need.

How it works

Banks that choose to join FedNow will become part of the program’s network. And from there, funds can transfer from one bank to another within seconds so that there’s no waiting period for recipients.

Right now, that’s largely not the case. Let’s say you’re a freelance contractor and someone has paid you by bank transfer. It could easily take a day or two — or longer — for that money to move out of your client’s bank and hit your own bank account. With FedNow, that transfer might happen on the spot, giving you access to your money right away.

Similarly, let’s say you’re a small business owner waiting on payment of an overdue invoice whose funds are necessary for you to cover other pressing expenses. You might receive an apology and a same-day transfer when you call to follow up on that invoice — but it might still take a few days for the funds in question to clear and hit your bank account. With FedNow, that waiting period could be eliminated.

Another great thing about FedNow? It will operate all the time. This means that the transfer of funds can happen whether it’s after hours, a weekend, or a holiday.

However, to be clear, consumers and small business owners can only benefit from FedNow if they bank with an institution that’s part of the FedNow network. Also, FedNow is only designed to facilitate the immediate transfer of funds between banks. It won’t get you your money sooner if you’re a business owner who’s waiting for a credit card payment to be processed.

A positive development

Some people are used to the idea of getting instant payments via apps like Venmo. But not everyone uses these apps, and some may be hesitant to start doing so.

The upside of FedNow is that you, as an individual, don’t have to download an app to use FedNow. Rather, it’s a service you’ll get to benefit from by virtue of your bank being part of its network.

So far, 35 banks and credit unions are set up to use the FedNow system, and that number is expected to grow. It’s also worth noting that a number of larger, well-known banks have already adopted the system, including JPMorgan Chase and Wells Fargo. And once more banks follow their lead, it could be a real game changer for people who want to get paid ASAP.

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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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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