Money Management

A high credit score guarantees your credit card applications will be approved, right? Wrong. Find out why. 

The factors that decide who’s approved for a credit card are tricky to pin down. Sure, it makes sense that your credit score would hold the most weight and that a high score would mean very few credit card issuers would deny your application. And while that’s not entirely false — your credit score is important — it doesn’t explain why people with excellent credit often have applications denied.

Like me. A few months ago, I applied for an American Express credit card with a credit score of 811. I was pretty confident I was going to get the card and even had some ideas on how I would spend the welcome offer. Imagine my surprise, then, when my application was immediately denied and American Express said it would send me its reason via mail.

About a week later, I got American Express’s reason. And though it had nothing to do with my credit score, I’m still feeling a little crushed.

The reason I was denied

The long and the short of it is — I simply have too many open credit cards.

I’ve had three hard inquiries into my credit within the last two years (four now, with the denied application). I also have several cash back credit cards, which I use frequently enough but whose total revolving credit is more than triple my annual spending. The American Express card was going to become my new travel credit card, but between the hard inquiries and the number of cards I’m using, American Express was not confident I’d make a suitable cardholder.

Even though I have a high credit score, the number of inquiries threw up a red flag. It’s not as if I have a high credit utilization — less than 1% — but the fact that I have multiple revolving credit lines, almost triple what I spend in a year, likely made them wonder why I was applying for another.

You have to remember that American Express is very particular about who it issues cards to. Given that it makes money on merchant transaction fees, it wants to issue cards to people who will use them frequently and for large purchases. If it suspects that the applicant is signing up for the high welcome offer alone, it can deny the person’s application, no matter how high their credit score.

In my case, it likely saw how many cards I had and suspected I wasn’t going to charge a hefty annual amount to the card. It may have been spooked by the recent inquiries but more likely than not it was hesitant my spending habits weren’t suitable for the card.

What you can do if your application is denied

If you have a high credit score, few recent inquiries, and only a handful of credit cards, you can certainly call the credit card issuer and dispute a denied application. Often, the credit card company feeds your application through an algorithm, which may or may not have gotten your situation right. Calling the card issuer directly will put a human on the case, who can look over your application and issue a second opinion.

As for me, I’m not going to dispute the rejection. I do have quite a few cash back credit cards, and I’m probably not the right person for that special American Express card. Besides, I’ve already applied for another cash back card and having had the application approved, I am pretty satisfied with my alternative.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Looking for ways to get the most out of your money? Check out safe, profitable ways to invest your money and protect your wealth in an unpredictable market. 

In today’s economic climate, it’s important to find reliable ways to protect and grow your wealth. It’s no surprise then, that investors are increasingly concerned about where to put their money.

With so many options available, it can be challenging to identify the best accounts that can keep your money safe. When it comes to storing cash, a bank account is still the most reliable and secure option. Despite higher interest rates, checking account rates average just 0.07%. Fortunately, there are several types of accounts that provide better yields than regular checking accounts.

High-yield savings accounts

High-yield savings accounts have become quite popular in recent years, as they offer higher returns on cash. A high-yield savings account typically offers much higher interest rates than traditional savings accounts do. They are FDIC-insured, and you can withdraw your money at any time without penalties.

With a high-yield savings account, you will earn a higher interest rate on your money. If you’re looking for a risk-free investment, this is a great option for parking your money. Some online banks are offering interest rates as high as 4.95% right now.

Money market funds

Money market funds invest in short-term Treasury bills, municipal bonds, and other safe securities. They are typically low-risk and aim to generate small returns for investors. They offer a safe alternative to savings accounts, as they are not FDIC-insured but still very safe if you choose the right one.

You can invest in money market funds through brokerage accounts and mutual funds. Money market rates have reached nearly 5% APY thanks to today’s rate environment, which makes it a great time to open a money market account!

Certificates of deposit

Certificates of deposit (CDs) are another alternative to a savings account. They are FDIC-insured and can offer higher interest rates than savings accounts can, but you must agree to leave your money alone for a set period.

The period can be a few months and up to five years. If you withdraw your money before maturity, you’ll face penalties. CDs offer guaranteed returns and can be a good option for investors looking for a fixed income and locked funds. Currently, some 12-month CDs are averaging well over 5%.

Short-term Treasuries

Short-term Treasuries are issued by the government, making them low-risk investments. They generally offer lower rates of return than other investment options, but they are highly secure.

Investors can invest in Treasury bills for as little as a few weeks to up to a year, with a rate of return that is higher than what savings accounts offer. Treasury bills are not FDIC-insured, but they offer guaranteed returns and are perfect for those looking for a place for their money.

It’s essential to invest your money in safe and profitable ways. Parking your cash in a bank account might seem like the safest option, but the returns are negligible. High-yield savings accounts, money market funds, CDs, and short-term Treasuries provide you with higher interest rates and guaranteed returns.

Depending on your risk tolerance and investment goals, you can choose an option that suits you. Make sure to do your research to make informed decisions and maximize your returns.

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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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Homes in need of repairs are sitting on the market longer. Read on to find out which type of homes buyers are looking for. 

Rising interest rates have cooled down much of the housing market. And one type of home has become the least desirable to prospective buyers: The fixer-upper.

A recent article from The Wall Street Journal said that homes needing renovations receive fewer offers and are low on home buyers’ must-have list. The article noted that real estate agents say homes that need renovations sit on the market longer than those that don’t need work. And it’s one of the reasons homes currently for sale receive just three offers on average, compared to about six from a year ago.

So why are fixer-upper homes not getting any love from home buyers? It all comes down to cost.

It’s expensive to renovate a house right now

It’s no secret that mortgage rates have increased dramatically over the past few years. The current interest rate for a 30-year mortgage is 6.7%, compared to about 5.7% a year ago. That means if you buy a $350,000 house right now, with a 20% down payment, your monthly mortgage payment would be about $181 more per month than last year.

Higher monthly housing costs are likely keeping some home buyers away from purchasing a home that needs additional work. That’s because the cost of renovation loans has also become more expensive.

The interest rates for renovation loans vary, but many are above 7%. And since the average cost of a single renovation project is $15,000, borrowing money for a renovation project over five years could add several hundred more dollars to your monthly expenses.

In addition to high interest rates, the rise in housing demand over the past few years has increased house prices. According to the U.S. Census Bureau data, the median sales price for a house in the first quarter of this year was $436,800, up 18% over the past two years.

Home buyers are shifting toward new homes

The rising cost of homes and the expense of renovating them has led some home buyers to seek out new construction homes. According to U.S. Census Bureau data, sales of existing homes were down 20% in May compared to a year ago. At the same time, sales of new homes were up 20%, per National Association of Realtors data.

Why the shift? Home builders are often able to offer discounts and incentives to buyers that traditional sellers may not be able to match. In May, more than half of home builders provided some sort of buyer incentive, like down payment assistance or a reduced interest rate, according to the National Homebuilders Association.

Home builders can offer lower mortgage interest rates through their own lending arms or through a lender partnership. This can sometimes mean a new construction buyer is paying an interest rate as low as 5% for their mortgage, compared to 7%.

If you’re in the market for a home but aren’t interested in new construction, make sure you shop around to find the best lender. And if you’re considering buying a fixer-upper, make sure you know what you’re getting into before you tackle your home renovations.

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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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Real estate investment trusts (REITs) may not be a smart investment for 2023. Read on to learn why. 

Real estate investment trusts (REITs) are companies that own and operate real estate properties. Like stocks, you can buy and sell shares through brokerage accounts, and they’re required by law to pay at least 90% of their taxable income to shareholders as a dividend.

As much as I’ve loved REITs in the past, 2023 hasn’t exactly produced the ideal climate for them to thrive. While that’s not totally a bad thing, I think potential REIT investors should be aware of what they’re getting into and the hiccups that, like air bubbles in wallpaper, won’t go away.

Why I wouldn’t invest in REITs in 2023

Disregarding for a moment some popular real estate speculation — market crashes, the commercial real estate crisis, you know, the usual hubbub — the real estate sector isn’t performing great right now.

Looking at the S&P 500 Real Estate index, which gives us an overview of the sector’s top performers, real estate hasn’t changed much in 2023, sporting a rather stagnant year-to-date increase of roughly 2.7% (as of July 3). If we look closely at different REIT types in this sector, we’ll see that most are underperforming its larger real estate sector. Take a look for yourself. Here’s a quick snapshot of how REITs have moved year to date.

Only one of these REIT types — industrials — is outperforming the wider real estate market and by such a narrow margin (2.7% vs. 2.9%) it’s hard to say one is even outperforming the other.

Investor confidence in REITs is low. Part of that could be due to speculation, but a larger part is due to the Fed’s aggressive interest rate hiking campaign, which has increased the federal funds rate by its fastest pace in 40 years. Since REITs typically employ heavy leverage to develop and manage properties, high interest rates tend to increase borrowing costs and at the same time slow down property appreciation. That could leave some REITs with less revenue to dish out to shareholders, making them slightly less attractive this year.

Now, I will say this — rising interest rates could affect REITs differently, and while bearish investor sentiment could affect the REIT industry as whole, certain REITs could find a way to flourish. Understanding how a specific REIT company makes money — as well as how much debt it’s leveraging — could help you make a smart investment decision.

As for me, the REIT industry is a bit too volatile right now, and I think my money could be invested in better places. I understand that certain great REIT companies could be trading at discounted prices, but I’m also attracted to those investments that are positively impacted by interest rates, like CDs. I’ll likely stay away from REITs until I feel like the sector has stabilized enough to prop up those fat dividends these investments are known 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.The Motley Fool has a disclosure policy.

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CDs may not earn as much as the S&P 500 over long periods. But they do have advantages. Read on to learn what happens when you choose CDs. 

It seemed like just yesterday that large national banks were paying just fractions of a penny on the dollar for money held within a certificate of deposit (CD). In fact, it was only last March, just before the Fed began its most aggressive rate hiking campaign in four decades, that the best CD rates were barely gophering above 2%, with most banks advertising — proudly, mind you — APYs far below that.

Fast forward 16 months later and CDs are having a bonanza year. Many great short-term CDs are on par with or above 5%, and the Fed’s “we’re not done here yet” attitude toward inflation could cajole CD rates a little higher before the year ends.

In comparison, the S&P 500 is slowly waking up but isn’t having the best performance of its life, especially now that the Fed will likely hike rates again this year. We’re technically in a bull market, albeit not the bulls of former days — like those with Michael Jordan — but a weaker market that can’t seem to decide if it will keep moving in this direction.

The certainty of CDs against the backdrop of market instability may make the former seem like a smarter investment than stocks. But are CDs better for your money in 2023? Let’s take a look at what happens when you open a CD instead of investing in the S&P 500.

What a CD offers that the S&P 500 can’t

When you deposit your money in a CD over the S&P 500, you get the certainty of guaranteed returns, assuming you don’t break your contract and pull money out too early. You know, for instance, that a 5% APY on a 1-year CD will return 5% of your deposit at the end of that one-year term, regardless of the economy or how the stock market swings.

This makes CDs suitable for those who have savings they’re not going to use in the near term, as well as those who have a weak appetite for risk. It’s also ideal for those who are nearing the completion of a big financial goal — like saving for retirement or the down payment on a first home — and want stability over volatility, even if it means getting smaller returns.

Additionally, today’s CD rates offer you what stocks have promised for years: the potential to earn above the rate of inflation. Even though you have to factor in taxes on your CD earnings (unless you’re holding it in a tax-advantaged account, like an IRA), many top-paying CDs can prevent your money from losing purchasing power to inflation, something stocks can target but can’t guarantee.

What the S&P 500 offers that CDs can’t match

Hands down, the S&P 500 offers investors greater upside potential. In this year alone, in fact, the S&P 500 has already appreciated by roughly 16% — far more than what short-term CDs could pay during the same period.

The stock market does have risks, but for investors with long time horizons, the S&P 500’s worst years are often more than made up for with the good days. You may not trust the stock market right now (and no one is telling you that you should), but if history can teach us anything, it’s that the S&P 500 always bounces back, eventually.

In the end, opening CDs will leave you with more stability, even if you’re sacrificing greater returns. You won’t have to worry about how your money is performing today, or if you will have a certain balance by tomorrow. This could help you plan your personal finances, as you’ll know exactly how much will be returned to you and on what day.

As with most things, a middle ground could be reached — if you have enough cash to invest in both — but if you’re after near-term stability, perhaps there’s no better time to open a top-paying CD.

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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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Costco is a great store — but not for everyone. Read on for signs that it’s not the best place for you to shop. 

For many people, the $60 it costs to join Costco for a year is more than worth the money. That’s because that membership fee can more than pay for itself in the form of savings on groceries and household essentials.

But while a lot of people would agree that Costco is a fabulous store, that doesn’t mean it’s a great place for you to shop. Here are a few reasons you may want to steer clear of Costco — and not spring for a membership.

1. You’ve moved and your new home seriously lacks storage space

Maybe it made sense to maintain your Costco membership when you had a lot of closet space at home. But if you’ve recently downsized and your new home lacks storage in a serious way, then it’s harder to make the case for shopping at Costco.

Sure, you might snag a discount by purchasing your paper towels and household cleaners in bulk. But if you don’t have space in your closets to house those items, and you’re forced to leave them out for guests to see or members of your household to trip over, then it’s not really worth the savings.

2. Your schedule is so busy you rarely cook or eat at home

Buying your groceries at Costco could save you a lot of money — if you actually eat them. But it’s important to be honest with yourself about your cooking habits. If you have a very busy schedule that leaves you with little to no time to cook or prepare meals at home, then you may be better off doing minimal shopping at a regular grocery store and skipping those bulk grocery purchases.

Furthermore, let’s say your career is such that you’re often not home for meals — for example, you’re in sales, and so you’re out dining with clients a few nights a week. That, too, makes Costco a less appealing place to shop.

3. You’re not good at managing your grocery inventory at home

Buying groceries at Costco, as opposed to a regular supermarket, could indeed result in a lower credit card tab. But if you’re someone who struggles to manage their inventory at home, then you may want to steer clear of Costco to avoid ending up with too many of the same items — a habit that could lead to food waste and lost money.

Some people keep a tight inventory of the items they have in their pantry and fridge, whether by maintaining spreadsheets or using apps. But if you know you’re just plain not going to make that effort, then you may want to stick to regular grocery stores for buying food. That way, if you wind up purchasing waffles when you already have a box at home, you’ll end up with 16 or 20 waffles in total — not 72.

There are plenty of good reasons to shop at Costco on a regular basis. But if these signs apply to you, it could mean that Costco isn’t your optimal shopping destination at all.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

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In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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