Money Management

Dave Ramsey is famously anti credit card, even though you can earn rewards on your spending if you use them. Read on to learn why. 

Dave Ramsey is anti credit card, and he does not believe that you should use cards even to earn rewards. In fact, Ramsey says card points aren’t worth earning.

There are a few key reasons why Ramsey thinks points aren’t worth it, but the reality is that he’s wrong about many of those reasons. Here’s why.

Here’s why Ramsey thinks card rewards aren’t worth it

Ramsey believes credit card rewards are not worth earning because:

You’ll spend more on your credit cards in order to earn rewardsYou’ll pay more in credit card interest than the value of your rewardsYou have to spend too much to be able to actually redeem your rewardsYour points may expireYou’ll get hit with annual feesYou’ll pay a high interest rate once any introductory rates expire

Ramsey is very clear that he believes the downsides of using a card outweigh the upside. And, as he points out, “No one ever got rich off credit card points.”

Ramsey is wrong for a whole host of reasons

Although Ramsey has a whole lot of reasons why he thinks you shouldn’t use a rewards card, he’s not right about most of them.

There are plenty of credit card rewards programs out there that have rewards that never expire. And, with many cards — especially cash back cards — there’s either no limit or very low limits on how big your rewards balance needs to be before you can redeem. There are also dozens of cards with no annual fees, and it’s entirely possible to avoid interest charges entirely simply by paying off your balance in full. You can set up automated payments to do that.

As for the claim that no one ever got rich off credit card points — that’s not entirely true either. I have been using a cash back credit card for many years. I have it set up to deposit my card rewards directly into my brokerage account, and I’ve been investing that money steadily into exchange-traded funds. The brokerage account my points go into now has well over $12,000 in it (including both the points I’ve earned and the investment returns). That’s just from credit card points and returns — I haven’t contributed anything else to it.

While that doesn’t make me rich in and of itself, no one has ever gotten rich off passing up a free $12,000. That’s exactly what I would have done had I steered clear of rewards cards, since I would have had to spend the money I charged on my cards anyway.

You have to be careful with credit cards

One thing Ramsey is right about, though, is that consumers do spend more when using a credit card. In fact, research from Shift Credit Card Processing has shown that people spend up to 83% more when using a card versus cash.

The problem is, however, that evidence suggests that this inflated spending happens even when using a debit card versus when using cash. So, unless you are going to take money out of your bank account regularly and walk around with a wallet full of cash and use it for all of your transactions, this isn’t a persuasive reason to pass up rewards cards.

Instead, the best course of action is to just make sure you’re spending responsibly regardless of the payment method you use. You can do that by making a budget or setting spending limits and sticking to them.

If you can be responsible with credit cards — which means repaying your balance in full each month, making payments on time, and not opening more cards than you can easily manage — then you should get a rewards card and use it for everything you possibly can. You will likely find, like I did, that earning free money in the form of credit card rewards is well worth it.

And if you can’t be responsible with your cards, then working on the underlying financial issues that make that the case could be a very good use of your time, as it’s likely that those spending problems will extend into other areas of your life even if you never open a credit card at all.

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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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Tying the knot? Read on to see if a personal loan is a good way to finance a wedding. 

If you’re in the process of planning a wedding, you may be overwhelmed and excited at the same time. But you may also be wondering how on earth you’re going to pay for the big event.

In 2022, the average wedding cost $30,000, according to The Knot. And even if you’re willing to trim some costs, you might still be looking at a five-figure bill by the time all is said and done.

When it comes to throwing a wedding, your best bet is really to keep your costs down enough to cover them in full and avoid debt completely. But that may not be realistic.

If you have a large family, for example, then cutting your guest list might be tough. And if you’ve always dreamed of having a certain type of wedding dress or venue for your wedding, then you may not want to compromise on one of the most significant days of your life.

As such, it’s fairly common for people who are getting married to borrow money in some shape or form. If you’re going to go this route, a personal loan is generally a far better option than a credit card. With the latter, you might end up getting stuck paying a huge amount of interest. But just because personal loans are a more affordable option for borrowing doesn’t mean you should go overboard, either.

Aim to keep your wedding expenses in check

It may be that even if you’re willing to compromise on some of your wedding-related must-haves, you’re still looking at a $15,000 tab. If you only have $8,000 in your savings account to cover your wedding, you might have to borrow the rest.

A personal loan lets you borrow money for any purpose, so taking out one of these loans to pay for a wedding is doable. And if you have great credit, you might snag a relatively competitive interest rate on your personal loan, making it more affordable to pay off.

But if you’re going to go this route, do your best to really set priorities when it comes to wedding costs and try to keep the amount you borrow to a minimum. The more money you borrow via personal loan, the more interest you’ll end up accumulating, and the higher your monthly payments for that loan will be.

What’s more, if you borrow too much money to finance your wedding, it might easily put a strain on your budget once you and your spouse start your life together. And if you’re worried about money constantly, it might put a strain on your marriage.

Set priorities and go from there

You may not want to compromise on your dream wedding dress or cake. But if money is tight and you’re already looking at borrowing to pull off your wedding, order your expenses by priority and consider cutting those that aren’t as important to you as others.

If you’re not someone who loves flowers, for example, skip them. You can enlist the help of a crafty friend to make centerpiece arrangements that don’t cost a whole bunch of money. And if you’re not all that picky about your band, hire your cousin and their college friends who like to jam in their garage for $500 rather than pay a local band five times that much or more.

You deserve a wedding you cherish and remember forever. But you don’t want to end up loaded with debt in the course of pulling it off. And even though personal loans tend to be an affordable way to borrow, you want to be careful not to get in over your head.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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We can expect to see more banks leverage AI-powered solutions to improve their customer experience and operational efficiency. Take a look at how. 

The financial sector is one of the biggest adopters of technology, and artificial intelligence (AI) has been at the forefront of most of these technological advances lately. From fraud detection to customer service, AI has proved to be indispensable in making banking more efficient, cost-effective, and secure. Here are three ways in which AI will impact banking this year, as well as the benefits and potential challenges that come with it.

1. Personalization of services

AI-powered chatbots and virtual assistants are quickly becoming common in the banking industry. These intelligent systems offer customers a personalized and interactive experience, usually via text or voice. Customers can ask for checking and savings account balances, initiate transfers, and even troubleshoot issues without having to talk to a human agent. This increased level of control gives customers greater insight into their financial activities in real time.

For example, since its launch in 2018, Bank of America‘s virtual financial assistant “Erica” has helped nearly 32 million clients with over 1 billion interactions. Here are a few highlights:

Bank of America clients viewed 37 million proactive insights to help them review their finances, cut recurring subscription charges that may have increased unexpectedly, know when they’ve received a merchant refund, or have duplicate charges.Erica sent more than 4 million proactive notifications about eligibility for Bank of America’s Preferred Rewards Program, which have helped clients enroll in the program and enjoy the benefits.Erica sent more 60 million Spend Path insights that helped clients understand their finances with a weekly snapshot of spending.More than 98% of clients get the answers they need using Erica. In September 2022, the bank launched Mobile Servicing Chat by Erica to connect clients for a live chat with representatives to answer more complex servicing questions, with more than 170,000 chats having already taken place.Erica will soon connect clients to financial specialists when they have questions about new products and services, such as a mortgage, credit card, or deposit account.

Bank of America’s Erica is more than just an AI virtual assistant. Its capabilities have expanded to cover the entire banking, lending, and investing relationship with the bank. Erica provides insights on portfolio performance, trading, investment balances, quotes, and holdings, and it can even connect clients to a Merrill advisor.

Erica isn’t the only financial virtual assistant powered by AI. Wells Fargo will leverage Google Cloud’s artificial intelligence to power Fargo, its soon-to-be-rolled-out virtual assistant. And Chase Bank customers can use Chase Digital Assistant. With these bank virtual assistants’ growing abilities, customers can continue to expect a better banking experience.

2. Fraud detection and prevention

Financial fraud continues to be a significant challenge for both clients and banks, resulting in billions of dollars in losses every year. With AI, banks can quickly detect potential fraud and take preventive measures before losses occur. AI-powered systems can identify unusual patterns and behaviors in transactions, flagging them for review by security professionals.

AI can also be used to improve physical security systems at banks. For example, facial recognition technology powered by AI can scan customers’ faces against databases of known criminals or suspicious individuals and alert security personnel if someone appears from that list.

Similarly, intelligent surveillance cameras powered by AI can monitor activity around ATMs or bank branches for suspicious behavior and alert authorities if something seems amiss. By combining these technologies with traditional physical security measures, banks can ensure that their premises remain safe.

3. Risk management and compliance

With the volatile nature of the financial industry, banks need to have robust risk management strategies. AI-powered solutions can analyze market trends and patterns, offering insights that help banks anticipate potential risks and vulnerabilities. This technology enables banks to make informed decisions, allocate resources effectively, and minimize losses.

With the sudden collapse and failure of Silicon Valley Bank, Signature Bank, and First Republic Bank, we can expect to see more banks adopting AI-powered risk management strategies to optimize their operations and improve their bottom line. In addition, compliance regulations are stringent in the financial sector, and non-compliance can result in hefty fines.

AI-powered solutions can help banks comply with these regulations by automating compliance processes, eliminating manual errors, and cutting down on the time taken to audit transactions. AI can help banks stay ahead of regulatory requirements, reducing the risk of non-compliance.

AI is quickly becoming a game-changer in the banking industry, offering banks and customers alike numerous benefits. From improved customer service to enhanced security, the impacts of AI are continuing to grow. Banks that are not adopting AI-powered solutions will have trouble competing as the technology gets better. AI has the potential to revolutionize the industry for banks, regulators, and customers.

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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Alphabet, Bank of America, and JPMorgan Chase. The Motley Fool has a disclosure policy.

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Do you really know everything about Costco? Read on to find out. 

Joining Costco is a great way to reap savings on everything from groceries to household essentials to larger purchases like electronics and furniture. And if you shop there frequently, you may find that your credit card bills shrink.

But do you really have the inside scoop on Costco? Here are a few key things you need to know.

Truth No. 1: You can return almost anything

Costco is very big on customer service and satisfaction. To that end, it maintains a very flexible return policy.

In a nutshell, you can bring almost any item back to Costco and get a full refund, no questions asked, when there’s a quality issue. This extends to half-eaten food or clothing that’s clearly been worn.

Now you should know that some purchase categories come with restrictions when it comes to returns. For electronics, you’ll generally need to make your return within 90 days to get refunded. And there’s a process to follow for returning specific types of jewelry. Also, while Costco does take most items back without a hassle, it does not accept returns on alcohol or cigarettes.

Truth No. 2: You’re not locked into your membership

A basic Costco membership costs $60 a year, while an upgraded executive membership costs $120. The extra $60 for your executive membership will give you access to 2% cash back on your Costco purchases.

But if, at any time, you find yourself unhappy with your Costco membership, you can simply cancel it and get a prorated refund. And similarly, if you upgrade to an executive membership and decide that it’s not worth the extra cost, you can downgrade to a basic membership and get refunded the difference.

And the lie: Costco always has the best prices

Costco’s prices are unquestionably competitive. But does that mean that Costco will always have the cheapest price? Not necessarily.

Right now, for example, Costco only offers a single one-piece swimsuit option online for girls that costs $15.99. But if you go to a store like The Children’s Place, right now, you can find a host of girls’ swimsuits for $12.48. As another example, Costco is selling a 12-pack of playing cards online for $21.99. Amazon has a 12-pack available for $11.18.

Now one issue you might encounter when comparing prices between Costco and other retailers is that Costco often has special-run items manufactured expressly to be sold in its stores. To put it another way, you may not find the exact same item at Costco as you would at Target or on Amazon.

Furthermore, Costco prices can vary by region. And, they can vary between the online price and the in-store price. The point, though, is that Costco’s prices aren’t always the cheapest, so it pays to do some comparison shopping.

This especially applies when it comes to groceries. Supermarkets run sales all the time, and it’s more than possible to reap savings by purchasing a sale item at your regular grocery store than buying it at Costco.

All told, Costco is a great place to shop. But make sure you know the real deal so you can make the most of your experience there.

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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 and Target. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, and Target. The Motley Fool has a disclosure policy.

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