Money Management

Banks have been failing at a rapid clip. Read on to see if another name in the banking industry is at risk. 

In March, Silicon Valley Bank collapsed in the biggest bank failure since the Great Recession. Just a few days later, Signature Bank succumbed to a similar fate. And just earlier this week, First Republic failed, leaving its customers reeling and stock investors with serious losses on their hands.

Now, PacWest Bank, which is based in California, has confirmed that it’s exploring different options to shore up its finances. And if yet another bank fails, it could spell disaster for the industry on a whole.

A precarious situation

PacWest Bank’s stock value plunged after it announced that it was considering a sale. The bank is looking at different options that include splitting up the company or trying to raise capital to address its financial shortcomings.

Now, the good news is that according to PacWest Bank, as of May 2, 75% of its deposits were insured. But still, the last thing the banking industry and economy need right now is yet another bank failure.

Consumers are already wary of bank failures, and smaller banks in particular are at risk of failure when customers withdraw their funds in short order. But just as investors tend to react to panic, so too might consumers with money in various banks opt to do the same if yet another bank goes under.

Meanwhile, investors in bank stocks could get hurt if the industry continues to experience its share of upheaval. This applies even to investors who own shares of larger banks that aren’t at risk of shuttering anytime soon.

Is your money safe?

No matter what bank you keep your money at, it’s important to do what you can to safeguard the cash in your savings account. Your best bet is to make sure you’re banking at an institution that holds FDIC insurance.

With FDIC insurance, your deposits of up to $250,000 are guaranteed on a per-bank basis. This means that if you have $500,000 in savings, but you’ve split it evenly across two different FDIC-insured banks, you’re fully protected from losses even if both of those banks go under.

What’s more, you should know that the $250,000 FDIC insurance limit doubles for joint account holders. So if you and a spouse, for example, have a joint account at the same bank, you’re protected for up to $500,000 in deposits at that bank.

Should you be worried if you have your money at a smaller bank?

Smaller banks don’t have the same vast financial resources as larger ones. A bank run — where consumers withdraw money all at once at a rapid clip — is more likely to hurt a smaller bank than a larger one.

But that said, even if your bank is smaller, as long as it’s FDIC-insured and your deposits aren’t over the $250,000 limit ($500,000 for a joint account), then there’s really nothing to worry about. And since many people have a lot less money than that in the bank, it’s fair to say the typical consumer who banks at an FDIC-insured institution really doesn’t have to lose any sleep, despite the recent upheaval the banking industry has experienced.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

An insurance policy with a low deductible has some advantages, but it’s also important to consider the downsides. Learn more here. 

Deductible size is one of the biggest decisions insurance policy buyers must make. Whether buying home insurance, auto insurance, or most other types of insurance coverage, those purchasing coverage will get to decide how large their deductible should be.

Before making this choice, it’s important to consider the pros and cons of opting for a low deductible on any insurance policy.

Pros of a low-deductible policy

There are several big benefits of choosing an insurance policy with a low deductible. Here are the advantages:

More risk is transferred to the insurance company. A deductible is an amount that the insured policyholder must pay when a covered loss happens before the insurer pays anything. With a low-deductible policy, the policyholder pays very little out of pocket so they transfer more of the risk of financial loss to the insurer.A policyholder won’t have to come up with a lot of cash when a covered disaster happens. Insurance pays out when something goes wrong, like a motor vehicle accident or problem at home. During this stressful time, having to come up with money to cover a deductible can just add more stress. With a low deductible, the policyholder will only need a small amount of money before the insurer picks up the rest of the tab.

Cons of a low-deductible policy

While there are advantages of a low-deductible policy, there are some downsides as well. Here are some of the disadvantages:

Insurance premiums will be higher: Since the insurer is accepting more risk with a policy that has a low deductible, the insurer will end up charging higher premiums for the policy. This means a policyholder will have to pay more for their coverage.The policyholder may end up spending more in the long run. By paying more to transfer the risk of something going wrong, the insured policyholder could end up costing themselves more money over time if they never have a covered loss. Say, for example, that a policyholder pays an extra $10 a month to reduce their insurance deductible by $250. If the policyholder had saved that $10 on premiums for 25 months, they would have had enough to cover the deductible and then would be able to benefit from continuing to save $10 every month thereafter. So, if no covered loss happened within 25 months, they would have been better off with a higher deductible.

By weighing these pros and cons, insurance buyers can make the best choice about whether to opt for a high or a low deductible. Those who have the money to pay the deductible easily when a covered loss occurs may find they are much better off opting for a high-deductible plan.

But, anyone who would be stressed about having to find the cash and who would prefer higher fixed costs rather than a large surprise expense would likely be better off with a low-deductible plan.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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.

 Read More 

It’s not common knowledge that Costco may revoke a membership. Keep reading to learn what could push the retail giant to the breaking point. 

Reddit’s Costco page features an interesting thread that asks Costco employees to name the weirdest items they’ve ever seen returned to the warehouse store. Their answers are sometimes funny, often cringe-worthy, and sometimes a little sad. But they also help to explain why it’s possible to lose your Costco membership if you abuse the retailer’s generous refund policy.

Costco employee stories

Current and former store employees chimed in to paint a picture of the types of returns customer service can expect to see on any given day. Here’s a sample:

Sony boombox, over a decade oldOld mattress with clear signs of urine stainsContainer of bones and fat, all that was left of a ribeye steak13-year-old fish that had been found in a freezerPlayset because “the kids grew up”4-year-old Whirlpool washing machine10-year-old sneakers15-year-old pressure washer10-year-old ping pong table

As you might imagine, reactions vary. Some Costco employees winced at the idea of giving a refund on food products that had obviously been consumed, wine that had been drunk, and dead plants that only died because they were never watered. Others have learned to laugh at the ridiculous things Costco members think to return and gladly refund the money back to their bank account or Visa card.

No matter how employees feel about it, though, Costco rarely refuses to refund an item, or at the very least, work with a member to make them happy.

There’s a limit

The lady who returned an empty bottle of wine because it “gave her a headache” should probably know that Costco does reach a breaking point. There’s a limit to how much a member can return before they’re asked to surrender their membership card. And if that Costco card is helping a member save money, it can be a huge loss.

The tricky bit is that no one knows precisely what the limit is. Costco keeps track of merchandise as it comes back into the store and which member made the return. At some point, a member who habitually returns merchandise will be flagged. And once flagged, they may be operating on borrowed time.

In truth, this sounds far more ominous than it is. The worst that can happen is that Costco offers one more refund — this one for the person’s membership card. Once Costco has canceled their membership card, it may be impossible to purchase a new one.

A little like the Wizard of Oz

Like the great and powerful Oz hiding behind a curtain, no one knows for certain how it all works. It’s not clear if the decision to cancel a membership is made at the district level or if store management has that power. We aren’t sure if all stores have the same return limit or if that’s decided on a store-to-store basis. It’s also unclear whether making returns to different Costco locations makes a difference.

What we do know is that you’ll have to truly abuse Costco’s return policy to be flagged. Thirteen-year-old fish aside, Costco has worked hard to make members comfortable with its return policy and prides itself on removing as much stress as possible from the process.

You’d have to step over a faintly drawn line (several times) before customer service would consider revoking your membership.

Still, there are plenty of things to do in life that are brag-worthy. Testing the patience of a popular retailer is not one of them.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

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

 Read More 

When I make an offer to buy a property, I will make sure my offer includes both an inspection contingency and an appraisal contingency. Here’s why. 

I’m currently in the market for a new house and I will hopefully be making an offer to buy a property once I’ve found a place that I love. When I do make an offer, there are two clauses I’ll absolutely insist are included in my purchase contract. Here’s what they are.

An appraisal contingency

The first clause is one making the purchase of my home conditional on a satisfactory appraisal that shows the house is worth at least as much as I’m paying for it.

I’ll be including an appraisal contingency in my offer because I’m going to get a mortgage, and mortgage lenders set a limit for how much you can borrow relative to the value of the house. The lender I use will consider the market value of the house when deciding how much I’m allowed to borrow for a mortgage.

If the appraisal were to come in too low, then my lender might raise my interest rate because it would be taking on more risk. Or it might charge me private mortgage insurance if it ends up loaning me more than 80% of what the appraiser says my home is worth after taking my down payment into account. Private mortgage insurance would provide protection for the lender against loss, but would cost me hundreds of dollars extra a month without directly benefiting me.

In a worst-case scenario, if the appraisal came in really low, I might have to put more money down or the loan might be denied entirely.

I want to avoid these outcomes by making sure the house doesn’t appraise for less than I’m paying. I also don’t want to buy a house for a lot more than an expert appraiser says it’s worth. Doing so would mean that I would likely be underwater on the home right away.

With my appraisal contingency, if the house appraises for less than I offered to pay for it, I would have the chance to walk away from the sale without losing my deposit. This could give me leverage to renegotiate the price or to simply opt out of continuing with the purchase.

An inspection contingency

My offer to buy a house will also include a clause making the purchase of the home conditional upon a satisfactory home inspection. This will enable me to bring in a professional inspector to assess the condition of the house and ensure there are no surprise repairs that would end up being necessary after my family and I move in.

By including this contingency, I can either negotiate to get repairs made (or money to make them) or have the chance to walk away from the sale if there’s something wrong with the house I didn’t know about.

These two clauses will provide vital protection for my finances. That’s why I’m going to make sure that when I make a home offer, these are a part of it.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

The rate of savings in the U.S. is on its way down. Here’s why the same things may not be happening anywhere but here. 

How much do you bring home a month, and what percentage of that do you manage to tuck away in savings? If it’s more than 4.5%, you’re currently saving more than the average American citizen. For decades, the personal savings rate averaged between 10% and 14%, but the numbers began to drop around 1985. By 2005, the rate was down to 2.9%. Here, we look at why we don’t seem to be able to save more money.

It’s not just one thing

If we could point to one thing to explain the low savings rate — like the pandemic, inflation, or rising interest rates — it would be far easier to make changes. However, countries like the United Kingdom and Canada face the same issues, with a few extras thrown into the pot. And yet, households in the United Kingdom are expected to save around 8% this year and Canadians should hit a 6% savings rate.

There has to be more to the story.

In 2019, only 29% of Americans considered themselves financially healthy, and things have not improved much since that time. Today, a whopping 70% of us admit to being stressed about personal finances, according to a CNBC Your Money Financial Confidence Survey. The same survey found that 58% of Americans are living paycheck to paycheck. Given those statistics, a lack of savings comes as no surprise.

But why? What’s keeping us from building an emergency fund or planning for retirement? It’s likely a multitude of factors, but here are four of them.

1. We’re slammed with advertising

While the number seems unreal, research shows that the average American is exposed to 4,000 to 10,000 ads per day. We may not even notice them, or we may believe we’re not paying attention. But every time we scroll social media, use a search engine, listen to a podcast, or watch a television show, ads worm their way into our lives. The number of ads we’re exposed to today is nearly double the number the average person saw in 2007, and more than five times as many as the average person was exposed to in the 1970s.

It matters because those ads shoot out images of what our lives “should” be. We’re supposed to wear certain clothes, drive a particular car, and live in neighborhoods once reserved for TV families like the Cleavers and Bradys.

When we’re insecure, sad, or angry, we make ourselves feel better by buying something we can easily live without, just to impress people who don’t actually care.

So much of who we are as a society is tied up in image, which helps explain the number of people who heavily edit their social media photos. In short, we’re interested in fitting into a world that’s sold to us by advertisers, and that’s an expensive habit.

2. It’s dangerously easy to borrow money

Speaking of advertising, make it a point to count the number of ads you see for credit cards, loan companies, and banks in a single day. Those businesses make money when we borrow and they spend a chunk of it convincing us that we need to borrow more. Buying now and paying interest drains our bank accounts and makes us feel poor.

3. We’re not using cash

We spend more when we’re using credit cards than we do when we’re shelling out cash. According to a study by the Sloan School of Management, we not only spend more, but we’re more likely to make impulse purchases and give larger tips when we’re paying with plastic. There are a few theories as to why this happens. Here are two of them:

Just thinking about using a credit card makes the reward region of the brain light up. In short, it’s pleasurable.We don’t feel the pinch of spending when we use a credit card. In fact, until the bill arrives, we almost feel as though we got something for free.

4. We’re exhausted

Whether we’re rushing to get to work in the morning, trying to get the kids on the school bus, or taking the dogs for an early walk, most of us hit the ground running. By the time evening arrives we’re too tired to do much of anything productive, and that includes paying bills and working on a monthly budget. If we’re not saving enough money, we really don’t want to think about it if we don’t have to.

The problem is, we have to look an issue in the face to come up with a solution. That solution may be cutting unnecessary expenses or taking on a side hustle — neither of which is necessarily attractive.

If you’re facing a savings shortfall, it’s okay to start small. Toss your loose change into a jar, use an app to save money on groceries, or automate your savings. If your debt load is standing in the way of saving, consider working with a non-profit debt counseling organization, such as the National Foundation for Credit Counseling. A professional can help you come up with healthy strategies to make your money work for you.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

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.The Motley Fool has a disclosure policy.

 Read More