Money Management

Personal loans can be expensive and aren’t the best way to fund your travels. Read on for the one situation in which a personal loan for travel is a good option. 

Personal loans offer a flexible way to borrow money. Unlike mortgages and car loans, which limit your purchase to, well, homes and cars, a personal loan can be used to finance just about anything: home renovations, emergency repairs, weddings, and, yes, travel expenses.

Normally, I wouldn’t recommend taking out a personal loan to travel. The interest rates and fees are high, and you’ll be putting your credit at risk for an unnecessary expense.

But there is one situation in which I wouldn’t hesitate to take out a personal loan to travel, no matter how much it costs me.

When you should take out a loan to travel

The only time I would take out a loan to travel is to visit a loved one who’s experiencing a medical emergency. If you don’t have an emergency fund, or a family member can’t lend you the money, a personal loan may be your only choice.

Some loans, such as emergency loans, are designed to help you in a dire situation. These loans are issued fast and often don’t require a stringent credit check. In fact, some lending companies will give you money within 24 hours of your application, while others can give you cash in one to three business days.

Regardless of the loan’s terms, I would take out an emergency loan to visit a loved one in a medical emergency, especially if it’s terminal. Ultimately, people are more important than money. You might have to work a bit harder (or sacrifice expenses) to pay off the loan, but going into debt isn’t permanent, whereas deciding not to visit a loved one in what could be their final moments isn’t a choice you can revoke.

Which loan is best for travel?

Ideally, you should find a loan with a low interest rate and a term long enough for you to pay it off.

If you have something to put up as collateral, such as a certificate of deposit (CD), a secured personal loan might be a good choice. Secured personal loans are attached to your assets, which makes lenders feel more comfortable as they can seize assets if you default on the loan. As such, you may get a lower interest rate.

Without collateral, you may have to apply for an unsecured personal loan. Since these loans aren’t attached to any assets, your lender can’t seize your property if you default. That makes them more risky to your lender, and as a result, your interest rate might be higher.

It’s best to avoid predatory loans, like payday and title loans. While predatory lenders will issue personal loans for emergencies, they’ll likely give you an outrageously high interest rate, like 400%. This can make it impossible to pay off the loan’s balance and trap you in a cycle of debt. I would also avoid cash advances on credit cards. Cash advance APRs are high and apply to your balance immediately after you get your cash.

What credit score do you need?

Generally, most lenders will want you to have a 640 or above to get an emergency loan. That said, some lenders may accept scores as low as 580, often in exchange for a higher interest rate.

How can you avoid emergency loans?

In some circumstances, a personal loan is your only choice to pay for a visit to a loved one in a medical emergency. But they can be expensive. Not only will you pay interest on what you borrow, but you’ll also pay an origination fee, which could be 1% to 5% of your loan value. And if you miss a payment or default, it could take years to repair the negative impact on your credit.

To avoid loans in an emergency, here’s what you can do:

Build an emergency fund. Start setting money aside for emergency purposes. You can use our emergency fund calculator to determine how much you should have saved based on your monthly expenses.Get a salary advance. This will give you a portion of your paycheck before payday. Some employers offer salary advances as an employee incentive, but you could also speak privately with your employer about getting a one-time advance in an emergency.

Again, I would avoid taking out personal loans for leisure travel or visits to family that aren’t an emergency. If an illness or injury isn’t making the visit urgent, then borrowing money isn’t the best way to fund your travels.

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Want to cancel a credit card? Read on to see why it might prove more difficult than expected. 

You may reach a point when you decide it’s time to cancel a credit card you’re not getting much use out of. Generally speaking, it’s actually a good idea to keep credit card accounts open if you’ve had them for a long time. That’s because the length of your credit history is a pretty big factor that goes into calculating your credit score. And keeping long-standing accounts active could help your score improve or remain strong if it’s already in good shape.

But while it’s one thing to keep an old credit card that doesn’t cost you anything to maintain, it’s another thing to hang onto a rarely used credit card that charges an annual fee. In that case, you’re effectively throwing your money away by paying that fee, so it could make sense to close an account like that, even if it means facing a modest drop in your credit score.

But financial expert Dave Ramsey warns that closing a credit card you no longer want may not be as quick or simple as you think. Here’s why.

You need to reach out and have a conversation

These days, you can check your credit card balance online and pay your bill online every month. So you’d think you’d be able to cancel your credit card online, too.

But as Ramsey points out, most credit card companies don’t allow you to cancel an account online. Rather, you need to make a call, speak to a live person, and cancel your account that way. And that’s not as easy.

First of all, you may need to wait on hold or get bounced around to different extensions before you’re able to reach a credit card company representative who can actually help you close your account. And from there, you can bet that the person you speak to is going to do everything in their power to convince you to keep your account open.

They might warn you that closing your credit card account will cause your credit score to drop (you may see a small, brief dip in your score). They might also try to get you to change your mind by pointing out all of the perks you’ll be giving up, like cash back on your purchases. So you’ll need to prepare to stand your ground and go through with your plans to cancel your account if keeping it doesn’t make sense financially.

A process that just plain shouldn’t be so difficult

You’d think it would be easier to close a credit card account and move on with your life. But credit card companies don’t want you to cancel your account. If you do that, they can’t make money off of you by charging you various fees and interest on carried balances.

That’s why these companies intentionally make it hard to cancel an existing account. But if you’re tired of paying for a credit card you don’t use, or one that isn’t worth its fee, then it’s important to take the steps needed to close your account and start saving your money.

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Costco is one of the most popular warehouse clubs in the country. Find out why by learning about the big perks of shopping at Costco. 

Costco is many people’s favorite store, but you need to pay for a membership to shop there. That costs $60 per year for a gold star membership or $120 per year for an executive membership, which also includes a 2% annual reward up to a $1,000 limit.

People often wonder if it’s really worth it to pay an annual fee to shop somewhere. In this case, it definitely can be. With all the big perks of shopping at Costco, a membership can quickly become a bargain.

1. Competitive prices on everything you buy

Costco has a well-deserved reputation for affordable prices, and that applies to its entire inventory, so it’s easy on your personal finances. Whether you go to Costco for groceries, electronics, furniture, clothes, or anything else it offers, you can expect good deals.

Costco is able to offer these low prices because of the membership fee and because it’s selective about the products it carries. Costco warehouses carry about 4,000 products, compared to about 30,000 for most supermarkets, according to the Costco website. By being selective and only carrying products it can sell at a competitive price, Costco is able to provide value for its members.

2. Being able to stock up by buying in bulk

Buying in bulk normally saves you money, as long as you use everything you buy. Costco is known for its bulk items, including food and household essentials. It’s a great place to shop if you have a large family to feed, and even if you’re only shopping for yourself, you’ll probably still find some affordable bulk items you can use.

3. High-quality store brand products

Store brand products can be hit or miss, but Costco’s Kirkland Signature is a hit with shoppers. Kirkland Signature products tend to be about 20% cheaper than products from comparable brands. Those savings don’t come at the expense of quality, either. They usually get high marks, and research into who really makes Kirkland products has found that many of the products are made by name brands. For example, Starbucks makes several Kirkland Signature coffees.

4. Filling up at Costco gas stations

Costco warehouse clubs often have the lowest gas prices in the area. A GasBuddy analyst found that Costco’s gas was usually $0.05 to $0.25 cheaper than standard gas stations. It’s not selling low-quality gas, either, as its gas meets top quality standards. The retailer is simply willing to sell gas at a loss to bring more shoppers into its stores.

5. An incredible return policy

On most products, Costco has a risk-free 100% satisfaction guarantee. There are some items you can’t return to Costco, such as alcohol and cigarettes. There are also product categories, such as electronics and major appliances, where Costco accepts returns within 90 days (which is still longer than what most retailers offer).

The vast majority of Costco’s products can be returned practically anytime, often even if you don’t have the receipt. For an example of just how generous Costco’s return policy can be, one shopper returned an ancient Keurig that was several years old, when she was no longer a Costco member. She was still able to return it and get a gift card for the full amount she had paid.

6. Car deals through the Costco Auto Program

Car buying can be stressful, and it has only gotten harder as inventory shortages have pushed up prices. The Costco Auto Program makes it easier. Members have access to prearranged pricing on new and pre-owned vehicles with Costco’s partners, which includes more than 3,000 dealerships. Some shoppers have reported being able to buy a car through Costco for under the current market value, so there are often deals available that would be tough to find elsewhere.

7. Free sample stations

If you like to snack while you shop, Costco’s free sample stations are one of the nice things about shopping there. They’re also a great way to discover new products you wouldn’t have known about otherwise.

8. The Costco food court

While the free sample stations are good for a quick bite, the Costco food court has lots of options if you want a full meal. The $1.50 hot dog and soda combo is a fan favorite and has had the same low price since 1985. If you’re feeling adventurous, or you want something to post about on social media, you can try the Forbidden Glizzy. This strange yet popular combination involves stuffing a hot dog into a chicken bake. Reviews vary. Personally, I’d stick to pizza.

9. Free extended warranty coverage

At most retailers, if you want extended warranty coverage on a purchase, you need to buy it or pay with a credit card that offers it as a perk. Not so at Costco. With eligible items, such as major appliances and electronics, Costco automatically extends the manufacturer’s warranty by up to two years from the purchase date.

10. Special seasonal and holiday products

Costco has its mainstays, as well as a rotation of seasonal products. For example, during the holiday season, you can expect to see more decorations, gift baskets, toys, and yummy sweets. For many members, one of the highlights of shopping at Costco are the special limited-time products.

11. A unique shopping experience

There’s no denying that shopping at a Costco warehouse is a much different experience from shopping at most stores. Everything is bigger, and because you need to navigate through the whole store to get to the food, it feels like you’re going on a journey. I still have memories of going to Costco as a kid and thinking that it was so much more exciting than going to a regular supermarket.

12. Vacation deals through Costco travel

If you’re never quite sure where to book travel, Costco could be the answer. Through Costco Travel, it offers members deals on vacation packages, hotels, cruises, and rental cars. This isn’t just budget travel, either. Many Costco Travel packages offer deals at all-inclusive resorts.

13. Low prescription drug prices

The Costco Pharmacy is an affordable place to buy prescription drugs. In fact, its prices beat several major drug stores, like CVS. To make it even better, you don’t need a membership, as the Costco pharmacy is open to anyone. While greeters usually ask to see proof of membership when you enter Costco, you can just let them know that you’re there to get a prescription.

14. All the latest electronics (and free tech support!)

Costco has a fantastic selection of electronics, including TVs, cellphones, computers, and video game consoles, in stores and on its website. As usual, prices are competitive with other major retailers. One area where Costco sets itself apart is by offering free tech support through its Costco Concierge service. If you need any help with electronics you bought at Costco, you can get assistance by phone or online chat.

15. Supporting a company that treats its employees well

Finally, it’s worth mentioning that Costco is known for providing a good working environment. It has consistently offered starting wages higher than those of other major retailers, and it raised its minimum wage to $17 per hour in 2021. In addition to a competitive starting salary, Costco has a graduated wage program with raises based on hours worked, plus excellent benefits.

While there are plenty of places to shop, Costco’s commitment to offering value for its members makes it stand out. If you can take advantage of the many benefits of shopping at Costco, it’s well worth the price of a membership.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Starbucks. The Motley Fool recommends the following options: short April 2023 $100 calls on Starbucks. The Motley Fool has a disclosure policy.

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Opening multiple CDs could work to your benefit. Read on to see if there’s a limit as to how many you can have. 

If you have money socked away in the bank for emergencies, then your best bet is generally to keep it in a regular savings account. But if you have money beyond that and you don’t want to invest it in a brokerage account and risk losing it in a down market, then you may want to open a certificate of deposit, or CD, instead.

The upside of going this route is that CD rates are commonly more generous than savings account rates. But there’s a danger of tying money up in a certificate of deposit. If you end up needing to cash out your CD before it comes due, you could face a costly penalty, which will vary by bank. At Wells Fargo, for example, you’ll be penalized three months of interest for cashing out a 12-month CD before it comes due.

It’s for this reason that you’ll often be told to ladder your CDs rather than put all of your money into a single CD. With a CD ladder, you have CDs maturing at different times so that your money is freed up at different intervals, giving you more flexibility.

But how many CDs should you open as part of this strategy? And is there a limit to how many you can open?

You have choices when it comes to CDs

Generally speaking, you can open as many CDs as you want. Will your bank say no if you already have 15 CDs and attempt to open CD No. 16? Maybe, since that could be considered an excessive amount. But in that case, you could always go to another bank and open a CD there.

That said, just because you can generally open as many CDs as you want doesn’t mean you should have several dozen of them. It’s a good idea to have your money available to you at varying intervals, so a good idea may be to open four or five CDs that come due at various points during the year. That way, you have access to some of your money every two to three months.

But beyond that point, having multiple CDs could get messy. You might have a hard time tracking your CDs and keeping tabs on when they mature. And you might end up causing yourself needless hassle. So while there’s no specific answer as to what number of CDs is the right number, you may want to stick to half a dozen or less so you’re able to manage your money with relative ease.

Should you open your CDs at different banks?

You might open three CDs with varying maturity dates at one bank, only to then see a better rate at a different bank. In that case, you may want to open your fourth CD at the bank that’s paying more.

But if you find a bank with top CD rates, it could work to your benefit to have all of your money at the same institution. That could make it easier to track your funds and, as needed, transfer funds back and forth between accounts.

That said, if you’re planning to deposit more than $250,000 into various CDs, then you should open CDs at multiple banks. FDIC insurance protects you from losses for up to $250,000 in deposits per bank. But if you have more money than that, you’ll want to spread it around to make sure your cash is protected.

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

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Extreme coupon shopping allowed me to get great discounts on certain items. Take a look at some things I didn’t pay for for years. 

Clipping coupons can be a good way to keep your credit card bills down if you’re buying items you really need. But you can take couponing to a whole new level if you decide to become an extreme couponer.

Extreme couponers go beyond just printing out or clipping a coupon or two from the Sunday paper. The practice of extreme couponing involves pairing store coupons with manufacturer coupons and shopping during sale periods to try to get items for free or for pennies on the dollar.

For years, I was one of those extreme couponers who took all of these steps. And while I’ve since given up the habit because I found it was a big time-suck that ultimately didn’t provide enough value, I did enjoy the fact there were some items I was able to get totally for free, thereby enabling me to keep more money in my checking account.

In fact, for several years, I didn’t pay anything for these four items — and, more than a decade later, I actually still have some of them left.

1. Toothbrushes

Toothbrushes were one of the easiest items to get for free. Stores often had them on sale for around $1 or so, and manufacturer coupons usually provided $0.50 off. When stores ran promotions like buy-one-get-one free, I could “buy” two toothbrushes for $1 and then use two $0.50 off coupons to pay nothing for them.

2. Toothpaste

Toothpaste was another item that I was able to get tubes of for $0.00. I used the same trick of combining buy-one-get-one sales with manufacturer coupons.

CVS also runs promotions where you could buy a certain dollar value worth of products and get back CVS ExtraBucks. Other stores would offer the chance for rebates or gift cards, and toothpaste was regularly included in these deals. When combining store and manufacturer coupons with these types of special deals, there were times I got paid to purchase toothpaste — so I ended up with dozens of tubes of it.

3. Shampoo

Shampoo was yet another product that it was very easy to get for free — especially when new products came out. Manufacturers often provided generous coupons for it, and there were store deals to combine them with. I used to buy extra copies of shampoo coupons from the Sunday paper using online websites that sell them because I could reliably expect that shampoo deals would be available.

4. Razors

I was able to get a ton of razors for free as an extreme couponer. Many razor manufacturers provide generous coupons in hopes that you will buy their razor and then spend years buying replacement blades. I would just take advantage of the coupons and store sales to purchase the razor and then I would switch to a new one once the blade wore out, rather than falling for the trick of buying the blades.

Getting these items for free was definitely nice, but the reality is it took a lot of time to match up coupons with sales and visit the stores offering the bargains — and I did end up with more than I needed. So even if you are getting stuff for free as an extreme couponer, take the time to make sure it’s really worth your effort.

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Home renovations can improve your life. But read on to see why waiting might be a better bet. 

Now that spring is officially in the air, a lot of people might have home improvements on their radar. And if you have the money sitting in your savings account to move forward with a big renovation, then you may be eager to dive in.

But many people can’t afford home renovations outright. Rather, they need to borrow money to cover their costs, whether by taking out a personal loan or borrowing against their home equity.

The problem with that, though, is that borrowing has gotten expensive across the board. So if you take out a personal loan, home equity loan, or HELOC today, you might get stuck with an interest rate you’re not happy with.

It’s a bad time to borrow money

The Federal Reserve really wants inflation levels to drop. To that end, it implemented nine consecutive interest rate hikes at its last string of meetings.

How do interest rate hikes help with inflation? Interest rate hikes can drive consumers to curb their spending for two reasons. First, when it becomes more expensive to borrow money, doing so becomes less appealing. Second, interest rate hikes tend to lead to higher interest rates in savings accounts. And when that happens, consumers are more motivated to save their money rather than spend it.

Meanwhile, rampant inflation tends to arise when the demand for consumer goods and services exceeds the available supply. So if consumer spending declines, it should narrow that gap between supply and demand and allow inflation levels to drop.

To be clear, the Fed isn’t trying to hurt consumers by hiking up interest rates. If anything, it’s trying to help consumers by bringing inflation down to a more tolerable level. But because the Fed has raised interest rates so many times over the past year and change, it’s a very expensive time to borrow money for just about any purpose. So if you’re able to put off your home renovations, you may want to do so. Holding off on taking out a loan could allow you to lock one in at a far more affordable rate down the line.

What if your renovations can’t wait?

You may have a pressing need to renovate your home. You might, for example, be putting on an addition so an aging relative can come live with you, and that’s the sort of thing you may not want to wait on.

If that’s the case, take your time to compare your borrowing options so you end up with the most affordable loan you qualify for. That could mean shopping around with different personal loan and home equity loan lenders to see what rates are on offer.

You may also be tempted to take out a HELOC if you’re not sure exactly how much money you need to borrow for renovations and want more flexibility. A HELOC might be helpful in the context of taking on a large home project, but these lines of credit tend to come with variable interest rates. That means you risk facing more expensive payments over time.

Both personal and home equity loans come with interest rates that are fixed. So while you’re locked into a specific loan amount, you also don’t have to worry about your payments climbing down the line. And at the time when you’re starting out with a higher interest rate, that’s an important thing.

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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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