Money Management

Don’t just resign yourself to being stuck in a bad situation. 

Once you retire and move over to a fixed income, you may find that money starts to get tight. This might hold true even if you’re entering retirement with a solid level of savings in your IRA or 401(k).

That’s why it’s important to go into retirement with as little debt as possible. Ideally, you should aim to have any credit card debt paid off before your career comes to an end. It’s also a good idea, if possible, to start retirement without a mortgage.

To be clear, not everyone who retires does so at a point when they’re mortgage-free. The National Association of Realtors reports that as of late 2021, nearly 10 million homeowners aged 65 and older still have a mortgage.

But if you’re able to pay off your home before you retire, you’ll have one less expense to worry about at a time when you might have less financial wiggle room. And that’s why it’s important to borrow strategically for a home if you’re first purchasing one in your 50s.

You may want to stick to a shorter-term loan

There’s a reason 30-year mortgages tend to be so popular among home buyers. These loans allow for lower monthly payments than shorter-term loans, which can make homeownership more affordable for a lot of people.

But if you sign a 30-year mortgage in your 50s and you don’t accelerate your payments, then you can pretty much bank on not paying off your home until you reach your 80s. And that may not be ideal. So if you’re buying in your 50s, a good bet may be to sign a 15-year mortgage. If you stick to that schedule, it’s more than conceivable that your home will be paid off in full before your career comes to an end.

But that’s not the only reason to look at a 15-year mortgage. Another benefit of signing a shorter-term loan is that you’re likely to snag a lower interest rate on a 15-year mortgage than a 30-year mortgage. That’s because your lender is taking on less risk by loaning you money for a shorter period of time. And in exchange for that reduced risk, you should expect to be rewarded with a lower interest rate.

Can you afford to sign a 15-year mortgage?

If you can swing the higher monthly payments that come with a 15-year mortgage, then you may find this loan product is the best choice for you when you’re buying a home a bit later in life. But before you commit to those larger payments, crunch the numbers.

As a general rule, your total housing costs should not exceed 30% of your take-home pay. And those costs should include more than just your mortgage — they should account for things like property taxes and homeowners insurance premiums as well.

If you can swing the higher payments that come with a 15-year loan, then by all means, sign one. But if you’re not sure, then you’re probably better off sticking to a lengthier loan — and trying your best to pay it off as quickly as you can.

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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.
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Balances soared in 2022, and that means cardholders are in for some expensive interest charges. 

Inflation sent prices skyrocketing last year. With practically everything being more expensive, it’s no surprise that credit card debt increased. The surprising part is just how much people’s card balances went up. Here’s the recent data and what you can do if you have credit card debt right now.

The average credit card debt in the United States

The average credit card debt increased by 13.2% last year, from $5,221 in 2021 to $5,910 in 2022, according to an analysis by Experian. Average credit utilization (the portion of their credit that a consumer uses) increased from 26% to 28%.

This is the first time average credit card debt has increased during the pandemic, and it’s getting closer to pre-pandemic numbers. Here’s a look back at how the average has changed over the past four years.

Most types of debt increased last year, but nowhere near as much as credit card debt. The next-largest increases were:

Auto loans: 7.7%Mortgages: 7.3%Personal loans: 7.0%HELOCs: 3.8%

Considering the effect inflation had on prices, you might assume that people were relying on their credit cards more for everyday expenses. Interestingly enough, Experian attributed the increase to consumers spending more on goods and services such as vacation travel and dining out. There were certainly plenty of people who used their credit cards to help cover regular bills. But part of the increase was also people getting back to normal spending habits after being unable to travel or dine out much during the pandemic.

What to do if you have credit card debt

It’s always better to avoid carrying balances on your credit cards when possible. You won’t get charged interest this way, and you’ll have more money available to put toward financial goals.

However, right now is an especially challenging time to be in credit card debt. The Federal Reserve has been raising interest rates to fight inflation. Credit cards already had high interest rates, but they’ve gotten much higher. The average credit card APR is now over 20%. On that average balance of $5,910, a 20% APR would cost you $1,182 per year.

So, what can you do if you’re in that situation? Here are a few tips that will help you get out of credit card debt:

Track your spending and cut back on expenses. A budgeting app can help you see where you’re spending money and find places to save. Watch out in particular for big discretionary expenses, such as dining out and online shopping.Pay as much as you can every month. Don’t just make minimum payments — it takes years to pay off a credit card this way. Use all your spare cash to pay down your debt.Save money on interest with a balance transfer. Balance transfer credit cards offer a 0% intro APR, and intro periods can last 18 months or longer. If you have a good credit score, try applying for one of these cards. If you’re approved, you can transfer over your credit card balances and pay them down interest-free during the intro period.

As the numbers demonstrate, credit card debt is a common issue. It doesn’t need to be something you live with indefinitely, though. If you prioritize paying it off, and you follow those tips, you’ll be well on your way to getting free of credit card debt.

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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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Just because it’s a Costco offering doesn’t mean it’s a good deal. 

When we think about the holidays consumers commonly splurge on, Easter doesn’t necessarily come to mind. Sure, many of us rack up giant credit card tabs for Christmas, and Halloween can be expensive if you’re handing out lots of candy and going all-out on costumes and decor.

Easter tends to be a more moderate holiday that doesn’t have to break the bank. This holds true even if you have a tendency to put together Easter baskets for your friends and family members.

Now, if you’re looking to shower your kids or loved ones with the ultimate Easter basket, then you may want to look at Costco. Right now, the warehouse club giant has what it calls a “deluxe” Easter basket available for $80 online. That’s a $20 discount from its usual price, and that $80 includes shipping and handling.

But is the deluxe Costco basket a good deal? Or do you stand to save money by putting a comparable basket together yourself?

A potential source of savings

Figuring out the retail cost of Costco’s deluxe Easter basket is tricky. The reason? A number of the products it contains aren’t widely available for individual purchase, or at least not in comparable quantities.

Take Hammond’s lemon cakes, a product from Spain. A simple internet search reveals that these aren’t something you can simply buy on Amazon.

Now Amazon does sell a box of fancy lemon tartlets for around $11. But it’s hard to compare the cost of that with the cost of a product that clearly seems to be a Costco exclusive.

Now on the other hand, Amazon does sell an Easter Tootsie Roll Fun Bank, which is one of the many products featured in Costco’s deluxe gift basket. That product alone is $8 on Amazon. Considering that Costco’s gift basket contains 17 different items, it’s fair to say that putting a comparable basket together yourself will cost more than $80. And it will no doubt take up a lot of your time. But that doesn’t necessarily mean that Costco’s deluxe basket is a good buy, either.

Should you make your own scaled-down Easter baskets?

It’s nice to want to treat your children or family members to something special on Easter. But the reality is that you don’t necessarily have to spend $80, or anywhere close, to do that. You also don’t need your Easter baskets to contain 17 distinct treats. For young kids, a variety of five or six items is probably enough.

Even if you’re making a single Easter basket for your family to share, that $80 price point is pretty steep. This especially applies if you’ve been struggling to keep up with your bills during this ongoing period of inflation.

If you happen to love Easter and want to pull $80 out of your savings account to indulge your family with Costco’s deluxe basket, go for it if money isn’t tight. But realize that there are many other routes you can take here.

In fact, right now, Costco is also offering a smaller bucket of sweets for $30. It contains eight different sweets and comes with a cute bunny design. If you’re not the creative type and would rather buy a premade Easter basket, this one reads like a much more reasonable purchase for the average consumer than the deluxe offering.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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It’s not always easy to keep track of your credit cards. 

A time may come when you realize that you completely forgot about an old credit card. Maybe you were doing spring cleaning and found it at the bottom of a desk drawer. Or you suddenly remembered a card you used to have, and now you’re wondering if it’s still lying around somewhere.

This happens to plenty of people, but issues can arise when you don’t keep an eye on your credit cards. If you just found out that you forgot about one, here are the steps you should take right away.

Check if the card is still open

When a credit card hasn’t been used in a long time, the card issuer may close it. It usually takes at least a year of inactivity, but this depends on the card issuer.

To check the card’s status, log in to your online account. If it has been awhile, you may need to reset your password. You’ll be able to see there if the card is closed. Another way to find out is to call the card issuer. Let the representative know that you just found an old credit card and want to know if it’s still open.

Review the account for any issues

Next, take a look around your online credit card account to make sure nothing’s wrong. For example, if the first thing you see when you log in is a notification about your payment being past due, you need to handle that ASAP.

If there’s a balance on your card, whether it’s past due or not, see if you recognize the transactions. It could be something you forgot to pay off. But it could also be credit card fraud. Even if you have the credit card in your possession, a cybercriminal could have gotten the card number. If you’re sure that you didn’t make a charge, dispute it and report it as fraud.

Make sure your contact information is up to date

Check the contact information your card issuer has on file for you, including the mailing address, phone number, and email address. If any of this is outdated, it puts you at risk of identity theft.

For example, when your credit card expires, the card issuer sends a new one to the mailing address on file. If you’ve moved, whoever now lives there could get their hands on your new credit card. In that situation, you need to first update your information, and then report your card as lost. It’s best to call the card issuer about this so you can ensure the replacement card gets sent to your current address.

Redeem any unused rewards

If you found an old rewards credit card lying around, don’t forget to check its rewards balance. There might be unused cash back or travel points. Some credit card companies have minimum redemption amounts, but if you’re able to redeem your rewards, make sure to do that.

Decide if you want to keep the card

The final consideration is what you’ll do with the card. As long as the card issuer hasn’t closed it, you’re free to start using it again. However, you might have stopped using it for a reason. Maybe you improved your credit, were able to qualify for other top credit cards, and you left your old one behind.

If you’re done with the card, you could close it, which is the simplest thing to do. Or, you could keep it open. Older credit card accounts are good for your credit score. Account age makes up 15% of your FICO® Score (the most widely used type of credit score by lenders), so there is some benefit to keeping an old account around, even if you’re not using it.

Just remember to put your card in a safe place and review the account every month if you keep it open. There’s nothing wrong with hanging on to an old credit card, provided you take precautions against credit card fraud.

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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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