Money Management

Consider all your options if you need to borrow in a hurry. 

Getting an unexpected bill is one of those parts of adult money management that no one enjoys, but happens to all of us. Perhaps your furnace died over a holiday weekend, or your car needs a pricey repair. Either way, now you need money in a hurry, and you’re looking for the easiest way to borrow. You definitely don’t want to fall back on a costly payday loan. You might consider a personal loan, but what if your trusty credit card could help you out?

There has long been a way to extract cash from your credit card in a hurry, and it’s called a cash advance. Cash advances let you borrow cash from your credit card’s cash advance limit, which will usually be lower than your credit limit, and can be found in your credit card terms and conditions. You withdraw the cash at an ATM, using a PIN provided by your card issuer. This method of borrowing should be considered an option of last resort, though, as you’ll be charged a cash advance fee as well as interest, which will begin accruing immediately, rather than allowing you a grace period like a normal credit card purchase.

But a few big-name credit card issuers are now offering credit card loans. Here’s how they work.

How credit card loans work

A couple of credit card companies now offer loans based on your existing credit limit with them. There’s no application process, and borrowers receive the funds via direct deposit or a mailed check, so it will likely be a few days’ wait at the most to get cash in hand. The credit card company tells the customer how much they can borrow and provides an interest rate based on spending habits and creditworthiness. The loan is then easy to manage by way of that existing account with the lender, and customers can select a payment timeline and see how many payments are left. Sounds pretty good, right? Unfortunately, credit card loans come with a few drawbacks to be aware of.

A few potential pitfalls of credit card loans

Before you rush to see if a credit card loan might help you out of a jam, there’s a few things to know. First and foremost, a credit card loan will increase your credit utilization ratio. This is the amount of your available credit that you’re using. To avoid credit score damage, it’s best to keep this number to less than 30%. If you have a $10,000 limit on your credit card and you’re already carrying a balance of $2,000, and then take out an additional $2,000 in the form of a loan, your credit utilization ratio for that card is now 40%.

Another potential problem with credit card loans is the interest rate. A credit card loan likely won’t be as costly as a cash advance, but if you have a solid credit score, you might qualify for a better interest rate on a personal loan — personal loans for good credit offer rates as low as 5.99%, while you might end up with an APR of 9.99% or higher on a credit card loan.

Alternatives to credit card loans

You have options when it comes to borrowing money, and perhaps one of these will be a better solution for you than a credit card loan:

Salary advance from your bank: Some banks offer a small-dollar loan program where you can borrow a little money, in the form of an advance on a future paycheck, in a hurry for a surprise bill.Personal loan: As discussed above, if you have good credit, you might qualify for a decent interest rate, and these won’t impact your credit utilization ratio.Buy now, pay later: BNPL plans are becoming more and more common, so check to see if this is an option for your surprise bill — it might be if you need to replace a vital appliance or make another large purchase in a hurry.0% APR credit cards: It could take a while to get one of these, so it might not be a fit if you need to pay for something ASAP. However, if you qualify, you’d be entitled to a period of earning no interest on your bill or purchase for a predetermined period of time. So if your purchase can wait until you receive the card, this is a great option for cheap borrowing.

Emergency funds are ideal for just such a situation, but the reality is that many Americans don’t have one stashed away in a savings account for a rainy day. A 2022 Prudential Pulse survey found that 50% of those asked couldn’t cover a $500 emergency out of their savings. It’s important to be able to borrow money in a hurry when you need to, so make sure you consider all your options before signing on for a credit card loan.

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To get the best results, you need to find investments that fit your financial goals. 

There are all kinds of quality investments out there. As you build your portfolio, one of the biggest challenges is deciding how to invest your money when you have so many options to choose from.

Suze Orman brought up this subject on a recent episode of her podcast Women & Money, and she shared an important tip for every investor. When you invest, “you have to know the goal of your money,” says Orman. Here’s what she means and how you can do this.

Why knowing your goals is a must when investing

Each type of investment has its pros and cons. As you’d expect, there’s no single investment that’s right for every situation. Most investments are well-suited to some financial goals, but not as useful for others.

On her podcast, Orman mentioned how she had previously recommended a stock with a very high dividend payment to a couple. By replacing another stock in their portfolio with her recommendation, the couple could make nearly $10,000 per year more in dividends. Orman clarified that she wasn’t telling everyone to go out and buy the stock, but many of her listeners did.

This is a good example of a common dilemma for investors: Growth stocks versus dividend stocks. Growth stocks are companies that raise revenue and profits faster than than the average. Dividend stocks are companies known for paying generous dividends, like the one Orman recommended. Because these two types of stocks are so different, the right option depends on your goals and age.

At first, a stock with a high dividend may seem like a great choice to increase your income. And it could be, if you’re in a position where you could use more passive income, such as when you’re retired.

But dividend stocks generally don’t increase in value as much as growth stocks. Also, dividend payments raise your taxable income. Those are serious drawbacks for younger investors who want to maximize their wealth-building. If you’re in that position, growth stocks would likely be more appropriate.

How to match your investments to your financial goals

When deciding how to invest your money with your stock broker, think about your major financial goals and how soon you want to achieve them. Based on those goals and their timelines, you can pick out the investments that are the best fit for each one. As a general rule, the longer you have to save for a goal, the more you should prioritize growth in your investments.

One of the most common long-term goals is saving for retirement when you’re early in your career. Another example would be building a college fund when your child is a toddler. In both cases, it makes sense to fill your portfolio with stocks that have good growth potential. If you don’t want to pick individual stocks, you could opt for growth-oriented investment funds, such as:

Mutual fundsExchange-traded funds (ETFs)

Your goals will change as you get older, which is why you should review them and your investments regularly. For example, when you retire, making your money last is more important than growth. To do that, you’ll need to adjust your investments. You could shift some of your money to high dividend stocks, or you could invest more in bonds, since these aren’t volatile like stocks can be.

You can get solid performance with many types of investments. But to get the most from your portfolio, make sure to consider which investments match up best with your current financial goals.

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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.The Motley Fool has a disclosure policy.

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Don’t shop at Costco again until you’ve read this Ramsey advice. 

Costco is one of the most popular bulk-buying stores in the United States. Many people give their credit cards a workout buying Costco’s signature Kirkland brand items or indulging in the club’s famous $1.50 hotdog and soda combo.

For most people, though, the purpose of joining Costco is to save money on the things they need to buy by taking advantage of bulk discounts the warehouse club offers. But in order to actually end up with more money in your bank account due to your Costco membership, you need to be a smart shopper.

Finance expert Dave Ramsey has suggested two tips to help you do that. Here’s what they are, along with some advice about whether they will work for you.

1. Only buy products you’re confident will be used up

Ramsey’s first tip may seem obvious, but it can be harder to follow than you might think.

“Only buy things you know you’ll use,” Ramsey said. He warned specifically about not buying things like produce or herbs and spices, which are likely to spoil (or lose their potency) before you have time to use up all that you have purchased.

“While it might be tempting to grab that 80-ounce jar of mustard, ask yourself, ‘Am I really going to eat that?,'” Ramsey suggested. “You don’t want to buy in bulk just to end up with the ‘bulk’ of it in the trash. Stick to buying things you know you or your family will eat or use.”

To follow this advice, carefully consider your family’s consumption habits. Think through, for example, how much pasta sauce or how many boxes of crackers you use in a month. Then check the expiration date on the items you’re buying. If you aren’t 100% confident you will be able to use every bit of the bulk items you’re buying, put them back on the shelf (or find another family to go in on a shared purchase that you will split up).

2. Compare costs among multiple stores

Ramsey’s second suggestion is to make sure you’re actually getting the best deal when you buy at Costco (or other warehouse clubs selling bulk items).

“Compare prices,” Ramsey urged, suggesting that you look at the price per unit offered for a product at Costco and elsewhere to see which really comes out to be the lowest possible cost. You can’t assume that just because an item is sold at Costco — or sold in a bigger box — that the per unit price is actually lower than what you might get at another store.

By taking these steps, you can avoid wasting money on things that are too expensive or things that will inevitably expire before you get a chance to use them up. Your Costco purchases will be limited to things you really need that you would have paid more for elsewhere, and you’ll get your money’s worth out of your warehouse club membership. So, try them out before you head back to Costco for your next big shopping trip.

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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.Christy Bieber 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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Make sure it’s something you’re prepared for. 

A few months ago, I was driving down the street when a car pulled out of a parking spot and hit me. What made the matter even more unfortunate, and a little awkward, is that the driver was a fellow elementary school parent I’m friendly with.

Thankfully, no one was hurt, since I happened to be driving down the block at a very slow speed. But my car sustained several thousand dollars’ worth of damage due to the size of her vehicle and the angle at which I was hit.

As such, I contacted my auto insurance company to file a claim. I then took my car to an approved auto body shop to get in their queue so my car could be fixed.

I figured that since the accident clearly wasn’t my fault, I wouldn’t have to pay anything in the course of getting my car repaired. But I was wrong.

When you still need to pay your deductible

I was under the false impression that my auto insurance company would go after the other driver’s insurance right away so I wouldn’t need to shell out money for my deductible, which happens to be $750 — not a small amount of money. But instead, what I had to do was pay that money (in the form of a swiped credit card) and then wait for my insurance company to go through the process of subrogation, which involves recovering money from the insurance company covering the person who was at fault.

As part of this process, I had to go through an in-depth interview with a representative from the other driver’s insurance company to explain what had happened. I then had to wait a number of weeks for that insurance company to make a determination.

At the end of the day, I got a check from my car insurance company refunding me my $750 deductible. But it took a couple of months for me to get my money back as the insurance companies worked things out.

Always have money in savings, just in case

This experience taught me a very important lesson: Always make sure to have some emergency savings on hand. In my case, I had to pay the credit card with my $750 deductible charge well before I was reimbursed that sum from my insurance company. Had I not had the money in my savings account to cover that bill, I would’ve racked up interest on that balance — despite not having been at fault for the accident in question.

Of course, your auto insurance deductible may be higher or lower than mine. American Family Insurance says the average auto insurance deductible is $500.

But either way, it’s a good idea to make sure you have at least enough cash in savings to cover your car insurance deductible. You never know when you might need to swipe your credit card or write out a check, even if you’re completely not to blame for the situation at hand.

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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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