Money Management

Read this if you move U.S. dollars to or from your Binance account. 

Binance will temporarily suspend U.S. dollar withdrawals and deposits, starting on Feb. 8. The popular crypto exchange, which has not given a reason for the suspension, says it is looking for a solution. According to a company tweet, “Only a small proportion of our users will be impacted by this and we are working hard to restart the service as soon as possible.” It added, “All other methods of buying and selling crypto remain unaffected.”

It’s worth noting that Binance.US is a separate entity which says it won’t be affected. As American customers cannot use the international platform they should not be impacted. “We are NOT suspending $USD withdrawals & deposits on February 8,” tweeted Binance.US customer support.

Binance’s suspension of U.S. dollar transfers

If you’re a Binance user, any headline that mentions suspending withdrawals is likely alarming. The crypto community is still on edge after the recent collapse of FTX and other crypto platforms. Billions of dollars’ worth of FTX customer funds are missing or tied up in the legal fallout.

Binance CEO Changpeng Zhao, also known as CZ, sought to reassure users by saying that only 0.01% of its monthly active users use U.S. dollar bank transfers. But it would be more reassuring if the company was transparent about why it is making the move. Any hint of issues with accessing customer money triggers alarm bells, even if it’s only withdrawals in one currency.

It’s not the first time Binance has suspended withdrawals and deposits for particular currencies. In the summer of 2021, it had to halt British pound withdrawals and deposits for UK customers, following issues with the country’s Financial Conduct Authority (FCA). While it did eventually resume the service, the episode spooked British crypto investors.

Since then, Binance has attempted to stay on the right side of regulators by increasing its compliance team and stepping up its anti-money laundering and other anti-crime activities. However, according to Reuters, in December 2022 U.S. authorities were considering bringing money laundering charges against the exchange. Binance dismissed the Reuters report as “wildly outdated” and “incorrect” and told Fortune that its top priority is user protection.

How to protect your crypto assets

The good news is that Binance’s move to suspend U.S. dollar withdrawals has been telegraphed in advance, so customers have time to prepare. In addition, it says withdrawals and deposits in other currencies won’t be affected. Another reason the impact will probably be minimal is that American customers, who likely make the majority of U.S. transactions, can only use the Binance.US platform.

All the same, it’s important to be cautious. Particularly because we don’t know why Binance is restricting U.S. dollar activity. It could be because of an issue with a specific banking partner, as Bloomberg suggests, but there could be something bigger at play.

To be clear, it’s unlikely this is the beginning of something more serious and it’s unlikely it will impact Binance.US customers further down the road. Unfortunately, it is hard to be 100% sure because trust in centralized crypto exchanges is extremely low. Bear in mind that in the days prior to FTX’s collapse, the company assured its customers funds were safe.

As a crypto investor, the only surefire way to protect your assets is to move them into a crypto wallet you control. Known as non-custodial wallets, you’ll need a bit more crypto know-how to set one up and get confident with moving your assets around. You will also be totally responsible for its security, so don’t lose your security phrase. There are billions of dollars of Bitcoin (BTC) stuck in crypto wallets that people can’t get to because they’ve forgotten the password.

The temptation to leave your crypto in a custodial wallet on the platform where you bought it is understandable, and it does offer some advantages. For starters, crypto exchanges are much more user-friendly. The fees are easy to understand. And if you lose your password, you’ll be able to recover it without too much hassle. Finally, many exchanges make it straightforward to stake your crypto and earn rewards.

The big downside is that there’s very little in the way of investor protection. Unlike banks, crypto assets on exchanges aren’t protected against failure by FDIC insurance, so your money could get swallowed up in any bankruptcy proceedings. This is the main reason to learn about non-custodial wallets. If your exchange fails, gets hacked, or is forced to suspend withdrawals for another reason, crypto that’s held in an external crypto wallet won’t be affected.

Bottom line

Binance’s planned suspension of U.S. dollar withdrawals is almost certainly a temporary issue. However, it’s not surprising that crypto investors are nervous. Whether it’s Binance or another crypto exchange, if you keep your assets in a custodial wallet, they could be at risk in the event of platform failure or get stuck if the exchange freezes withdrawals.

Given that one of the big advantages of crypto is that you don’t have to rely on centralized platforms, it’s worth looking into alternative ways to store your crypto.

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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.Emma Newbery has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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If you want to pay with a credit card at Costco, it’ll need to be a Visa. 

Costco is known for low prices, massive warehouses, and having arguably the most restrictive credit card policy of any major retailer. While Costco stores and gas stations accept most debit cards, they only accept Visa credit cards.

Most other retailers accept credit cards from all the major payment networks, which include American Express, Discover, Mastercard, and Visa. What makes Costco different? Here’s the answer.

Why does Costco only accept one type of credit card?

Costco’s credit card policy is all about saving money. It negotiates a partnership agreement with a single payment network in exchange for much lower processing fees. As part of its current deal with Visa, it pays transaction fees of only 0.4%. By saving on fees, Costco is able to keep prices low.

For a store to accept credit card payments, it needs to pay a fee to the payment network on every transaction. Credit card processing fees normally range from about 1.3% to more than 3%, depending on the store and type of credit card used. For most stores, these fees are simply the cost of doing business. They need to accept all types of credit cards because if not, they could lose customers.

Costco doesn’t have that problem. It has a loyal customer base, with nearly 121 million members as of November 2022. That gives it a couple of key advantages in negotiating payment processing fees:

It doesn’t need to accept every payment network to be successful. It can choose to work with just one, and has done so for decades.Its huge customer base gives payment networks a reason to play ball. The payment network that partners with Costco guarantees that only its cards are accepted there.

Costco previously partnered with Discover, followed by a 16-year partnership with American Express. Under its deal with American Express, Costco paid a transaction fee of 0.6%. Costco and American Express split when Visa agreed to take 0.4%.

What to do if you’re a Costco member

If you like to shop at Costco, then you should have at least one Visa credit card. You could also pay with cash or a debit card, but credit cards are the better payment option. They offer much more generous rewards programs that allow you to earn cash back or travel points. Many also have valuable complimentary protections, such as purchase protection and extended warranty coverage. These aren’t as common with debit cards, and you don’t get anything like this when paying in cash.

Fortunately, Visa is the largest payment network by market share, so there are plenty of great card options to choose from. If you’re not sure where to start, check out the best Visa credit cards. Or, you could focus on Visa cards that offer a specific benefit you want, such as:

Cash backTravel rewards0% intro APR on purchases

For those who shop at Costco often, a Costco credit card could make the most sense. Costco members can apply for the Costco Anywhere Visa® Card by Citi.

Keep in mind that you can use Mastercard and Discover credit cards on Costco.com. If you have one of those cards that you like using, you could at least use it to pay for your online Costco purchases.

Costco’s rules on credit cards can be a bit frustrating for shoppers who’d rather pay with a different type of card. But this is also one of the ways Costco offers low prices, so it’s a net positive. Just make sure you have a Visa credit card, and you’ll be good to go.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Mastercard, and Visa. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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It’s important to set aside money for healthcare, since you never know when you might need it. 

There are certain expenses in life that are absolutely essential — things like housing, transportation costs, food, and healthcare. But the cost of the latter has risen a lot through the years, leaving many people struggling to keep up.

As of December of 2022, the cost of healthcare was up 4.1% on an annual basis, according to the Bureau of Labor Statistics. And that number has the potential to keep climbing — even if inflation levels cool this year.

That’s why it’s so important to make sure you have money set aside for medical expenses. And one account will allow you to save for healthcare in a tax-advantaged manner — if you qualify for it.

Are you eligible for a health savings account?

You could simply pad your regular savings account to cover upcoming healthcare needs. But you won’t snag any tax breaks in the process. On the other hand, if you fund a health savings account (HSA), you can save for healthcare and enjoy some neat tax breaks along the way.

The beauty of HSAs is that they offer three types of tax benefit. First, your contributions get to go in tax-free. Next, you get to invest money you don’t need right away, and any gains in your HSA will be yours to enjoy tax-free. Finally, the withdrawals you take will be tax-free, as long as you use that money for qualified medical bills, like copays for prescriptions, diagnostic tests, and doctor visits.

Furthermore, HSAs are extremely flexible. They don’t require you to spend down your balance year after year like flexible spending accounts do (which, despite their name, are really anything but flexible). You could fund an HSA at age 25 and carry your money all the way into retirement if you want to.

The only drawback of HSAs, though, is that your health insurance plan needs to conform to certain rules for you to qualify. In 2023, your plan needs to meet the following criteria:

Have a minimum $1,500 deductible for individual coverage or a $3,000 deductible for family coverageHave an out-of-pocket maximum of $7,500 for individual coverage or $15,000 for family coverage

If your health insurance plan has a family deductible of $3,000, but an out-of-pocket maximum of $18,000, you won’t be able to participate in an HSA.

Don’t leave yourself vulnerable

You never know when you or someone in your family might get hurt or sick, resulting in hundreds or even thousands of dollars in medical bills in a short period of time. Having money set aside for healthcare costs could spare you the stress of racking up debt due to medical expenses.

Of course, we don’t know how much more expensive healthcare will get in 2023 compared to 2022. But it’s important to recognize that even if inflation levels generally cool off this year, the cost of healthcare might still rise because that’s how it’s been trending for a long time. So the more of an effort you make to save for it in advance, the better off you’ll be.

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It could come at a different cost.  

It’s gotten expensive to take out a mortgage loan. That’s because mortgage rates are considerably higher than they were a year ago. And home prices are also elevated. In November, the median existing-home sales price rose to $370,700, reports the National Association of Realtors. That’s a 3.5% jump from a year prior.

All told, buyers need to be very careful when purchasing a home and signing a loan to finance one. And so now more so than ever, it’s essential to shop around for a mortgage rather than jump on the first offer that comes your way.

But in the course of your mortgage shopping, you may be inclined to go with the loan that comes with the lowest interest rate. That logic certainly makes sense. But there may be more to the story than the rate you’re looking at. And in some cases, a lower mortgage rate might actually cost you in other ways.

When a lower mortgage rate doesn’t mean you’re saving money

It may be that one lender is able to offer you a lower rate on a mortgage than another. But what closing costs are you looking at in return? If those fees are high, then it may be that they’ll wipe out the savings you’ll get via a lower rate.

Let’s say you’re offered a 30-year, $300,000 mortgage at 6.5%. That leaves you with a monthly principal and interest payment of $1,897. If another lender offers you a rate of 6.4%, you might think it’s an easy call to take it. At that point, your monthly payment drops to $1,876.

But what if that first lender with the 6.5% rate wants to charge you $6,000 in closing costs and the second lender wants to charge you $9,000? That second loan might save you $21 on your monthly mortgage payments. But if you’re looking at an extra $3,000 in closing costs, it will take you about 143 months, or almost 12 years, to break even. And who knows if you’ll even still be in your home by then?

In addition to higher closing costs, a lower mortgage rate might also come with the requirement to pay points. Some lenders will let you buy down your rate with points, and in some cases, it makes sense. But it will also cost you.

One point on a mortgage is equal to 1% of the sum you’re borrowing. So in our example of a $300,000 mortgage, one point would cost you $3,000. By paying that $3,000, you might manage to lower your mortgage rate by 0.25%.

So, let’s say you can drop a 6.5% mortgage rate to 6.25% by paying for a point. That leaves you with a monthly payment of $1,848. That’s $49 in monthly savings compared to a mortgage rate of 6.5%. But when you factor in the $3,000 you’re spending, it will take you 61 months, or over five years, to break even. That’s still a long time.

Read the fine print

A lower interest rate on your mortgage could save you money. But make sure you’re not taking on added costs in the process. If so, that lower rate may not be worth 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.

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