Money Management

Consider these conditions before making the move. 

If you are thinking about changing to a different bank, you probably already know that the process of moving your money can be pretty involved.

Obviously, you’ll have to find a new bank to do business with and move your money from your old account to your new one. But there may be many other steps to take as well, such as changing all of your direct deposits, getting new checks, and changing any and all recurring payments or transfers from your old bank account to your new one.

Taking care of all these tasks can seem like more effort than it’s really worth. But, there are situations where changing to a different bank still makes good sense. Here are a few of them.

You’re being charged a monthly fee to keep your account with your current bank

One of the biggest reasons to switch banks is monthly account maintenance fees. Some financial institutions actually charge you a fee just for the privilege of having an account open with them.

These fees are almost never worth paying — especially since, unlike credit cards with annual fees, bank accounts that charge you for being a customer don’t usually offer you any special privileges.

If you are paying a monthly maintenance fee on, say, your checking account, you are wasting your hard-earned money. There are plenty of banks out there that will not charge you for this, and you should find one. Once you’ve gone through the process of changing banks, you’ll get to enjoy keeping that extra money in your account going forward.

Your bank is hitting you with tons of other fees

It’s not just a monthly maintenance fee that can cost you. If your bank charges you for lots of other things, then you should think about switching.

For example, if you end up paying money to take cash out of an ATM all the time, then consider switching to a different bank that reimburses ATM fees. If you are regularly charged overdraft fees, switch to a bank that won’t charge them. Ideally, you’ll also want to stop overdrafting your account in this situation, but since that can be hard, it’s still best to avoid being charged extra money while learning to better manage your bank balance.

Your bank makes mobile or in-person banking inconvenient

While changing to a new bank can be a hassle, it can also be a pain to stick around with a bank that doesn’t offer very good customer service and support.

If your bank makes depositing mobile checks a big ordeal, for example, or if it has low mobile deposit limits so you constantly find yourself having to go deposit checks in person instead of using your phone, then you may want to switch to a different financial institution.

In situations where you’re getting poor service or have limited features, biting the bullet and going through the process of switching banks can actually end up saving you a lot of time and aggravation in the long run.

In each of the above situations, you should seriously think about making a change to your bank account. You likely won’t regret it.

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It’s a move that could save you money — and a hassle. 

There’s a reason so many people have moved away from physical banks over the past few years and have begun banking online instead. Often, you’ll get a higher interest rate on your savings with an online bank than with a brick-and-mortar establishment, and the reason is simple.

It costs money to keep a physical place of business running. In addition to hiring staff, there’s rent, electricity, housekeeping, supplies, and all sorts of overhead.

Online banks don’t have those same expenses. As such, they’re often able to pass that savings on to customers — namely, by offering more competitive interest rates for savings accounts as well as CDs.

But if there’s one drawback to banking online, it’s losing out on certain benefits that only a brick-and-mortar bank can give you. With an online bank, for example, you can’t walk in and get access to a safe deposit box or notary service. And you also can’t log into your online bank account and have a wad of cash magically appear in your hands. Rather, you need an ATM for that.

In fact, a lack of ATM access is perhaps the single biggest downside to sticking to an online bank. So if you’ve ditched your physical bank, there’s one important move you may want to make.

Keep some physical cash on hand

You may be in the habit of swiping a credit card or debit card, or using a payment app, for most of your purchases. But you never know when you might encounter a situation where you need actual cash to buy something.

Some small businesses, for example, are cash-only. And if you need to hire a babysitter at the last minute to watch your kids or chip in for a baby shower gift for a neighborhood friend, you may have no choice but to hand over actual bills (assuming your sitter and neighbors don’t use an app like Venmo).

That’s why it pays to keep a decent amount of cash on hand if you bank online. If you don’t have great ATM access, you’ll spare yourself the hassle of having to make a long trip to take out money. You might also spare yourself the fees you’ll be charged for using an ATM that isn’t part of your bank’s network.

Store your cash securely

When you bank online, keeping a few hundred dollars’ worth of cash on hand can be a good idea. But you don’t necessarily want to walk around with all of that money in your wallet.

For one thing, you might be tempted to spend it. And also, if you lose your wallet, there’s a good chance you won’t get that money back.

A better bet is to keep your cash in a home safe, or another secure location, like a drawer in your office that locks. Taking larger cash withdrawals makes sense when you don’t have a convenient network of no-fee ATMs at your disposal. But if you end up wasting or losing that money, it really won’t do you any good.

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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 more than 13x 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.

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It really depends on how much debt you have. 

Most people who want to purchase a home don’t have hundreds of thousands of dollars just sitting in their savings accounts waiting to be tapped. That’s why it’s so common to take out a mortgage loan to finance a home purchase.

But getting a mortgage isn’t a given. To qualify for a home loan, you have to meet certain criteria.

For one thing, you need a decent credit score. It actually takes a minimum credit score of 620 to qualify for a conventional mortgage, but many lenders will want to see a higher number than that before agreeing to loan you a large sum of money. (And the higher your credit score, the lower a mortgage rate you might snag.)

You also need to show proof of income to qualify for a mortgage. And your income needs to be high enough to support the loan amount you’re asking for. If you earn $40,000 a year, for example, you might have trouble qualifying for a $500,000 home loan.

But there’s a third factor that mortgage lenders consider when assessing applicants — existing debt. Specifically, lenders look at a measure known as your debt-to-income ratio. It shows how much debt you have relative to your income.

Too high a debt-to-income ratio could hurt your chances of getting a mortgage. And so if you have a large personal loan outstanding, you may want to pay down your balance before applying to borrow money for a home purchase.

Don’t let a personal loan get in your way of buying a home

A modest personal loan balance relative to your income may not stop you from qualifying for a mortgage. But if you owe many thousands of dollars on a personal loan, and that sum translates into large monthly payments, then it could be a barrier to mortgage approval.

Mortgage lenders, by nature, take on a lot of risk. That’s because they’re lending out large sums of money over a lengthy period of time.

Let’s say you sign a 30-year mortgage. A lot can change in three decades, yet your lender is giving you that much time to pay off your home.

In exchange, your lender wants reassurance that you’re able to keep up with your loan payments, at least initially. And if you’re already on the hook for an expensive monthly personal loan payment, it’s easy to see why a mortgage lender might worry about tacking on to that debt.

Shed your debt before getting a mortgage

If you’re worried that an outstanding personal loan balance will make it difficult for you to get a mortgage, then you may want to hold off on homeownership, save up some more money, and use it to pay that loan off. Doing so might make a lender more comfortable with the idea of giving you a mortgage.

Plus, when you’re taking on a new monthly debt payment, shedding an existing one could make your bills easier to manage. So that’s yet another reason to try to pay a personal loan off before venturing into homeownership.

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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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It’s a really bad time to end up in debt. 

It’s common for credit card companies to lure in consumers by offering sign-up bonuses. And some of those bonuses could be very enticing.

You might, for example, come across an offer that gives you $300 cash back for spending $2,500 within three months of opening a new credit card. That’s a nice pile of cash.

But while it’s easy to see why you might be tempted to chase a credit card sign-up bonus, 2023 may not be the best year to do it. Here’s why.

You don’t want to get stuck with costly debt

It’s one thing to rack up enough purchases on a credit card to snag a sign-up bonus and then pay off your balance in full right away so you don’t wind up accruing interest on your charges. But many consumers don’t end up doing that. Rather, they rack up balances they’re forced to carry forward. And that’s where you might run into trouble in the coming weeks and months.

Right now, borrowing rates are up across the board on the heels of interest rate hikes implemented by the Federal Reserve. But the Fed also isn’t done raising rates. And in 2023, the cost of borrowing could soar even more — not just for credit cards, but for other products, too, like auto and personal loans.

That’s why now’s a bad time to land in credit card debt. Credit cards are notorious for charging high amounts of interest. But these days, you’re apt to pay even more due to the aforementioned rate hikes.

Now this isn’t to say that if you decide to chase a sign-up bonus, you’re guaranteed to end up in debt. But that’s the situation many consumers wind up in, even if they think that won’t be the case. And that’s an expense and source of stress you really don’t need.

Be mindful of inflation, too

Inflation levels are still high these days, which is the whole reason why the Fed is intent on moving forward with interest rate hikes. But that also means that the cost of goods is still higher than usual.

If money is tight due to inflation, then you probably don’t need the pressure to spend extra money on a new credit card to snag a sign-up bonus. And also, if money is limited due to inflation, you might have a harder time than usual paying a newly acquired balance off.

All told, there’s definitely nothing wrong with pursuing a sign-up bonus if you’re confident you can meet the spending requirement without stretching yourself too thin financially. If you need to spend $2,500 within three months to score a sign-up bonus and you routinely spend $850 a month on essentials without landing in debt or struggling in the slightest, then you’re not taking on such a big risk.

But be careful if $2,500 within three months is a stretch for you. A nice payday from a credit card company isn’t worth a pile of debt and a load of financial stress.

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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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You may have other options. 

Sometimes, even people with good or great health insurance end up on the hook for thousands of dollars in medical bills. After all, a single illness or accident could result in a world of unavoidable healthcare expenses.

If that’s happened to you, and you don’t have the money in your savings account to cover those costs, you may be getting worried. And you may be ready to take out a personal loan to pay those bills off.

A personal loan is an unsecured loan that lets you borrow money for any purpose. You can use a personal loan to renovate your home, start a business, or fix an ailing car.

One benefit of borrowing money with a personal loan is that you’ll generally pay less interest than you will with, say, a credit card. This especially holds true if you’re a borrower with great credit.

But is a personal loan your best bet for tackling medical bills? Before you take one out, it pays to make these three moves.

1. Make sure you owe as much as you think you do

It’s not unheard of for medical providers to make mistakes in the course of their billing. You may be sitting on larger bills than you’re responsible for due to a billing code error. Before you take out a loan to cover those bills, make sure they’re actually correct. And also, if you’re looking at bills because your health insurer has denied a claim, it could be worth appealing that denial before borrowing money.

2. See if you can negotiate a payment plan with your providers

Falling behind on medical bills could cause eventual credit score damage. And you don’t want to let that happen.

But many medical offices are sympathetic to patients who can’t pay a massive bill in one fell swoop. So it’s worth putting in a call to your providers and seeing if they’re willing to put you on a payment plan. You may find that’s an easier, more affordable route to take.

3. See if you have leftover funds in an FSA or HSA

Maybe you didn’t use up your FSA funds in 2022, and your plan allows you to carry a portion of your balance into the next calendar year (some plans do). Or maybe you have money in a health savings account you forgot about. HSA funds actually never expire, so there’s no deadline for using up your money.

Granted, in either scenario, you may not have enough money to cover your medical debt in full. After all, if you owe $5,000 but have that much cash in your HSA, that’s a sum you’re unlikely to forget about. But if you have, say, $300 in your HSA, that’s $300 less you’ll have to borrow if you end up taking out a loan.

Even if you do your best to budget for medical costs, you may find that large bills throw your finances for a loop. In that scenario, a personal loan could end up being an affordable borrowing option. But it still pays to make these key moves before submitting your application.

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

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