Money Management

You might be surprised at how closing a credit card can impact you. Take a look at what you need to know. [[{“value”:”

If you have a credit card you’re no longer using, it might seem logical to close the account. Maybe the card doesn’t have a competitive rewards program or valuable travel perks you can use. But before you close it, it’s important to know how closing a credit card account can impact you.

With that in mind, here’s a rundown of the potential impacts of closing a credit card and when you might want to do it anyway.

Are you in the market for a new credit card to replace your old, unused cards? Click here for our up-to-date list of the top credit card offers right now.

How canceling your unused credit card could hurt you

If we take a closer look at how the FICO credit scoring formula works, it’s easy to see why closing an unused credit card can have a negative impact.

First, and most significantly, 30% of your score comes from the amounts you owe. This doesn’t necessarily mean the dollar amounts of your debts, but the amounts you owe relative to your ability to borrow. For credit cards, this concept is known as “credit utilization.”

If you have $2,000 in credit card balances and $10,000 in total credit limits, you’re using 20% of your available credit. If you were to close an unused credit card that has a $2,000 limit, your total available credit drops to $8,000, and your balance now represents 25% of your available credit. Higher credit utilization has a generally negative impact on your score.

In addition, 15% of your score comes from the “length of credit history” category, which considers several time-related factors. In addition to the age of your oldest account, this category also considers the average age of all of your credit accounts. If the card you close has been on your credit report for a long time, it could be a positive influence on this category, and closing a long-established credit account can cause your score to dip temporarily.

Reasons you might want to cancel anyway

Before we go any further, in most cases, the impact to your score from canceling an unused credit card is likely to be modest and short-lived. In other words, if you have a strong credit score now, closing an unused credit card is unlikely to drop your score to an extent that it affects your ability to get another credit card or qualify for competitive interest rates.

This is especially true if you have several other credit card accounts in good standing and with reasonably low balances. So, the impact on your score isn’t the only factor to keep in mind.

And while it’s generally a smart idea to keep an unused credit account open, there are some cases where it can certainly make sense to close it and absorb the temporary ding to your credit score.

Your unused credit card has an annual fee and you aren’t getting value from it. As an example, I have a travel credit card I don’t use much that costs about $200 per year. However, the card offers free checked bags for my preferred airline for me and anyone traveling with me. I estimate this perk saves me and my family at least $500 per year in bag fees, so I keep the card.You have too many credit cards to effectively keep track of. There’s no sense in feeling overwhelmed by credit cards for the sake of avoiding a small dip in your credit score.

The bottom line

If you have an unused credit card, it’s important to know the potential impact from closing the account as well as the reasons you might want to do it anyway. Like most personal finance decisions, there’s no one-size-fits-all best course of action, so be sure to weigh the pros and cons before deciding what’s best for you.

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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.Matt Frankel 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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There’s no perfect rule for how much you should have invested by 50. But find out how to tell if you’re on the right path. [[{“value”:”

How much should you have saved in investment accounts by the time you’re 50? Like most personal finance questions, there isn’t a one-size-fits-all answer. Different 50-year-olds have different income levels, family situations, and future lifestyle expectations. Plus, other variables figure into the calculation.

However, we can use some common guidelines to help you determine where you stand and if you need to start saving more aggressively.

Are you looking for a new brokerage account? Check out our up-to-date list of the best brokers in the industry.

The short answer

According to Fidelity, it’s a good idea to have at least six times your annual income saved for retirement. So, if you earn $70,000 per year, you should have $420,000 in your investment accounts (of course, even more is better).

To be clear, this includes:

Employer-sponsored retirement accounts like 401(k)s and 403(b)s.Traditional or Roth IRAs and other tax-advantaged retirement accounts you contribute to on your own.Non-retirement (taxable) brokerage accounts that contain long-term investments. In other words, if you use an account to day trade, don’t include it, but a diversified stock portfolio can count toward this.You can also include any savings accounts, certificates of deposit (CDs), or money market accounts if the funds in them are specifically intended to save until you retire.

If you’re curious, Fidelity’s guidelines state that you should aim to grow this further to eight times your annual income by age 60 and 10 times your annual income when you’re actually retirement-ready.

Every 50-year-old is different

It’s also important to note that general guidelines are exactly that — general. They don’t take your unique circumstances into account, and therefore your optimal savings level at 50 could be significantly higher or lower.

This is especially true of your retirement savings. The most important thing isn’t the dollar amount you’ve saved or invested, but the amount of income you can produce after you retire.

Here’s why this is important when it comes to savings targets. Let’s say you determine you’ll need $5,000 per month after retirement in order to live comfortably, and you expect to get $1,800 per month from Social Security. If you also expect a $2,500 monthly pension from your job once you retire, your savings need is significantly less than someone who doesn’t have a pension.

Also, the “six times your income at 50” figure assumes you’ll retire at 67. So it might not be the best guideline if you plan to retire significantly earlier or later.

Having said all of that, the goal of having five to six times your annual income saved for retirement by the age of 50 is a solid estimate that can help you determine whether you’re on track for a comfortable retirement or if you need to start saving more aggressively.

What if you’re not where you need to be?

If you’re a little short of where your long-term savings should be, the simple answer is that you should start saving as aggressively as possible to catch up.

Be sure to take advantage of the tax benefits of saving in retirement accounts. For 2024, you can save as much as $23,000 in a 401(k), plus an additional $7,500 catch-up contribution if you’re 50 or older. The contribution limit for a traditional IRA or Roth IRA for someone 50 or older is $8,000, and in many cases (depending on your income), you can contribute to an IRA in addition to a 401(k).

It could also be a smart idea to seek professional guidance from a Certified Financial Planner® or another financial professional if you’re worried about the best way to get caught up.

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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.Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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This writer once had perfect credit. Here’s how she pulled it off early in life. [[{“value”:”

In my 20s, I had a perfect credit score. And the only reason I know I had one is that when I applied for my first apartment, the property manager shared that fact after running a credit check on me.

But it wasn’t particularly surprising to me that I had perfect credit. I took steps to manage my expenses well and keep my debt manageable. Here are three things I did back then that helped me build a perfect 850 credit score.

1. I paid every bill on time

Several different factors go into calculating your credit score. But the one that carries more weight than any other is your payment history.

Paying bills on time can help your credit score improve, while a single late payment could drag your score down tremendously. The one thing I always made sure to do was pay my bills on time.

Back then, the only monthly bills I had that were recorded for credit scoring purposes were a credit card (just one) I charged expenses like groceries on, and a monthly payment for the loans I took out during college. But I also made a point to stick to a tight budget so I’d be able to pay those bills on time.

Now, since my 20s were, well, a long time ago, back then, people didn’t really use budgeting apps. Or at least I certainly didn’t. I relied on a boring Excel spreadsheet to track my expenses, but it got the job done.

If you want to make sure you’re paying all of your bills on time, play around with different budgeting apps and find one that works well for you. It could be your ticket to not just a higher credit score, but meeting your savings goals.

2. I paid off every credit card bill in full

In my 20s, I had a rule I’ve upheld to this day: Never pay interest to a credit card company. And sticking to that rule not only saved me money, but allowed me to have a perfect credit score.

Another factor that goes into calculating your credit score is your credit utilization, or the amount of revolving credit you’re using at once. The lower it is, the more your score improves. Since I always paid my balances in full, and I kept those balances low to begin with, I was able to maintain a solid score.

3. I stayed on my parents’ credit card but didn’t use it

OK, so here’s where I’ll own up to a bit of privilege I had in my 20s. At that time, I completely supported myself, and not once did my parents pay any of my bills, whether it was rent or a medical expense.

But I’ll be honest and say that I was an authorized user on my parents’ credit card for emergency purposes only. I never charged a dime on that credit card. And had I done so, I would’ve paid my parents back.

But the simple fact that I was listed as an authorized user on their credit card helped me achieve perfect credit. That’s because length of credit history is another big factor that goes into calculating a credit score.

As a 20-something, I only had a credit card of my own for a few years. But because my parents had me on that long-standing account, it helped my credit score. I realize this option isn’t available to everyone. But if you’re able to take advantage of it, it could give your credit score a lift.

I haven’t had perfect credit in a long time

The things I did in my 20s to achieve perfect credit are things I continue to do today. I pay my bills on time, I pay off my credit cards each month, and I maintain long-standing credit card accounts of my own rather than cancel cards I don’t use often. Instead, I put a small recurring charge on those cards to keep the accounts active and maintain my credit history.

The reason I don’t have perfect credit is because I’ll occasionally apply for a new credit card. And each time you do that, your credit score takes a tiny hit.

Also, while I pay off my credit cards in full, I have more expenses now than I did in my 20s. So sometimes, my balances will be high temporarily, which drives my utilization up on a short-term basis.

Because of this, my credit score tends to fluctuate in the 810 to 840 range, but it hasn’t gotten back to 850 in quite some time. And you know what? That’s OK.

You don’t need perfect credit

Only 1.54% of U.S. consumers have a perfect credit score, according to Experian. And the reason is that perfect credit is really hard to achieve. But if your credit score is strong, it doesn’t matter if it’s not perfect.

Once you reach the 800 mark, you’re likely to get approved for any loan you apply for provided you meet the earnings criteria (you’re unlikely to get a $600,000 mortgage, for example, if you only earn $30,000 a year).

And once your credit score is around 800 or higher, you’re likely to qualify for a top rate on any loan or credit card. Check out this list of credit cards for applicants with top credit scores.

If your credit score is stuck in the 600 range, or the lower 700s, I would absolutely encourage you to take the steps I took in my 20s to bring your score up. But once you get to 800, don’t sweat it. At that point, you’re in a great place credit-wise. And there’s no need to stress yourself out about hitting 850 when it’s pretty darn tough to achieve.

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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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Hotels are one of the bigger travel expenses — especially if you’re overpaying for them. Check out a few common mistakes that make hotel stays cost more. [[{“value”:”

It’s easy to get sticker shock when booking a hotel. In major U.S. cities, mid-range hotels cost about $200 to $300 a night, according to research by Viqal. For just a long weekend trip, you could spend well over $1,000, especially after paying for meals, parking, and all those other extras.

Fortunately, there are lots of ways to save on hotel bookings. But if you don’t know about them, you might end up overpaying. Read on to find out how travelers end up paying too much for their hotel stays.

1. Not using travel rewards cards

To get the most affordable hotel stays, I highly recommend picking up a travel rewards card. I’ve used them for stays that would have cost $5,000 in Manhattan and $2,500 in the south of France. Because I booked using travel points, I didn’t need to spend a dime.

If there’s a hotel chain you like, you could get a hotel credit card with it. These credit cards earn points in the hotel’s loyalty program, and you can redeem points for free stays. They may also offer other special perks with the hotel, such as:

A free night certificate every yearElite status in the hotel’s loyalty program (which may include free breakfast)Spending credits at the hotel

Another option is to get a travel card that isn’t tied to a specific hotel. Many travel cards have transferable points that you can use at multiple hotel chains. These cards are a good way to go if you’d like more flexibility about which hotel you book.

Ready to get a hotel card and start saving on your stays? Click here to see our favorite hotel credit cards and apply for one today.

2. Only traveling during the peak season

Hotel stays are much more expensive during peak season. Viqal reports that peak season prices can be 20% to 50% above standard rates. On the other hand, if you travel during the offseason or shoulder season, you could save 10% to 40%.

I realize that the peak season is popular for a reason. Most people want to visit the beach in the summer, not the winter. But many destinations can be just as exciting — and not nearly as busy — outside of the peak travel times.

The shoulder season, in particular, is often a nice compromise. It’s still a good time to visit tourist destinations, it isn’t as crowded, and you can get a much better deal on a hotel.

3. Buying extras you don’t need

Hotels love to upsell guests. When you book a room, they’ll show you the suite you could book instead for just $50 more (per night). Other common examples include special in-room services, food packages, and transportation.

Adding extras to your stay isn’t necessarily a bad idea. It can be convenient to reserve what you need directly through your hotel. Just make sure it’s worth the cost before you commit.

For example, my wife and I stayed in a Hyatt hotel last year, and the receptionist gave us the option of adding daily breakfast for two. We decided not to, and instead, we just ordered room service a la carte each morning. It was much less expensive this way, because the daily breakfast was quite large and priced accordingly. By only ordering the food we wanted, we spent less overall.

Getting a good deal on a hotel stay isn’t too difficult. Try traveling outside of the peak season and avoiding add-ons you don’t need, and consider adding a travel card to your wallet, if you haven’t already. And if you need help finding one, check out our list of the best travel rewards cards here.

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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. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Hyatt Hotels. The Motley Fool has a disclosure policy.

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As the Fed drops rates, are CDs still a solid investment? See what you need to know about buying CDs in today’s market. [[{“value”:”

In September, the Federal Reserve lowered the benchmark interest rate by 0.5%, with more cuts likely to follow. This is good news for borrowers, who will pay less to borrow money. But for savers, it signals the end of the high interest rates we’ve enjoyed. So, can you still make money off certificates of deposit (CDs)?

The short answer is yes, you can still make money with CDs. But whether you should depends on your overall financial goals.

Yes, you can still make money in CDs

CDs remain a safe place to store money, especially for short- to medium-term goals. One of the biggest perks of CDs is they’re FDIC-insured, meaning your deposits are protected up to $250,000 per bank, per depositor, per ownership category, even if the bank fails.

The downside? Your money is locked in for a set term, and withdrawing early usually results in penalties.

Unlike stocks, CDs provide a fixed rate of interest, so you’ll know exactly how much you’ll earn. Currently, top CDs still offer an interest rate of around 4%. Let’s look at what you can make in a CD, assuming a CD rate of 3.8% and a $10,000 investment.

CDs can be especially useful if you’re saving for a specific goal with a clear timeline, like buying a house in a few years. You can protect your money and earn some interest without exposing your savings to market fluctuations. CDs also may appeal to retirees who value stability and guaranteed returns.

However, if you’re too heavily invested in CDs, you could be missing out on opportunities for higher growth elsewhere.

CDs aren’t always the best choice

With CD rates likely to drop further, you may feel tempted to lock in today’s rates. But don’t let the fear of missing out cloud your judgment—there are situations where CDs aren’t the best option.

For instance, you shouldn’t tie up your emergency savings in a CD. Emergency funds need to be easily accessible, and locking your money in a CD could limit your access when you need it most. A high-yield savings account (HYSA) is usually a better choice for your emergency savings.

Click here for the best high-yield savings accounts and enjoy APYs around 4%.

Here’s how that same CD rate compares with putting that money in the highest-interest-rate HYSA I could find:

You could miss out on nearly $800 in growth over five years. (Which, of course, assumes that rates stay the same, and they might not!)

CDs also aren’t ideal for long-term retirement savings. If your retirement is more than a few years away, investing in the stock market is generally a better bet. Stocks tend to offer higher returns over time — around 10% annually on average. While there’s more risk involved, the potential for growth over the long term may outweigh the stability of CDs.

You don’t need to be a financial expert to start investing either. Low-cost mutual funds or investment apps can simplify the process and help you build a diversified portfolio.

Want to make investing easier? Check out the top investment apps.

Should you buy a CD today?

Don’t let the recent 0.5% Fed rate cut drive your CD decisions. While it’s true that CD rates will decline, they won’t drop overnight, and your personal financial goals should guide your choices. CDs are still a good option for some savers, but it’s essential to think about what you need your money for, when you’ll need it, and how much risk you’re comfortable taking.

In short, CDs are still a viable investment option. But with rates on the decline, you’ll want to weigh your options carefully.

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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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Are you trying to decide whether you should stick with Costco? Here are a few reasons it may be smart to get rid of your membership. [[{“value”:”

A Costco membership can be a solid investment if you get value from the perks provided. But it’s not the right fit for every shopper. Some members may want to consider whether it’s time to wave goodbye to Costco.

Paying for a membership you no longer value can be a waste of money. Are you unsure whether it’s time to cancel your Costco membership? Here are a few reasons you may consider canceling your Costco membership this fall.

1. You’re wasting money on food that goes to waste

While not every item sold at Costco is packaged in bulk, many essentials are. Some bulk items, like food, can spoil quickly. If you live alone or have a smaller family and continue throwing out food waste, it may be time to cancel your membership.

A Costco membership isn’t the only way to find good deals. If you love to have fresh fruit and vegetables on hand, but don’t want to drain your checking account every time you buy produce, one option to explore is shopping at Aldi.

I looked at the weekly sales flier for Aldi and saw that zucchini is on sale for $1.19 per pound, and a 10-ounce container of grape tomatoes costs $2.29. Those are fantastic deals that may appeal to shoppers living in a smaller household. Even better, you won’t need a Costco card.

2. You’ve moved and no longer live near a club

If you’ve moved and no longer have a Costco club near your home, you’ll need to decide whether it’s still a good choice to be a Costco member. You can shop great deals at Costco.com, but you may want to explore alternative retailers if you prefer to shop in-store.

One option is to join Sam’s Club if there is a location nearby. I have some good news — the membership fee is cheaper. A standard Club membership costs $50 annually, while a Plus membership is $110 per year. The biggest benefit to becoming a Plus member is that you can earn 2% back in rewards on eligible purchases.

But if you want to avoid an annual membership fee, there are other opportunities to save money. Before you head to local retailers, review the weekly sales flier. Planning your shopping list based on what’s on sale can be a win for your wallet. Buying more affordable store-brand essentials can also make a difference.

Here’s another tip: Maximize your savings by earning rewards. By using a rewards credit card at checkout, it’s easy to get rewarded when you shop. Want to maximize your savings? Click here to view our top cash back credit cards with big rewards.

3. You always spend more than you plan

Even if you have a carefully drafted shopping list, it can be tempting to overspend at Costco. Many items are sold in bulk, and the warehouse club frequently introduces seasonal finds and new items. For those who struggle with overspending, having a Costco membership card may be a bad idea.

The last thing you want to do is rack up credit card debt from overspending at Costco. If you want to reel in your spending, canceling your membership is a good idea. Doing this can help you learn new spending habits and have more control of your money. Need help? Explore the top budgeting apps to learn how to set spending goals and monitor your progress.

You can save money without paying a yearly membership fee

This is an excellent reminder that you don’t have to pay a yearly membership fee or buy in bulk to take advantage of discounts. Look for opportunities to save money at other retailers. You can shop great deals at retailers like Target and Aldi.

If you’re ready to take a break from Costco, don’t hesitate to cancel your membership. Costco has a membership guarantee. If you’re unsatisfied with your experience, you can cancel and get a refund.

Top credit card to use at Costco (and everywhere else!)

We love versatile credit cards that offer huge rewards everywhere, including Costco! This card is a standout among America’s favorite credit cards because it offers perhaps the easiest $200 cash bonus you could ever earn and an unlimited 2% cash rewards on purchases, even when you shop at Costco.

Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

Click here to read our full review for free and apply before the $200 welcome bonus offer ends!

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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Target. The Motley Fool has a disclosure policy.

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