Money Management

Not everyone gets the most out of their travel cards. Watch out for these travel card mistakes that could prove costly. [[{“value”:”

Lots of credit cards can save you money with the perks they offer. But if you go on trips often, travel cards offer the most value. The right one could help you save thousands on airfare, hotel stays, and other travel expenses.

Because travel cards have so much potential value, you also have more to lose if you make any mistakes with them. Here are some common mistakes that could cost you over $1,000.

1. Not spending enough for the sign-up bonus

Travel credit cards generally have the biggest sign-up bonuses. Some of the most popular cards offer 50,000 to 100,000 bonus points for new cardholders. You can often get $0.01, $0.02, or even over $0.03 per point, depending on how you use them. A 75,000-point bonus could be worth anywhere from $750 to over $2,250.

But you’ll need to meet a spending requirement to qualify for these sign-up bonuses. For example, you may need to spend $4,000 or $5,000 on purchases in the first three months. If you don’t spend enough, you miss out on the entire bonus. Keep track of your spending to make sure you meet the requirement for your travel card’s sign-up bonus.

2. Picking the wrong travel card

There are many travel cards available. Since most of them have annual fees, picking the wrong one could cost you. The most expensive have annual fees as high as $695 — a lot to pay, if you later realize you don’t really like the card.

Another consequence of picking the wrong card is that you might not be able to use your rewards. For example, you apply for an airline card on a whim, but the airline doesn’t have as many flight options as you expected. If you have a hard time using your travel rewards, your card won’t save you much money.

Finding the right travel card can be tough. With so many options, it quickly starts to feel overwhelming. If you’re not sure where to start or which card to pick, check out our list of the best travel credit cards to find the right fit for you.

3. Redeeming points for cash back instead of travel

As I mentioned earlier, travel points can be worth quite a bit. Most travel cards offer a value of at least $0.01 per point, and depending on the card, it may be possible to get much more. But to maximize value, you need to use your points for travel.

Card issuers usually let you redeem your points for cash back, as well, which may seem convenient. The problem is that you almost always get less value this way. Instead of $0.01 per point or more, you might get as little as $0.005 per point. For every 100,000 points you redeem this way, you could lose $500 in value.

4. Carrying a balance and paying interest

One of the keys to saving money with travel cards is to pay the full statement balance every month. If you do that, the card issuer won’t charge you interest on your purchases. But if you carry a balance, you’ll be charged interest, and it won’t be cheap.

The average rate on credit cards that are assessed interest is 22.76%, according to the Federal Reserve. Carrying a $5,000 balance would result in about $1,138 in yearly interest charges. Instead of saving money thanks to your card’s travel rewards, you might be lucky to break even after factoring in the interest you paid.

5. Overspending to earn more travel rewards

The dark side of credit card rewards is that they tempt you to spend more. You know you shouldn’t spend that extra $500 at the mall or to book a fancier hotel room on a trip. But then you think to yourself, “Well, I would be earning bonus points, so it isn’t that bad of an idea.”

Let’s say you convince yourself to spend an extra $2,000 during the year because of the travel rewards you’ll earn. We’ll be generous and say you earn three points per $1 on those extra purchases. That’d be 6,000 points total, which would probably be worth anywhere from $60 to $180 in travel. Even assuming you save $180 from your rewards, you’re still down $1,820 from the extra money you spent.

The good news is that these mistakes are all 100% avoidable. Now that you know about them, you can make sure you get the most out of travel rewards cards.

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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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Fed rate cuts are supposed to make borrowing money more affordable, but it may not change much for those with credit card debt. Here’s why. [[{“value”:”

The Federal Reserve initiated its first federal funds rate cut in four years on Sept. 18, 2024. It opted for a more aggressive half-percentage-point cut, and people are already feeling the effects. The federal funds rate doesn’t directly influence consumer products, but banks often use it as a benchmark when setting certificate of deposit (CD) and savings account interest rates.

The decision also affects borrowers. Those seeking loans over the next year will find this is much more affordable. People carrying a credit card balance may also notice changes, although these are a little less certain.

The Fed rate cut could affect credit card interest rates

The federal funds rate is the interest rate that banks charge one another to borrow money overnight. The Fed sets this target and adjusts it up or down as a way to manage inflation. Now that inflation has cooled, we’re seeing rate cuts. This usually leads banks to reduce annual percentage rates (APRs) on their banking and loan products, including credit cards.

But there isn’t a direct tie between your credit card’s APR and the federal funds rate. We usually see bank account rates drop at nearly the same magnitude as the federal funds rate. This makes sense: Interest rates on savings accounts and CDs represent money paid to consumers. Reducing these rates means lower expenses for the bank.

Credit card interest, however, represents money flowing to the bank from your pocket. Banks are less inclined to drop these too much. They still use the federal funds rate as a benchmark in determining their prime rate — the interest rate they charge to buyers with the best credit scores.

However, there’s also an APR margin on top of this that applies to all credit card holders and determines your final rate. For example, the prime rate might be 3% and the margin might be 10%, giving you an APR of 13%.

If a bank reduces its prime rate, this might lower your credit card APR slightly. But it may not make the difference you hope. Credit cards’ average APR margin is at an all-time high, according to the Consumer Financial Protection Bureau. It’s currently sitting at 14.3%. This has helped banks rake in billions from consumers.

Some banks might decide to give consumers a break now that the Fed is beginning what’s expected to be a long-lasting cycle of rate cuts. Or they might decide to increase their APR margins further, negating some or all of any prime rate cuts they make.

What consumers with credit card debt can do

More Fed rate cuts are expected through 2025, along with another two quarter-percentage-point cuts likely in November and December. If your credit card issuer lowers your APR, it’ll probably notify you on your monthly billing statement, so keep an eye out for this. If you’re not sure, you can also contact the card issuer directly to ask.

It doesn’t hurt to request a rate decrease even if your issuer doesn’t provide one automatically. It’s often as simple as calling the company and laying out your situation. Highlighting your strong payment history helps, if you have one. Right now, it also might not be a bad idea to bring up the rate cuts and the possibility of finding lower rates elsewhere.

If that doesn’t work, you might want to consider opening a balance transfer card. These cards have a 0% introductory APR, sometimes for more than a year. You’ll pay a one-time balance transfer fee, but then your balance won’t accrue any interest until the APR period ends. Click here to check out some of the best balance transfer card offers, as reviewed by our experts.

Personal loans are another option. This gives you a fixed monthly payment, which some people find helpful in paying off their debt. However, if you plan to go this route, it might be better to wait until 2025. More Fed rate cuts are expected, and this will lower the interest rates on personal loans further.

Consider waiting until mid-2025 before applying for a personal loan or auto loan. But feel free to start comparing some of the best personal loan lenders now so you’re ready to act fast when rates come down.

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Click here to read our full review for free and apply in just 2 minutes.

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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If you make a large deposit, you’ll likely be asked a lot more questions by your bank. Here’s what you need to know. [[{“value”:”

If you’re like most people, you use a bank account for your everyday transactions. Ideally, you’ll pick a great bank account, like these top-rated checking accounts that charge few or no fees, offer perks like overdraft protection, and make it easy to access your money with large ATM networks.

Some day, there may come a time when you decide to make a large deposit at your bank. If that happens, and your deposit totals $10,000 or more, you may be surprised to discover that this transaction is a little more complicated.

Here’s why a deposit of $10,000 or more could be different than when you make smaller deposits.

Want to maximize the interest you earn on your large deposit? Click here to see our recommended list of the best high-yield savings account picks, chosen by our experts.

Banks may want more details from you if you make a large deposit

If you go to the bank with a deposit of $10,000 or more, you may find that the bank doesn’t just accept your money and give you a receipt. Instead, you might be asked some extra questions, like to confirm your Social Security number or your current address.

The bank isn’t just being nosy if they inquire about these things. It’s collecting information it will need to send to the federal government. The Bank Secrecy Act requires financial institutions to report certain transactions totaling $10,000 or more. The goal is to prevent money laundering and tax evasion by collecting these details.

While answering these questions could be a little bit of a hassle, don’t try to avoid them by breaking up your big deposit into smaller ones. That’s called structuring, and it’s illegal even if you earned the deposited money legitimately. The bank is almost certain to realize what you’re doing and file a Suspicious Activity Report. This could trigger an investigation by the Feds.

What should you do with a $10,000 deposit?

If you don’t want to break up your big deposit to avoid extra inquiries, what should you do?

The answer is pretty simple. You should deposit the money and answer the bank’s questions. The reality is that unless you actually did launder the money or are planning to commit tax evasion, you won’t get in trouble for putting money in your account.

Banks have an obligation to keep your information secure, so there’s no real risk in providing them the information they need. They’ll take care of filing the required paperwork and you can go on with your life.

You should also make sure you’re depositing your $10,000 in an account that will provide you the most benefits since that’s a big chunk of change. If you won’t be spending the money right away, you may not want to put it in your regular bank account. Instead, consider putting the money into one of the best high-yield savings accounts or money market accounts where it will earn interest and continue to grow over time.

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Click here to read our full review for free and apply in just 2 minutes.

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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