Money Management

The holiday season is right around the corner. Here’s how to get through it without hurting your credit. [[{“value”:”

The holidays are technically still a few months away, but the holiday shopping season is about ready to kick off. Retailers like Walmart have announced holiday deals beginning in early October, giving shoppers a chance to start early if they want to.

It makes sense because the high cost of holiday meal items and gifts can take a real toll on your finances. The high credit card bills you’ll face over the next few months are only part of the issue. Your credit score could also take a big hit from your increased spending, but there might be a way to avoid this.

Be careful how much you charge to your credit cards

Technically, you’re allowed to charge up to your credit limit to your card each month, but this is risky. If you can’t pay back what you borrow, you’ll rack up expensive interest charges and you may not be able to use that card again when you need it.

Using most or all of your available credit also increases your credit utilization ratio. This is the ratio between the amount of credit available to you and the amount you’re actually using. If you have a $3,000 balance on a card with a $10,000 limit, your credit utilization ratio is 30%. Generally, you don’t want it to be higher than this if you’re trying to keep your credit score high.

Lenders view higher credit utilization ratios as a sign that you’re living beyond your means. They see it as an increased risk that you won’t be able to pay back what you owe, so credit scoring models ding you accordingly. Your credit utilization ratio accounts for 30% of your credit score, making it the second-most important factor after payment history.

This is an issue people often run into during the holiday shopping season because they’re spending a lot more than usual. If your credit score takes a hit due to increased spending, it might not be a big deal, so long as you resume your normal spending patterns afterward. But if you’re unable to pay off what you owe immediately, that credit score dip might be much longer lasting. It could also cost you a lot more if you try to take out a loan in the future.

How to buy what you need without hurting your credit

There are several ways you can get what you need for the holiday season without raising your credit utilization ratio too much, including:

Spread your spending out over time: Take advantage of the early holiday shopping deals and spread your payments out so each bill isn’t too high.Pay in cash when you can: These payments won’t count against your credit limit, so they won’t hurt your score.Pay your credit card bill twice per month: The credit bureaus only see your balance at the end of each billing cycle. Paying your bill halfway through the month and again at the end makes it appear as though you spent half as much as you actually did.Keep your costs as low as possible: Be choosy about what you buy and search for coupons to reduce how much you pay for your holiday goods.Try layaway: Layaway services let you pay for goods in installments without counting toward your credit utilization ratio.

If you truly don’t think you can avoid carrying a balance, try to keep it as low as possible. You might also consider using a balance transfer card with a 0% introductory APR if you have one. This way, your balance won’t accrue interest for the first few months. It won’t help you lower your credit utilization ratio, but it will give you a better chance of paying off your debt before you get hit with extra fees.

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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.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

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Costco’s gift cards are one of its best membership perks. Read on to learn how to get 30% off when buying certain gift cards. [[{“value”:”

It’s no longer a little-known fact, but one that Costco members are everywhere taking advantage of. That’s right. I’m talking about gift cards.

Like other products at Costco, the club’s gift cards come in high denominations but super low prices. So low, in fact, it’s almost like Costco is giving away money.

If this is your first time hearing about gift cards, or you’ve seen them but didn’t know they could save you up to 30%, read on to learn why this Costco perk is its best membership benefit.

Costco gift cards have high values and low prices — but the instructions can be tedious

First off, when I say “Costco gift cards,” I don’t mean gift cards to Costco. Those would be Costco Shop Cards, and buying them directly does not automatically lead to immediate savings.

Instead, Costco gift cards are gift card bundles for other stores and brands. Many of these stores are restaurants and entertainment venues, but you can also find popular delivery services, like Instacart and Uber, as well as travel gift cards, like Southwest and Airbnb. It also sells gaming gift cards, but, in my experience, these have the lowest added value.

Let’s look at a popular gift card option: Uber. Members can purchase two $50 Uber eGift cards for $79.99. Since the value of these is $100, you get 20% off immediately by purchasing your gift cards from Costco. That can help you charge less to your credit card on your next takeout order.

Now, let’s zero in on a few things. First off, you can only buy two at once; Costco does not let you choose your denominations. So, if you wanted one $50 Uber eGift card, you would still have to buy two.

Secondly, if you buy your gift cards online, your gift card will be sent electronically to your email. You’ll then have to use the code that’s sent to you to upload the gift card into your account or an appropriate app. Some retailers will punch in the code at the registers, but not all will do this for you.

Finally, if you buy your gift cards online, it’s important to read the instructions on Costco’s listing pages, as some may have restrictions and limitations to usage.

For instance, you can purchase two units of Uber gift cards with a value of $200. However, you can only make one transaction of them every 14 days. That means if you buy one unit (value of $100) today, you can’t buy a second one tomorrow.

That sounds great. What about the 30% off?

Yes, you can save up to 30% on certain gift cards. For instance, you can get a $100 gift card to inKind restaurants for $69.99. Likewise, a $100 gift card for Synergy Restaurants is also $69.99.

To be sure, Costco occasionally adds new gift cards or puts current ones on sale. As of right now, most gift cards offer 10% to 20% off their values.

The best offering, or rather the one with the biggest value added in, is a $400 e-Card to Invisalign. If you’re a new patient to Invisalign, you can buy this gift card for $99.99. That’s right — 75% off this service just by purchasing your gift card at Costco.

Take a look at Costco’s website to see what other options are available. Even just knowing what gift cards Costco sells could help you in the future. You never know when you might find yourself at a Dave & Buster’s, thanking yourself for getting that extra $20 of gift card value to beat that high score at Galaga.

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

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

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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 positions in and recommends Costco Wholesale, Gala, and Uber Technologies. The Motley Fool has a disclosure policy.

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You don’t need CDs to have great passive income potential. Check out this other option. [[{“value”:”

With the recent announcement by the Federal Reserve Board that the federal funds rate will be dropped by 0.5%, the cost of borrowing for banks has dropped significantly. That means they won’t be offering the hot rates that have been available until recently on products like certificates of deposit (CDs).

In fact, the yield on savings vehicles started dropping in anticipation of the rate cuts, with 12-month CDs dropping from 5.21% on average in July to just 4.38% on average in September, and 60-month CDs dropping from 4.56% to 3.71% in the same timeframe.

The best rates for CDs have already set sail, but that doesn’t mean you can’t still make plenty of money with your money. There are other vehicles out there that aren’t tied to interest rates, including index funds.

What is an index fund?

An index fund is a specific type of exchange traded fund that you can buy and hold in a few ways. You can choose to buy it as part of your stock portfolio in your brokerage account and hold it just like a stock, or you can use a retirement account like an individual retirement account (IRA) or 401(k) to buy and hold your index funds.

Index funds are extremely low-risk investments because they’re designed to follow specific stock indexes, like the S&P 500 or the NASDAQ-100. These are collections of stocks for the biggest companies in the world, which makes them incredibly reliable investment vehicles.

Although there’s some risk of loss, unlike with a Treasury bond or a certificate of deposit, the risk is quite low. Like with government bonds, if the main components of the S&P or the NASDAQ lose all their value, we’ve got a much bigger economic problem than the loss of some retirement accounts.

Passive income with index funds

Index funds return passive income in two different ways, depending on how the fund is structured. Because they’re bought like stocks and function like stocks, you always have the (very good) chance of making a positive return on your investment simply by buying an index fund and holding on to it for a while.

But index funds also have a yield. This is kind of like interest, but is instead generated from maturing bonds and regular dividend payouts. It’s all earned income, just earned in a different way.

This is often smaller than what you’d get from a bank right now, but remember that the yield is only one part of the passive income from the index fund.

You do have to pay for an index fund, since it’s an actively managed investment. That means it’s constantly being adjusted to maintain its ability to track to the index it’s supposed to follow. You don’t have to do anything active yourself, but companies like Vanguard and Invesco do, and they charge a tiny bit for it.

Usually this is a fraction of a percent of your purchase price, so it’s not a ton. But it does need to be considered when you’re counting how much passive income you ultimately made.

Buying and holding your index fund is the way to big passive income, though, as stated above. But let’s look at how big it can be with a few examples. Remember, index fund returns are not guaranteed, though they are considered very safe and reliable investments.

To put it a different way, if you had bought $1,000 of VOO five years ago, you’d have made $935.10 by doing nothing, plus the yield. Meanwhile, $1,000 of QQQ would get you $1,584.40 today. And VTWO would have earned $490 on your initial $1,000 investment.

So the yield is a nice-to-have trickle of income, but when you sell your index funds, that’s where the potential deluge happens.

Certificates of deposit aren’t the only solid bets in town

CDs are high-quality investment instruments, and they have a near-zero risk of loss. But with the recent drop in the federal funds rate and more likely to come, CDs may go back to producing lackluster interest income as rates continue to shrink.

Index funds, on the other hand, follow the investment markets, and although not foolproof, they do benefit from upward pressure from inflation and a growing economy. Some are certainly more risky than others, but if you choose index funds that are well diversified, you should have no problem coming out with some major income on a long-term time horizon.

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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.Kristi Waterworth 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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Mortgage rates have fallen to their lowest level since early 2023. Should you apply to refinance? Keep reading to find out. [[{“value”:”

Mortgage interest rates have fallen to their lowest level in about a year and a half, and many people who bought homes within the past couple of years might want to start thinking about refinancing. The average 30-year mortgage rate peaked at nearly 8% in late 2023, but has fallen sharply in recent months, now sitting at about 6.15%. So, it’s fair to say that many recent home buyers could be able to save serious money.

With that in mind, here’s what you should keep in mind before deciding to refinance your mortgage, and if you might be better off waiting to see if rates plunge even further.

Two types of refinancing

Before we go any further, it’s important to realize that there are two different types of refinancing mortgages:

Rate-and-term refinance: You’re obtaining a new loan of the same amount but with a different interest rate.Cash-out refinance: You’re obtaining a new mortgage with a higher loan amount. It has a lower interest rate, but the main reason most people use cash-out refinancing is to use some of the equity in their homes.

The mathematics of refinancing

With rate-and-term refinancing, the mathematics are rather straightforward. Since refinancing comes with closing costs, such as origination fees, recording fees, and others, the question is whether the savings will more than offset the costs.

As a basic example, if it costs you $4,000 in fees to refinance and it saves you $200 per month, you’ll break even on the fees after 20 months of making payments on your new mortgage. Of course, it’s a little more complicated than this, especially if you’ve been paying on your existing mortgage for several years, but that’s the basic idea.

With a cash-out refinancing, it’s a little more complicated and depends on your personal situation. There are some obvious situations — for example, if you have a 7% rate on your current mortgage, can do a cash-out refinancing at 6%, and you plan to use the proceeds to pay off credit card debt at 25% interest, it’s an easy call.

On the other hand, some situations can be more difficult. Consider the same situation as above, but let’s say that your existing mortgage rate is 4.5%. Would it still be worth a cash-out refinancing to get rid of higher-interest debts, or would a home equity loan or HELOC be a better option?

What if rates keep falling?

I have a friend who bought a home last year and has a mortgage rate of about 7.5%. He doesn’t have any need to take equity out of the home, but a simple rate-and-term refinancing makes a lot of mathematical sense. On a roughly $400,000 home, refinancing would cause his mortgage payment to drop by $267 per month and he would more than recoup the origination fees within a year.

However, the biggest pushback he gives is, “Sure, but what if rates keep falling?”

He has a point. The Federal Reserve is widely expected to continue lowering the federal funds rate, and most experts project mortgage rates will reach the mid-5% range within a year or so. But there are two things to keep in mind.

First, there’s no guarantee that mortgage rates will actually continue to fall. Predictions are exactly that — predictions. How many experts do you think called for mortgage rates to more than double during 2022? Nobody knows for sure what will happen.

Second, there’s no rule that says you can only refinance once. I know someone who refinanced three times during 2020 and 2021 as rates plunged. If you refinance now, and a year from now rates have fallen another full percentage point, there’s no reason why you can’t do it again.

The bottom line

If you have a relatively high mortgage rate — say 6.75% or higher — it could be worth crunching some numbers to see how much money you could save by refinancing. Check out some of our top refinancing lenders, many of which will allow you to check your personalized rate offers without a hard credit check.

Of course, refinancing isn’t the right move for everyone reading this, but for many recent buyers, it could at least be worth it to start keeping an eye on mortgage rates.

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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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Unsure whether to invest in a Sam’s Club or Costco membership? Find out which valuable membership perk makes Sam’s Club a better option for some. [[{“value”:”

Warehouse clubs like Costco and Sam’s Club offer members-only pricing that can help shoppers keep more money in their checking accounts. Both warehouse club brands share many similarities, especially in the types of products and services they offer.

But they’re not entirely the same. You should compare the membership perks when deciding whether to join Sam’s Club or Costco. One noteworthy benefit that Sam’s Club offers isn’t available at Costco. Here’s why this feature may make you want to join Sam’s Club.

Save time with Scan & Go

Sam’s Club has a unique feature available to all shoppers, regardless of membership type. Every member can use Scan & Go, a self-checkout solution, built into the Sam’s Club mobile app.

Instead of waiting in the regular checkout line, which can often be lengthy, members can scan product barcodes to ring up items and checkout electronically before leaving the store.

Many Sam’s Club members use this tool because it helps them get in and out of their local club faster. You might like this electronic checkout feature if you have limited time to shop or are an introvert who doesn’t want to get stuck chit-chatting at the register.

Here’s how to use Scan & Go:

Click on “Scan & Go” in the Sam’s Club mobile appScan each item’s barcode as you shopWhen you’re done shopping, complete the payment process through the appShow your digital receipt to a staff member before leaving the club

Scan & Go offers can help you maximize savings

Scan & Go can be a time saver — but that’s not all. Sam’s Club is already known for having great prices, but members can access more deals by taking advantage of Scan & Go offers.

The retailer promotes Scan & Go offers for select products. You’ll get an additional discount when you buy an eligible discounted item and use Scan & Go to checkout and pay for your haul. Shopping deals like this can help you save more money.

These deals are highlighted in-club and listed on the Sam’s Club website and mobile app. If you love a good deal, consider browsing these offers as you make your next shopping list to maximize your savings and get the most from your Sam’s Club membership.

Choose a warehouse club retailer with perks that you value

Many people find warehouse club memberships to be a worthwhile investment. As you explore your membership options and decide on the right retailer for you, take time to explore the benefits offered.

If you’ll get value from the benefits provided with a Sam’s Club membership, it may be a good time to join. A Sam’s Club membership costs $50 to $110 per year to join.

However, the retailer offers discounted memberships for educators, seniors, healthcare workers, and more. Plus, Sam’s Club frequently promotes membership discounts to new members who join. So you may be able to get a good deal on your first year of membership.

Earn rewards every time you shop

If you like saving money, don’t miss out on the chance to earn rewards. Consider using a credit card that earns rewards when shopping for groceries and everyday goods. Many Sam’s Club shoppers use cash back cards. Check out our list of the best cash back credit cards to find out how to earn cash back rewards.

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

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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. The Motley Fool has a disclosure policy.

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Feeling regrets about not opening a CD before the Fed’s 0.50% rate cut? Don’t feel bad. Read on for a few good places to put your savings. [[{“value”:”

Before the Fed cut interest rates by 0.50% on Sept. 18, savers had a golden opportunity to open a certificate of deposit (CD). If you had opened a long-term CD (like 12 months or longer) right before the Fed rate cuts, you might have been able to lock in a 0.50% higher APY than is available now.

Think of it this way: Getting 0.50% higher yield on a $10,000 deposit in a CD for 12 months would have earned you an extra $50 of interest income.

However, CDs aren’t the best choice for every person’s cash. And the good news is, even if the Fed keeps cutting interest rates for the rest of 2024 and into 2025, you still have good account options for your savings.

Let’s look at a reason why you shouldn’t feel bad about not opening a CD before the Fed rate cuts, and learn what to do with your cash instead.

High-yield CDs have one big downside

It’s true that if you had timed the Fed’s decision-making perfectly, you could’ve earned an extra 0.50% APY on a CD. But CDs have one big downside to go with those temptingly high fixed APYs: When you open a CD, you have to lock up your money.

That’s right. CDs won’t let you take your money out until the end of the term. If you take your cash out too soon, you have to pay an early withdrawal penalty that can gobble up most (or all) of the interest you were hoping to earn.

Is losing the flexibility of how to use your cash worth an extra 0.50%? For many Americans, I would vote no. Most Americans don’t have enough cash to make a CD worthwhile. The typical American has $8,000 of cash in the bank, including checking accounts and savings accounts.

Unless you have tens of thousands or hundreds of thousands of dollars to put into a CD, unless you’re so financially secure that you are 100% sure you won’t need to access your CD cash until the term is up, in my opinion, CDs are too risky. The risk of having to pay that early withdrawal penalty is not worth the slightly higher yield.

What to do instead of opening a CD: Just keep your emergency fund and other short-term cash savings in a high-yield savings account or money market account. The best high-yield savings accounts give you similarly high APYs compared to the best CDs, and you can take your cash out anytime without penalty.

Want decent short-term yields? Buy bonds

Opening a CD can be a good move if you want to lock in a fixed APY on your savings. Even if interest rates go down while your money is in the CD, your rate of interest earnings will stay the same.

For example, if you open a 2-year CD with a 4.00% APY in September 2024, your CD will keep earning that same 4.00% APY for the next two years, even if the Fed cuts interest rates by another 1.50% during that time.

But CDs aren’t the only game in town for earning a decent yield on medium-term savings. If you’re willing to tolerate some risk and want easier access to your cash, you can invest in bonds.

What to do instead of opening a CD: Choose a low-cost, diversified bond index fund and invest in a mix of government and corporate bonds. For example, the Vanguard Total Bond Market ETF (BND) has delivered year-to-date returns of 4.83% (market price) as of Sept. 20, 2024. The Wealthfront Automated Bond Portfolio was earning 5.16% variable APY as of Sept. 10, 2024.

But keep in mind that bonds are not risk-free. Bond prices and yields can go down as well as up; unlike opening a CD, when you invest in bonds, exact returns are not guaranteed.

But if you like the idea of earning a decent yield on your savings for the next year or two or three, without the early withdrawal penalties of CDs and without the volatility and higher risks of stock investing, investing in bonds can be a good alternative to CDs.

Bottom line

It’s not too late to move your cash savings, even if you missed your chance to lock in a high-yield CD before the Fed rate cuts. If you can truly afford the risk of having to pay early withdrawal penalties, the best CDs are still paying pretty decent APYs (4.10% to 4.50% APY for a 1-year CD) and are worth looking into.

But if you want alternatives to CDs, you could consider investing in bonds — or just open a safe, reliable, liquid savings account.

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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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