Money Management

Trying to decide between a CD and a savings account? Based on the latest moves from the Fed, you shouldn’t feel pressure to open a CD. See why. [[{“value”:”

Have you been thinking about opening a CD in 2024? The best CDs are paying 5.00% APY or higher today. That’s pretty good! But the best savings accounts are paying the same or better APYs.

One of the best reasons to open a CD instead of a savings account is to lock in a high APY for a longer period of time, especially if you think interest rates might go down. CD interest rates are fixed for the length of the CD’s term. But savings account rates can go up or down with interest rate changes.

But based on the latest economic trends and statements from the Federal Reserve, you probably shouldn’t be in a big rush to invest in CDs instead of savings accounts. Let’s look at a few reasons why the urgency to open a CD might have subsided — for now.

Interest rates might stay “higher for longer”

Just a few months ago, in December 2023, the general consensus among Wall Street experts was that the Fed was going to cut interest rates in 2024. After hiking the federal funds rate rapidly in 2022-2023 to try to bring down inflation, lots of investors and financial journalists believed that the Fed was likely going to reduce interest rates in 2024.

The chance of looming interest rate cuts made millions of Americans eager to move money to CDs, so they could lock in higher yields. During 2023, according to research cited by Bloomberg, investors moved more than $600 billion of cash into “large CDs” (defined as having balances of $100,000 or more).

But in the past few months, new economic data has been disappointing to people (and investors) who were hoping for rate cuts. The economy has not slowed down enough for the Fed to feel a strong need to cut interest rates, and there are still signs of higher inflation.

As a result, much to many experts’ surprise, the Fed keeps not cutting interest rates in 2024. And the latest statements from Fed Chair Jerome Powell (and other analysis) seem to suggest that, although the Fed is probably not going to raise interest rates anytime soon, they might leave the current rates “higher for longer.”

Interest rates staying high = no rush to open a CD

If the Fed keeps its effective federal funds rate at the current level of 5.25%-5.50%, that means the best CDs, savings accounts, and money market accounts will likely keep offering APYs at 5.00% or more.

Opening a CD is a good way to earn a guaranteed rate of interest on your savings for a fixed period of time (“term”). But if interest rates stay the same for a while, or even go higher, you won’t necessarily earn more interest with the best CDs than you’d get from the best savings accounts. In fact, the best savings accounts are actually paying just slightly higher interest now (5.26% APY) than some of the best CDs (5.25% APY for a 1-year CD).

Bottom line

No one knows what the Fed will do next. The economy rarely moves in a perfectly predictable way, and inflation data can be surprising even to experts. Unless you’re a professional bond trader who makes big investment decisions based on fluctuations in interest rates, the Fed’s next move shouldn’t determine your choice of a CD vs. savings account.

But if interest rates stay the same for the foreseeable future, CDs are not going to be a better deal than the best savings accounts or money market accounts. Don’t feel as if you have to commit to a CD to earn high yields. You have other choices — money market accounts and high-yield savings accounts can give you a similarly high APY as the best CDs. And you won’t have to lock up your money or worry about early withdrawal penalties.

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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.
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Costco’s Executive membership offers lots of benefits. But read on for some surprising facts you may not have known. [[{“value”:”

When you join Costco, you have a choice. You could pay for a basic membership that will cost you $60 a year, or you could upgrade to an Executive membership for $120.

The Executive membership might cost double, but a major benefit is that it gives you 2% cash back on your Costco purchases. So if you use your membership often enough, you might easily make back the $60 upgrade fee via the cash back you accumulate.

But whether you’re new to having an Executive membership or you’ve held one for years, you may not be totally familiar with how the program works. Here are some surprising aspects of the Executive membership you should know about.

1. There’s a limit as to how much cash back you can accumulate

As mentioned, with an Executive membership at Costco, you get 2% back on your purchases. Spend $1,000 in the course of a year, and you’ll have $20 coming your way.

But there’s a limit as to how much cash back you can rack up from that membership each year, and it’s $1,000.

Before you get too bummed, though, realize that to accumulate $1,000 in cash back, you’ll need to spend $50,000 per year at Costco. Even if you shop at the store regularly, and even if you end up making a few larger purchases during the year, chances are, you’re not going to end up with a $50,000 tab. So the fact that your cash back is capped at $1,000 shouldn’t be a huge deal.

2. Not every purchase gives you 2% back

Many of the items you purchase at Costco are eligible for cash back with an Executive membership. These include groceries, electronics, and even travel packages.

But there are certain items that won’t give you cash back with an Executive membership. These include cigarettes, alcohol, postage stamps, and food court purchases (sorry, you won’t get a kickback from your $1.50 hot dog and soda combo).

You may also be surprised to learn that gas purchases at Costco aren’t eligible for cash back with an Executive membership. However, if you fill up using a credit card offering cash back at the pump, you’ve solved that problem.

3. Costco will make you whole if your Executive membership doesn’t pay off

To break even on the cost of upgrading your Costco membership, you need to spend $3,000 in a year — because 2% of $3,000 is $60, which is the price difference between the basic membership and the Executive one. So once you’ve spent just $3,001, you’re ahead financially with the Executive membership.

But if you have a year when you don’t spend $3,000 at Costco to break even on your upgrade cost, don’t sweat it. Costco will make you whole if you choose to downgrade to a basic membership by paying you the difference between the cash back you racked up and the $60 upgrade fee.

For example, let’s say you spend $2,400 at Costco with an Executive membership one year and get $48 back. If you decide that the higher-cost membership isn’t worth it to you, just go to customer service and ask to downgrade, and they should give you the $12 difference.

So all told, there’s really no risk in paying the extra $60 for an Executive membership, because you’ll get your $60 back either way.

Whether you already have an Executive membership at Costco or are thinking of signing up for one, it’s important to know how the program works. Keep these lesser-known points in mind as you make your decision.

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

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

Click here to read our expert recommendations for free!

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.Maurie Backman 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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Credit card debt is one of the most common financial issues. See how much a $10,000 credit card balance really costs you and learn how you can pay it off. [[{“value”:”

Carrying a credit card balance is a part of life for many Americans. The average American credit card debt is $6,501, according to research by The Motley Fool Ascent. And because of how interest charges add up, people who are in credit card debt often find themselves falling into a deeper and deeper hole.

If you have a $10,000 balance on your credit card, you may be wondering whether that’s cause for concern. To be completely honest, this much credit card debt is a big problem. Here’s a look at how much it could cost you and what you can do to pay it off.

Here’s how much a $10,000 credit card balance could cost you

To get an idea of how much your credit card balance costs you, multiply your balance by your card’s annual percentage rate (APR). The average credit card APR is 21.59%, according to Federal Reserve data. If this is the APR on your card, carrying a $10,000 balance would cost you $2,159 per year.

One of the dangers with credit card debt is that it seems manageable when you’re only looking at the minimum payment amount. Minimum payments are usually about 2% of your balance. So you could keep up with your credit card payments by paying about $200 per month. This sometimes gives cardholders a false sense of security.

But let’s say you pay that $200 per month on a card with a $10,000 balance and a 21.59% APR. It would take you 129 months (over 10 years!) to pay off your card and cost you $15,779 in interest. And that’s assuming you didn’t charge anything else to your card the whole time.

How to get out of credit card debt

Because of how costly credit card debt is, it’s best to pay it off as quickly as possible. Even with large amounts of debt, there are a few steps you can take to speed up the process.

Stop using your credit cards

People often stay in debt longer than necessary because they keep using their credit cards. This isn’t a good idea. You’ll be charged interest on those new purchases, and any charges you make will add to your debt.

Don’t use your credit cards while you’re in debt. Take them out of your wallet and remove them from online accounts, so you’re not even tempted to pay with them. Stick to payment methods that won’t cost you interest or add to your debt, like your debit card and cash.

Cut expenses wherever you can

Take some time to look at where you’re spending money every month. For any expenses you don’t need, see if you can cut back or cut them entirely.

Groceries are one of the most common sources of overspending. Lots of people could save an extra $100 to $200 or more just by tightening up their grocery spending. Streaming services are another place you may be able to free up some cash. You don’t need to get rid of all of them. But if you’re currently paying for three or four streaming services, trim it down to one for now.

Direct all your extra money toward your credit cards

When you’re in credit card debt, that’s where your extra money should be going. All that money you freed up by cutting back on expenses? Put it toward your credit cards. Earn any extra income from picking up more hours at work? Put it toward your credit cards.

If you’re currently saving or investing any money, redirect most of that to your credit cards. It’s fine to save and invest a little — those are good habits, so it’s good not to completely stop them. But you shouldn’t be putting a large portion of your money into either right now. You’ll get a much better return by paying down credit card debt, since that’s likely costing you 20% or more in annual interest.

Look into debt consolidation loans or balance transfer cards

Depending on your credit score, you may be able to refinance your credit card debt. In general, people with cardholders in the mid-600s or higher can normally qualify for loans or balance transfer cards. Here’s how these work:

Debt consolidation loans: You get a personal loan and use it to pay off your credit card debt. Loans normally have lower interest rates than credit cards, and you’ll have a fixed payment amount and timeframe to pay off your debt this way.Balance transfer credit cards: You open a credit card with a 0% intro APR on balance transfers. For the intro period, which can be 18 months or longer with some cards, you won’t be charged any interest on balances you transfer over.

Both of these options can help you save money on interest and pay off your debt more quickly. Just keep in mind that it’s still important to pay as much as you can toward your debt, even if you refinance it.

A $10,000 credit card balance is a significant amount of debt. But if you work hard on paying it off, you could be debt-free faster than you think. If you pay $500 per month, you’ll be out of debt in 25 months — just over two years. And if you’re able to increase your payment amounts or refinance your debt along the way, you’ll pay it off even sooner.

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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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Learn how to find better auto insurance rates as a new grad. Read on for key tips to help you save on the coverage you need. [[{“value”:”

Tossing your graduation cap may feel like crossing a finish line, but let’s be real — it’s more like stepping into a financial obstacle course. Up first? Dodging sky-high car insurance premiums. Thanks to your shiny new degree and less-than-shiny driving record, insurers might see you as a gamble. While the average Joe pays about $2,543 annually for full coverage, fresh grads like you often get slapped with higher rates. But there are still some ways to help you navigate the complexities of finding the right auto insurance policy at the best possible rate.

1. Understand what influences your premium

Several key factors impact the cost of car insurance for recent college grads:

Credit score: In many states, insurers use an insurance-based credit score to determine rates. If you have a lot of student debt or a thin credit file, you might face higher premiums. But here’s the good news: as you build your credit history, you may qualify for lower rates over time. This means that your current situation is temporary, and there’s hope for improvement in the future.Driving record: Insurers view drivers under 25 as high risk, often resulting in higher premiums. Maintaining a clean driving record free of speeding tickets, accidents, or DUI convictions can help mitigate some of these costs.Annual mileage: The more you drive, the greater your risk of being in an accident. Reducing your mileage can lower your premiums.Geographic location: Living in a big city with high traffic, limited parking, and greater crime rates typically results in higher premiums. Conversely, residing in a suburb and having garage parking can reduce costs.

2. Compare insurance rates

One of the first steps you should take is to shop around and compare insurance rates from various providers. Insurance companies use different formulas to determine premiums, so rates can vary significantly even for the same coverage. As a recent graduate, you might not have a long driving history, which can sometimes result in higher premiums. However, you can use this to your advantage by comparing offers from multiple insurers.

Start by getting quotes from at least three to five insurance companies. Online comparison tools can be particularly helpful and can save you time. When comparing rates, ensure you’re looking at similar levels of coverage. Pay attention to the details of each policy, such as the amount of liability coverage, deductibles, and any included extras like roadside assistance or accident forgiveness.

3. Look for discounts tailored to young drivers

Many insurance companies offer discounts that can significantly lower your premiums. As a recent college grad, you might be eligible for several types of discounts that you should definitely inquire about:

Good student discounts: If you maintained a solid GPA during your college years, you might still qualify for a good student discount. Insurers often see good students as lower-risk drivers and reward them with lower rates.Driver training discounts: Completing a defensive driving course or any driver education program can also lead to savings on your auto insurance. These courses not only improve your driving skills, but also demonstrate to insurers that you are serious about driving safely.Multi-policy discounts: If you rent an apartment or own a home, consider bundling your auto insurance with renters or homeowners insurance from the same company. This can lead to discounts on both policies.

4. Consider a higher deductible

Opting for a higher deductible is a well-known method to reduce your monthly car insurance premiums. Essentially, by choosing a higher deductible, you’re agreeing to pay more out of pocket before your insurance kicks in after an accident, which decreases your insurer’s risk and consequently lowers your payments. However, it’s crucial to select a deductible amount that aligns with your budget. If you can comfortably handle a $1,000 expense in an emergency, a higher deductible might make sense and save you money in the long term.

Before deciding, consider both your financial stability and driving habits. If you frequently drive in high-risk conditions or lack a substantial emergency fund, sticking with a lower deductible might be safer to avoid potential financial strain. Balancing your monthly budget with your deductible level is key to ensuring that you can afford it comfortably in case of an unexpected claim.

By taking the time to understand your insurance needs and options, you can find a policy that not only meets your budget but also provides the protection you need as you embark on your post-college journey. Remember, the cheapest policy isn’t always the best; it’s about finding the right balance between cost and coverage.

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This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

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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