Money Management

Carrying a credit card balance is very common, and the average balance increased by 10% over a year. Learn how to cope with your credit card debt here. [[{“value”:”

Owing money on credit cards is costly. According to the Federal Reserve Bank of St. Louis, the average interest rate was 21.59% as of February 2024.

Credit card debt is also pretty normal. In fact, data shows many consumers owe money to creditors and have charged a good amount on their cards. To help you understand how what you personally owe compares to your peers (and how to cope), let’s dive into the details.

This is how much the average American owes on a credit card

According to data from the credit bureau Experian, the average credit card balance among consumers in the third quarter of 2023 was $6,501. This was a 10% increase compared to the year before. Collectively, Americans carrying these balances owe close to $1.07 trillion in total.

Carrying a $6,501 balance can be pretty costly. At the 21.59% average credit card interest rate, someone making 2% minimum payments on a balance of this size would have a monthly payment of $130.02. They would take more than 30 years to become debt-free by paying only the minimum, and would pay a grand total of $36,610.75 before the card was fully paid off.

Unfortunately, not only does the typical American owe a lot of money to creditors, but they’re also using a pretty large percentage of their available credit. In fact, Experian’s data showed that the average credit utilization ratio in the U.S. is 29%. Credit utilization ratio is measured by calculating credit used vs. credit available. If it’s above 30% — which the typical American is really close to — this can hurt your credit score.

What should you do if your credit card debt or utilization ratio is too high?

If you’re like your peers and owe a lot of money on a card — especially relative to the card’s limit — you should know your situation is normal. But that doesn’t mean it’s great.

If you stick with the status quo, you could be in debt for a long time to come and could find fewer affordable borrowing options in the future if your credit score is damaged by a high utilization rate.

You don’t have to stick with the status quo, though. You can take control of your debt situation. You can do this by:

Exploring refinancing options. You could potentially get a personal loan and use it to pay off your credit cards. If the rate on your loan is lower, this would make debt payoff more affordable. A balance transfer card could also allow you to reduce your interest rate to 0% during a promotional period that usually lasts 12 to 15 months. Both of these options aren’t a substitute for debt payoff, but they make payoff easier.Develop a payment plan. Get serious about trying to repay what you owe ASAP. If you can make large extra payments toward your card balance, you’ll become debt-free way faster. All the extra you pay should go toward reducing your principal balance. Consider taking on a temporary side hustle — all the cash you earn (less taxes) can go toward your debt.Make a plan for future credit card use. You don’t want to get out of debt only to find yourself struggling with it again. Make a detailed budget to live on so you can ensure you’re able to pay off your card in full each month. And be careful to avoid charging more purchases on a card that already has a high utilization rate.

By taking these steps, you can make a meaningful change to your debt. If you have more credit card debt than your peers, it’s important to address it — or risk paying a lot of interest over time.

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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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Investing in a CD could not be any more straightforward. Take a look at a plan that can help you squeeze the most from your investment. [[{“value”:”

Taking a financial planning class is great, and reading about personal finances can only add to your knowledge, but there’s nothing like real-life experience to teach you what does and does not work for you. When it comes to certificates of deposits (CDs), it’s pretty hard to get it wrong. However, that doesn’t mean CDs are foolproof. I have personally found a way to mess it up a couple of times.

The first CD-related mistake I made involved not having an adequate emergency savings account before locking my money into a CD. The next involved opening a CD without making a plan for it. This second issue has convinced me that putting a simple plan in place can help you squeeze the most from your investment. Here’s how.

The basics

If you’re unfamiliar with how CDs work, here’s a quick breakdown:

A bank, credit union, or other financial institution offers a fixed interest rate in exchange for keeping your money in an account for a specific amount of time. The CD “matures” once that time passes.If you withdraw the money before the maturity date arrives, you may be penalized by losing the interest you would have earned.If you leave your money in the CD, you’ll receive the principal, along with your promised interest, at maturity.

CDs sound fairly straightforward, don’t they? CDs are among the few investments you can make that are FDIC-insured and offer a guaranteed interest rate. As a bonus, current CD rates are among the highest annual percentage yields (APYs) in banking. But entering a new CD with a simple plan can help you make a great banking product even better.

First things first

The best way to avoid withdrawing money from a CD before it matures is to build an emergency fund with enough money in it to cover three to six months’ worth of bills. That’s not to say you need three to six months’ worth of income, but rather, enough to cover your basic bills if you suddenly become ill or suffer a job loss.

Establish your goals

Fortunately, there’s nothing at all complicated about coming up with a plan. Once you have an emergency fund in place, make a list of your goals — both short- and long-term. Next to each goal, write down an estimate of when you would like to have the money to meet that goal. Here’s an example:

Weekend trip to the beach: Six monthsDown payment on a larger home: Three yearsNew car fund: Five yearsHelp child with college costs: Seven yearsEuropean vacation after retirement: 10 years

As mentioned, your list may look nothing like this. The point is to determine your personal goals and how long you have to save up for them.

Match your CD to your goal

Say one of your goals is to help your child pay for college, but you have seven years to save. You notice that interest rates on 1-year CDs are currently higher than the rates on CDs with longer terms. You also notice that some of the financial institutions you check don’t offer CDs with terms longer than five years (60 months), which means you’ll have to do more looking around.

For convenience, you decide to go with the highest rate you can find and lock into a 1-year CD. However, by the time the CD matures, the Federal Reserve has lowered interest rates across the board, and the bank is only paying a 2% APY on new CDs. Now you wish you could go back a year and lock into the highest rate you could find on a 7-year CD.

When interest rates were still high, you could have put the money you were saving for your child’s education into a high-yield savings account or money market account (MMA), but that wouldn’t have helped in the long run. Both of those accounts carry variable interest rates, meaning they drop when the interest rate drops.

By investing in CDs that match your savings goals, you can rest assured that you will receive a guaranteed return on your investment. Without a plan, the best you can hope for is that rates remain high.

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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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Costco memberships offer a world of value. Read on to make sure you’re making the most of yours. [[{“value”:”

Many people join Costco to save money on bulk grocery purchases and household essentials, like cleaning products and paper towels. And if you shop at Costco frequently, it’s easy enough to make back your membership fee during the year and come out ahead financially.

A basic Costco membership costs $60 a year, while an Executive membership costs $120. With an Executive membership, you get 2% cash back on your Costco purchases.

Now, the membership fee you hand over to Costco each year, whether it’s $60 or $120, is money you may be used to paying. But don’t you want to get the best bang for your buck? If these factors apply to you, perhaps you’re passing up a number of key benefits that come with a Costco membership.

1. You’re not buying gift cards at a steep discount

Costco isn’t your only option when it comes to buying gift cards. But at Costco, you can save big on various gift cards’ face value for awesome savings.

Right now, for example, you can buy a $500 Southwest Airlines gift card for only $449.99. That’s $50 in savings. And if you’re a fan of grabbing lunch at Subway, right now, you can snag $75 in gift cards for only $54.99.

These are just a couple of examples. It pays to browse your local Costco and look online to see what other discounted gift cards you can snag.

2. You’re not filling up your car when you shop

Costco’s gas is, for many people, the cheapest in town. In light of that, it pays to not only start filling up at Costco, but start timing your shopping trips based on when your tank is getting low.

One thing you should know is that Costco gas purchases aren’t eligible for 2% back on an Executive membership. But if you swipe a credit card with extra gas rewards, you can drive away with cash back in your pocket.

3. You’re not using Costco for tire replacement

Buying tires at Costco isn’t just cost-effective initially. Rather, Costco tires can save you money over time.

Costco’s tire center gives you access to numerous benefits, including free inflation checks, rotations, and flat repairs. Your tire purchase also comes with a five-year road hazard warranty.

4. You’re not using Costco for home services

If you own a home, there may come a point when you need to replace some flooring or put up new window treatments. You may also decide to replace your not-so-functional closet with a better shelving and organization system.

Costco offers all of these services and more via its home installation services. And the great thing about going through Costco is that much of the time, you’ll be rewarded in the form of a Costco Shop Card (the store’s version of a gift card). If you’re getting new floors installed through Costco, for example, and the cost is $5,000, you may be eligible for a $500 Shop Card that covers the cost of your groceries for a month.

5. You’re saying no to Kirkland products

Kirkland is Costco’s signature brand, and you’ll find it on a host of products, from cleaning supplies to baked goods. You may be inclined to pass on Kirkland offerings and stick to the brands you’re familiar with. But in doing so, you may be forgoing a lot of savings.

For example, coffee pods by Dunkin’ cost $0.58 per pod when you buy them in bulk at Costco.com. You’ll pay only $0.32 per pod for Kirkland Signature Coffee Organic Breakfast Blend.

A Costco membership might offer you a ton of value — if you use all its perks. So don’t overlook these key benefits of a Costco membership. Taking advantage of them could help you get more for your money.

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 recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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Impulse buys can be a huge budget-buster. Read on to see what this writer did to help break that habit. [[{“value”:”

There are certain things that tend to get in the way of meeting financial goals. Home repairs have been a big one in my world. Car repairs can be another.

But for many of us, all it takes is a string of unplanned purchases to derail our financial objectives. That’s why it’s important to do what you can to prevent impulse buys. And one savvy social media move on my part has helped me cut back on impulse purchases, leaving more cash for my savings account as a result.

Sometimes, it pays to be out of the loop

Years back, a well-meaning friend added me to a deal group on Facebook that would post bargains on sites like Amazon. Although I’m not on social media constantly, I check often enough because I’m a member of groups related to my kids’ schools and activities.

For a long time, in the course of my Facebook scrolling, I’d come across posts from that deal group that would inevitably drive me to make purchases I wasn’t planning on. But when I decided to audit my spending last year, I found that I’d probably racked up more than $500 in charges on my credit card in the course of jumping on those deals.

Thankfully, all of those charges were paid in full and didn’t cause me to rack up credit card interest. Also, because I’m a pretty decent saver, those extra buys didn’t hurt my long-term or even near-term finances.

Still, I didn’t like the idea of spending that much money on a series of unnecessary purchases. So I decided to break the cycle by removing myself from that deal group. Since then, my impulse online purchases have basically amounted to $0.

Remove the temptation to spend impulsively

Certain impulse purchases really can’t be helped. If you’re at the supermarket or Costco at a time when you’re hungry and you’re tempted to scoop up snacks that weren’t on your list, it’s hard to avoid that type of situation. But what you should do is try to identify a pattern in your impulse buying habits and see if you can break it.

Maybe you tend to make most of your impulse purchases while scrolling on your phone during your train ride home from work. To stop doing that, you have options. You could start by removing your credit card details from your phone. You could also bring a book, magazine, or another type of entertainment to stay busy during your commute.

You may also find that shopping with certain friends or family members tends to lead you to make extra purchases. If so, find other activities to do with those people if they’re the type to drag you into different stores and push you to buy things you could really do without.

Impulse purchases can also happen in a less obvious way. You may have plans to go to dinner when your friends decide at the last minute that you should have drinks first. If you weren’t planning to spend an extra $20 or so on top of the cost of your meal, you can decline.

It can be really hard to say no to impulse buys. But unfortunately, they have the potential to really bust your budget. That’s why it’s important to identify the situations that tend to lead to impulse purchases and remove yourself from them.

In my case, that was thankfully pretty easy, since my impulse buying was largely linked to this one source. You may need to do a little more thinking, but it’s an exercise worth engaging in if it results in less spending and more saving.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

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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