Money Management

Buy now, pay later lets you split up purchases into multiple payments. Make sure you know about one of the biggest risks if you’re interested in this service. [[{“value”:”

If money’s tight, you may find yourself occasionally turning to buy now, pay later (BNPL) plans. They’re undoubtedly convenient. You don’t need a high credit score to use them, and they’re a widespread payment option. If you’re shopping online, there’s a good chance the merchant will have BNPL available.

While these plans make it easier to buy what you want, that’s not necessarily a good thing. And the availability of BNPL has also led to a dangerous trend: loan stacking.

What is loan stacking?

Loan stacking is when you get multiple loans within a short period. It can refer to any type of loan. But it’s most common with BNPL, because these loans are typically easy to get and not reported on your credit history. You could get loans from multiple BNPL services, without any of them knowing about each other.

For example, let’s say you use a BNPL plan to order $200 of clothes online. A week later, you’re buying a gift for a friend’s birthday, and you spend $300 through another BNPL service. And then you need to get a new $500 tablet, so you pay for that the same way.

If you had paid in full upfront for all those purchases, it would’ve cost you $1,000. BNPL plans normally require that you pay 25% upfront. So instead of $1,000, you end up loan stacking. You pay $250 upfront and take on $750 in debt.

The dangers of BNPL and loan stacking

A single BNPL plan on its own isn’t a huge risk. You’ll need to make the payments, so you’ll be tying up money that you could’ve used for your savings or to pay your bills. But as long as you can make your payments, you won’t have any issues.

The real risk is that you get into the habit of using BNPL to make purchases you can’t afford. This is a common issue. People normally don’t use BNPL just once. A report by the Federal Reserve Bank of New York found that most of the consumers who have tried BNPL have used it multiple times.

Among financially fragile consumers who have tried BNPL, 89% have used it multiple times in the past 12 months. Over one-quarter (27%) said they’ve used it 10 or more times.

BNPL provides instant gratification. You get the item you want without needing to wait until you’ve saved enough money. And each time you make a purchase with BNPL, it gets easier to justify doing it again. If you become a frequent user, you’ll by tying up more and more money paying off purchases. If you take on too many BNPL loans, you could even reach the point where you have trouble paying your bills.

You’re better off avoiding BNPL

Instead of making a purchase with BNPL and paying it off over time, try doing the opposite. Set aside money in a savings account every month for the item you want. Once you have enough, then buy it. It may not be as exciting as getting what you want right away, but it’s a good financial habit. If you have trouble finding money to save, consider using a budgeting app to find places where you can tighten up your spending.

Over time, your financial habits make a huge difference in how much you’re able to save and how well you do with money. It’s important to develop good habits and try to avoid bad ones. Using BNPL every now and then might not seem like a big deal, but it can become one of those bad habits that makes it harder to reach your long-term goals.

Alert: our top-rated cash back card 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 lengthy 0% intro APR period, 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.

“}]] Read More 

Refinancing a mortgage could save money — but only under the right circumstances. Read on to learn more. [[{“value”:”

The interest rate you pay when you first sign your mortgage may not be the interest rate you pay for life — even with a fixed loan. That’s because you may decide to refinance your mortgage at some point in time.

When you refinance, you swap your existing mortgage for a new one with different terms. It’s not the same as mortgage modification, where you change the terms of an existing mortgage.

There are plenty of situations where refinancing a mortgage makes sense. But in these three scenarios, it generally doesn’t pay.

1. When interest rates are higher

Often, the purpose of refinancing is to lower your monthly mortgage payments. As such, it makes little to no sense to refinance at a time when mortgage rates are elevated, which is the case today.

The average 30-year mortgage rate as of this writing is 6.82%, per Freddie Mac. So if you’re sitting on a 5% mortgage, swapping it for a loan with a higher interest rate doesn’t benefit you unless you’re trying to take cash out of your home via a cash-out refinance. In that case, a refinance could make sense. But unless you urgently need money, it will likely pay to wait until rates come down.

2. When your credit score has taken a beating

It may be that the interest rate you have on your mortgage is higher than the rates that are available today. If you signed your mortgage at a rate of 7.80%, for example, then refinancing to 6.82% might work out in your favor.

However, if your credit score has recently taken a hit, that’s a move you should reconsider. The higher your credit score, the more favorable an interest rate you’re likely to qualify for in a refinance.

But let’s say your score just went from a 780, which is excellent, to a 640 because you fell delinquent on some bills. With a credit score of 640, you may not qualify for a rate of 6.82% depending on what rates look like in your area and the requirements lenders have in place. And if you get stuck with a rate of 7.65%, then it probably won’t pay to refinance for the minimal savings involved.

3. When you don’t plan to stay in your home for very long

Maybe you stand to lower your monthly mortgage payments by refinancing today based on current rates and your fantastic credit score. But if you’re planning to move in short order, you may want to think twice about refinancing.

When you refinance, you pay closing costs that often amount to 2% to 6% of your loan. So it’s important to run the numbers and make sure you’ll be in your home long enough to recover those fees and benefit all in.

Let’s say you’re charged $4,000 to put a new home loan in place, but that saves you $200 a month on mortgage payments. You’re looking at a 20-month breakeven period in that case. But if you think you might move in a year and a half, it won’t pay to refinance.

Refinancing is an option that homeowners with mortgages can and should keep on the back burner. But it’s important to know when it makes sense to refinance and when it makes sense to wait. If you’re having a hard time affording your mortgage but it’s not a good time to refinance, talk to your lender about loan modification. That could do the trick of lowering your monthly payments so you’re able to stay in your home.

Alert: our top-rated cash back card 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 lengthy 0% intro APR period, 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.

“}]] Read More 

It’s really not okay to put your financial well-being ahead of helping your grown kids. Read on to learn more. [[{“value”:”

When you’ve worked hard all of your life, you deserve to reach a point where you feel secure with your personal finances. But providing too much financial support to grown children could make it so you’re unable to get to that place.

Data from Savings.com reveals that 58% of parents agree they’ve sacrificed their own financial security for the sake of their adult children. And here are three signs that you’re at risk of doing the same.

1. You’re giving your adult children money instead of saving for retirement

Maybe you earn a higher salary. You earn enough money to not only cover your bills, but max out your IRA or 401(k) plan contributions and still have a good chunk of cash left over.

If that’s the boat you’re in, then sure, why not help your grown kids out with bills? But if you’re giving your grown kids money instead of making retirement plan contributions, or bigger ones, that may be a problem.

The reality is that if your grown kids have taken on expenses they can’t afford, the solution should be for them to scale back and get on a budget — not for you to compromise your retirement. That’s not fair to you.

Have an honest conversation if you’re providing financial support and are shorting your retirement savings because of it. It may be that your kids would be horrified to hear that you’re doing this and would encourage you to put your own needs first.

2. You’re pulling money out of your retirement savings to give to your grown kids

You may be of an age where you can take withdrawals from your retirement accounts penalty free (that age starts at 59 1/2). But any dollar you remove from your IRA or 401(k) early is a dollar you won’t have to spend later in life.

Plus, if you’re still planning to work for a few more years, you could also miss out on some investment growth between now and retirement, albeit a modest amount. If your nest egg generates a relatively conservative 6% return because you’ve shifted to safer investments, and you remove $5,000 six years ahead of retirement, you’ll actually end up missing out on $7,000. And again, while that’s not an earth-shattering amount of lost gains, it’s $2,000 — a sum that could pay for a home or car repair during your retirement.

Of course, if a grown child of yours is really in a jam and you take a one-time IRA withdrawal to help out, that may not be so terrible if, say, your balance falls from $950,000 to $947,000. That’s still a decent amount of money you’ve got there, and you may still have time to add to it. But if you find that you’re frequently tapping your retirement savings to help your kids, you should know that you may be risking a shortfall.

3. You’re compromising your earnings potential to help your grown kids

Maybe you’ve been cutting your hours at work so you can help your kids with child care — as in, be the person who gets the grandkids off of the school bus so their parents can work full-time. But if you’re in your peak earning years, you probably shouldn’t be compromising your job to do that.

Of course, if your job is flexible and you’re able to help, great. But otherwise, before you risk compromising your earnings to provide support in the form of child care, have your children do some research. It may be that through their town’s social media page or other connections, they can find a local high school or college student who charges a reasonable hourly rate to serve as an after-school babysitter. And that way, everyone can continue to work full-time and maintain their income.

It’s definitely a nice thing to want to help your grown kids as much as possible. But if these signs apply to you, it means you may be sacrificing your own financial security. And that’s a dangerous thing to do.

Alert: our top-rated cash back card 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 lengthy 0% intro APR period, 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.

“}]] Read More 

Using travel rewards at the last minute could cost you. Learn how to plan ahead with your rewards and why this is so important. [[{“value”:”

The big selling point of travel credit cards is being able to save on your trips. You earn points or miles on your purchases and can then use them to cover your travel expenses. For example, instead of paying $500 to reserve a hotel, you may be able to redeem 50,000 points and save the cash for the rest of your trip — or your bank account.

Now, many cardholders just use their travel rewards whenever they can. While this works, it’s not always the best idea. Because with travel cards, it pays to be a little strategic, for a few reasons.

You could get more value from your travel rewards

With many of the most popular travel cards, the value of your points or miles depends on how you use them. Travel rewards are generally worth more if you use them for more expensive bookings. This is the case with:

Airline credit cards that earn miles you can redeem for airfareHotel credit cards that earn points you can redeem for hotel staysCredit cards with transferable rewards that you can transfer to airlines and hotels

For example, let’s say you have a United credit card — or a card with transferable points you can send to United. You’re booking a three-hour domestic flight next month, and you want to take a trip to Europe later in the year.

The domestic flight may cost about $150 or 15,000 miles each way. So if you book an award ticket, you’ll get $0.01 per mile. The international flight could cost $1,200 or 40,000 miles. If you book an award ticket for that, you’ll get $0.03 per mile. As you can see, you save a lot more money with your miles if you use them for the international flight.

If you have any big trips coming up, consider saving your travel rewards for it. That’s what I’ve been doing for years with my travel cards. I pay for cheaper travel expenses in cash, even if I have enough points to cover them. I reserve my points for things like business-class airfare and luxury hotel stays.

You’re more likely to find deals if you book in advance

Airlines and hotels have limited amounts of award availability — seats and rooms you can book using rewards through their loyalty programs. With airlines, in particular, seats you can book with miles often go fast. Many of them also use dynamic pricing, where prices get higher as demand increases.

There are a few ways this can affect you. If you wait too long to book with travel rewards, there might not be any award availability left. In that case, you’ll need to pay in cash or change your travel plans.

Another possibility is that you find last-minute availability, but prices are extremely high. For example, I’ve seen ticket prices go from 30,000 to 90,000 miles in a matter of days. And when it’s already the last minute, you don’t have the luxury of waiting much longer to see if a deal pops up.

It’s a good idea to start shopping for flights around three to six months in advance. For domestic flights, you can cut it a little closer. The “Prime Booking Window” with the best cash prices ranges from 21 to 74 days in advance, according to a CheapAir.com survey. Cash and points prices don’t always follow the same patterns, but this still gives us an idea of when the best deals are available.

Maximizing your travel card rewards

Travel cards have a learning curve to them, but it’s not that complicated to get the most out of your rewards. Use them for bigger travel expenses when you can, because they’re worth more this way. Try not to wait until the last minute to book, either, because it could cost you significantly more. By following those two tips, you could easily get two- or three-times as much value from your points.

Alert: our top-rated cash back card 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 lengthy 0% intro APR period, 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.

“}]] Read More 

You may be getting lured into overspending at Costco. Read on to see how. [[{“value”:”

An estimated 73 million people have a Costco membership. So clearly, the store is doing a pretty good job of offering up great value.

See, most stores don’t charge you a fee just to enter and shop. But Costco’s entire business model is centered on membership fees. In fact, because Costco generates so much of its revenue from membership fees, it’s able to offer competitive prices on the items it sells.

Costco’s business model is also focused on customer satisfaction. It’s for this reason that Costco maintains a very flexible return policy, and why it simply will not stock items it feels it can’t offer at a reasonable price point.

But while shopping at Costco definitely has the potential to save you money, it might also, at times, bust your budget. That’s because Costco does have some tricks up its sleeve that may be causing you to spend more money than you normally would. Here are a few sneaky ways Costco pulls that off — and how to get around them.

1. Putting sale items at the front of the store

When you first walk into Costco with an empty oversized shopping cart, it’s like coming in with a clean slate. So if you’re tempted with sale items the moment you enter, you may be more inclined to scoop them up. After all, you haven’t spent any money yet, so why not grab a neat-looking kitchen gadget or fleece blanket at a discounted price?

But of course the problem with falling into this trap is that you’re buying things you don’t actually need. So rather than adding items to your cart within seconds of entering Costco, force yourself to do a complete walk-through and tackle your shopping list in its entirety first.

If, by then, you’re still tempted to go back to the front of the store and add one of those sale items, you’ve at least had time to think about it. But what may happen is you realize you don’t need to add another purchase to a cart that’s now full.

2. Tempting customers with free samples

Costco’s free food samples are often regarded as a neat little perk of shopping at the store. But while they might make for a tasty snack, they also have the opportunity to lead to impulse buys.

It may be that ravioli bites weren’t at all on your radar. But then you tasted one when you were hungry already, and boom — you’re bringing home a $15 box of ravioli bites when you’re not even sure it’s something your kids will eat.

It’s perfectly okay to enjoy free samples at Costco. But don’t let your taste buds alone guide your purchasing decisions. Instead, be practical and ask yourself if the item in question is:

One you need in a bulk quantityOne your family members are likely to enjoyOne you even have room to store

You might enjoy the bite of the ice cream sandwich you sample on your way to the checkout aisle. But do you really need 48 of them? And do you even have room in your freezer? And if you do have room, will fitting that giant box of ice cream sandwiches mean not being able to fit staple items, like chicken nuggets and French fries, that you rely on as quick meals for your kids? These are the questions you need to ask yourself before you buy a product you’ve sampled that wasn’t on your list.

3. Stocking so many rotating products that you’re constantly tempted to buy new things

The fact that Costco frequently rotates its product line is a good thing. But it can lead to extra purchases, since you’re more likely to get excited about a new product than the same fleece top you’ve seen on the shelf for months.

If you frequently overspend on new items, you may want to set a monthly budget for Costco impulse buys. That way, you’re more likely to enjoy your shopping experience, but you may be less likely to really go overboard.

So for example, you may decide that you can afford to spend $30 a month at Costco on non-essential items. You could then use that $30 to buy a single piece of home decor, or you could use it to buy two different snacks for $15 apiece.

Costco is really good at getting consumers to spend money. And look, it has to be in order to be successful. But you don’t want your love of Costco to wreak havoc on your finances. So do your best to avoid impulse purchases so you can enjoy the savings a membership has to offer.

Alert: our top-rated cash back card 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 lengthy 0% intro APR period, 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.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.

“}]] Read More