Money Management

If you have expensive credit card debt, you may be tempted to pay it off with your emergency fund. Find out if this is a good idea and what you should try first. [[{“value”:”

Credit cards are useful, but they also make it easy to go into debt. If you’ve been spending more than usual lately, you may have found yourself in this situation. And if so, you’re not alone. The average American’s credit card debt is $6,501, according to credit card debt statistics gathered by The Motley Fool Ascent.

If you have a healthy emergency fund, you could use that to help pay off your credit cards. But should you? Here’s what you need to know and a good alternative.

It’s better than paying costly interest charges

Emergency funds are intended for unexpected bills. So if you went into credit card debt because of an emergency, then it would make sense to pay that with money from your emergency fund.

What if it wasn’t an emergency? For example, you went on a vacation, spent more than you were expecting, and came back with $5,000 in debt. This clearly doesn’t fit the definition of an emergency, but it could still be best to use your emergency savings to pay for it.

In this case, you can break the rules because it will save you more money overall. Credit cards have high interest rates — the average on interest-bearing accounts is 22.77%. Even if you keep your emergency fund in a high-yield savings account, it won’t be earning anywhere near that.

Let’s say you have $5,000 in debt at a 22% APR. You can pay $400 per month toward it. Your options are:

Pay the $400 per month toward your credit card debt. You’ll pay it off in 14 months, and it will cost you $731 in interest.Take $5,000 from your savings to pay off your debt, and use the $400 per month to rebuild your emergency fund. You’ll rebuild your emergency fund in 12.5 months, and you’ll pay $0 in interest.

The risk is that you have an actual emergency after you’ve tapped into your emergency fund. But worst-case scenario, you could pay that with your credit card, and you’ll be in the same position as before.

You may not want to use your entire emergency fund. It’s always good to have some cash on hand, just in case you need it. You can’t pay everything with a credit card. You’ll need to decide how much money you’re comfortable taking out of your savings.

Look for balance transfer offers first

The benefit of paying off credit card debt with your emergency fund is avoiding interest, but there’s another way to do this. If you have good credit, meaning a credit score of 670 or higher, you might qualify for a balance transfer card.

Balance transfer credit cards have a 0% intro APR on balances that you transfer over. The intro APR period depends on the card. Some have a 0% intro APR for 15 months or longer.

If you have a credit card balance with a 22% APR, you could open a balance transfer card and transfer it over. There’s a small balance transfer fee — usually 3% or 5%. Once you’ve done a balance transfer, you’ll have time to pay down your debt interest-free.

You could get the best of both worlds this way. You avoid interest charges without needing to tap into your emergency fund.

Don’t make it a habit

Your emergency fund can work in a pinch for paying off credit card debt. With how high credit card rates are, there’s no reason to pay interest if you can avoid it.

Keep in mind that this still isn’t good for your finances. You’ll have less emergency savings, which could be problematic if a true emergency arises. You’re choosing the less expensive option, but it’s better not to put yourself in this situation.

Reflect on what happened, why you ended up with credit card debt, and how you can avoid it in the future. If you spent more money than you realized, work on a spending plan so it doesn’t happen again. If you’re going into debt to pay your bills, you’ll need to look for expenses you can cut and possibly also try to increase your income.

You can get yourself out of debt with your emergency fund this time, but you don’t want to fall into a pattern of doing this. By figuring out how to avoid credit card debt going forward, you can keep yourself financially ready for real emergencies.

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Discover how women excel in investing and close the gender gap. Learn how to start investing today. [[{“value”:”

It’s high time we spotlight a topic that, while making strides, still shows a considerable gap: the gender investing gap. For too long, the narrative has been skewed, painting a picture that investing is a man’s game.

In fact, did you know that according to a study from UBS Global Wealth Management, a whopping 58% of women leave the big financial decisions to their male partners? Yeah, you heard that right. And it gets even more interesting.

For the younger crowd, those between 20 and 34 years old, the number is slightly lower but still significant at 56%. Meanwhile, women over 50 aren’t too far behind, with 54% letting their spouses take the financial reins.

But here’s the kicker: life has a way of throwing curveballs, and at some point, many women will find themselves navigating finances alone. Whether it’s through never marrying, divorce, or widowhood (the average age for which is 59, according to the Census Bureau), a lot of us will need to manage our money solo for possibly decades.

Yet, when women take the reins on their investment decisions, the landscape not only shifts but flourishes. So, why does this matter? Well, because when women do step into investing, they tend to knock it out of the park.

Women investors consistently earn higher returns than men

It’s fascinating how studies keep showing that women are outdoing men when it comes to investment returns. So, how much better are they doing, you ask?

Well, let’s break it down with the help of data about women and investing collected by the Motley Fool. Fidelity analyzed about 5 million of its customer accounts over 10 years and found that women were ahead by 0.4%. That might sound small, but it’s a big deal in the investment world. And then there’s this study from the University of California, Berkeley, back in the ’90s, that showed women pulling nearly a 1% lead over men in investment performance.

And to add a cherry on top, a study by Wells Fargo covering a decade up to 2022 showed that women weren’t just beating men in the returns game, but they were doing it by taking on less risk.

Why women are better at investing

Ever wonder why women often see better returns on their investments than men? There isn’t a one-size-fits-all answer, but a mix of traits could be tipping the scales in women’s favor.

Women are more conservative investors

Overall, women adopt a more conservative or moderate approach to investing compared to men, who tend to take a more aggressive stance. And while guys might chase at the latest buzz, like everyone’s new favorite, cryptocurrency, women tend not to jump on the bandwagon as quickly and have more stable brokerage accounts.

Women investors are less impulsive

Embracing the long-term view and resisting impulsive decisions marks a winning investment strategy. Here, women seem to have the edge. They’re more likely to keep their cool when the market gets rocky. Fidelity noted that 51% of women would rather wait out market turbulence than 43% of men. Men are also more prone to adjusting their investments during these times, both increasing and decreasing, more so than women. The advice often given is to stick to a consistent investment plan, since market timing is notoriously tricky. Commit to a certain amount of cash set aside in your budget to contribute to your investment account.

Moreover, Vanguard observed that women check their accounts far less often than men and trade 44% less frequently. A study from the University of California, Berkeley, backs this up, showing women traded 45% less often than men. This difference in trading frequency underscores a less impulsive approach and translates to better annual returns for women.

How to start investing

Acknowledging obstacles such as confidence gaps, limited financial literacy, and enduring stereotypes is the first step toward dismantling them. Here are some tips for women aiming to conquer these challenges:

Break down financial goals: Start by setting clear, achievable financial goals. Whether you’re saving for retirement, making a down payment on a house, or creating an emergency fund, knowing what you’re working toward can help you stay focused and motivated.Embrace financial education: Commit to learning about investing. Resources abound, from online courses to financial podcasts. The more you know, the more empowered you’ll feel to make informed decisions.Start investing now: Don’t wait for the “perfect time” or until you have a “sufficient amount” to invest. Even small, consistent investments can grow significantly over time thanks to compound interest.Find a financial buddy: Partner with a friend who shares your financial goals. This partnership can offer mutual support, accountability, and encouragement to take bold steps in your financial journey.Consult a financial advisor: A professional can offer personalized advice tailored to your financial situation and goals. Don’t shy away from seeking help when making significant financial decisions.

By tackling the gender investing gap head-on and empowering women with the tools, knowledge, and confidence to invest, we can shift the financial landscape toward greater equality and success for everyone. Remember, the journey to becoming a savvy investor begins with a single step. Let’s make that step count.

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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.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Cash stuffing is a great way to see where your money is going, but “cash only” can be risky. See how to combine cash stuffing with banking products. [[{“value”:”

TikTok is not just a place to learn viral dance moves or watch comedy bits; it’s become a surprisingly vital hub of Gen Z personal finance. One of the most popular Gen Z money trends on TikTok is something that my generation used to call “the envelope method” — but the young folks are calling it “cash stuffing.”

With cash stuffing, Gen Zers on TikTok (and in real life) are “stuffing” cash into dedicated categories of envelopes and binders to help pay bills and pay off debt. Cash stuffing is a visually engaging way to look at, feel, count, and allocate your money. For people who struggle with impulsive spending, or who fear racking up credit card debt, cash stuffing can give a sense of calm and control.

All these benefits of cash stuffing can make it a good way to save money, get focused on budgeting, and get motivated to improve your personal finances. But this method has a few downsides and risks, too.

Let’s look at the biggest potential risks of cash stuffing, and how you can have fun with this Gen Z TikTok money trend, while also protecting your personal finances.

Risk No. 1: Cash can get stolen

I am too old to participate in TikTok trends, so I might be out of touch by raising this question, but: are cash-stuffing influencers actually keeping (some) money in the bank? I hope so! If you have hundreds or thousands of dollars in your home, in envelopes in your car, or being carried with you in a binder, you are at risk of losing that money.

Cash gets stolen, lost, misplaced, and even destroyed by fire or natural disasters. Bank accounts do not. Even if you forget your bank account password or ATM PIN, the bank will help you regain access to your money.

Even in the worst-case scenarios of being a bank customer, if your bank goes into a downward spiral and fails and goes out of business, your money is protected (up to $250,000 per qualifying account and account holder) by FDIC insurance. Cash stuffing doesn’t have FDIC insurance.

By all means, use cash stuffing and pay with cash as much as possible if that works for you and helps you feel better about your budgeting. But carrying too much cash, and keeping too much cash outside of the bank, can end up costing you more than you can bear.

Risk No. 2: Cash-stuffing binders don’t earn interest

If you’re saving money for an emergency fund, a big purchase, or any other short-term goal, your cash should be in the bank, in a high-yield savings account, earning interest. Cash stuffing can be a useful way to sort out your paycheck and literally see (and feel) where your money is going each month. But once you’ve categorized your expenses, put your money in a savings account.

If you don’t have much cash saved, you might wonder if it’s “worth” opening a savings account. Even if you only have $100 of savings, you worked hard for that money. And you deserve to earn interest on every dollar you save. And you might even find that watching your money earn interest feels inspiring and empowering, so you’ll want to keep up the momentum and save more.

Risk No. 3: Cash transactions are bad for budgeting apps

There’s no one “right way” to budget. Some people might want to use a spreadsheet or write down all their monthly purchases on paper. But one of the best ways to see where your money goes is to use easy, affordable budgeting apps. And cash stuffing makes it harder to do this.

“Digital transactions offer easy reporting capabilities that cash transactions don’t,” said Yuval Shuminer, CEO of personal finance app Piere (piere.com). “Cash budgeters must remain diligent in recording their spending to maintain visibility into where their money is going.”

Risk No. 4: Cash stuffing doesn’t build your credit score or earn reward points

Some people turn to cash stuffing because they’re afraid of credit card debt, don’t have established credit history, or have had a bad experience with credit cards. But if you’re handling all of your bills and everyday spending with cash, you are ultimately missing out on valuable chances to build credit. The best credit cards can also help you earn rewards on everyday purchases, like cash back or travel.

Cash transactions don’t get reported to credit bureaus. They don’t build credit history. Someday if you want to buy a car or buy a home, unless you’re history’s most frugal cash-saver, you’re going to want to qualify for affordable loans — and having a good FICO® Score can save you significant money on loan interest for the rest of your life.

Bottom line

Cash stuffing can be a good way to get more acquainted with your money and feel more in charge of your monthly budget. But if you are making all of your purchases with cash and not taking advantage of the benefits of bank accounts, credit cards, and other financial tools, you could be vulnerable to big risks and missed opportunities.

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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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Improving your credit score doesn’t always need to be a slow, steady process. Learn about the ways you could boost your score within a month. [[{“value”:”

Getting a high credit score doesn’t happen overnight. Some of the factors that impact your credit score have a time component involved, including your payment history and the age of your accounts. Credit scoring systems want to see that you can manage credit well and pay on time, and the only way to prove that is to do it consistently.

But there are ways to potentially speed up the process. This can be well worth it, especially if you’re hoping to get access to the most feature-packed credit cards or the lowest interest rates on loans. The following methods could all boost your credit score in as little as one month.

1. Request a credit limit increase

We’ll start with the easiest method. If you ever have credit card debt or high balances on your cards, ask for a credit limit increase. You may be able to request this in your online credit card account. Or, you can call the number on the back of your card.

This helps with a key part of your credit score, your credit utilization ratio. Credit utilization is the portion of your credit that you’re using — your card balances divided by their credit limits. If you have a $5,000 balance on a card with a $10,000 limit, then your credit utilization is 50%.

Let’s imagine you ask for an increase and get approved for a $20,000 credit limit. That $5,000 balance now only puts your credit utilization at 25%.

The lower your credit utilization is, the better. People who charge large amounts are seen as a greater risk, so high credit utilization can lower your credit score. It’s generally recommended to keep your credit utilization below 30%. If you’ve had high credit utilization, lowering it could add 25 points or more to your credit score.

2. Make a big payment toward your credit card debt

You can also lower your credit utilization the old-fashioned way: paying down your credit card balances. As you pay down your cards, it will reduce your credit utilization.

It’s harder to do this, since you’ll need to have the money to make a big payment. But it’s beneficial in more ways than one. You’ll improve your credit score, and you’ll save money on interest by getting your debt paid off as quickly as possible.

If you’re trying to figure out how to pay more on your credit cards, here are a few options:

Tap into your savings. It usually doesn’t make sense to keep money in your savings account when you have credit card debt costing you 20% or more in interest. Use it to pay your cards and build your savings back up once you’re out of debt.Look into debt consolidation loans. Qualifying for a loan will depend on your credit score. But if you can, this may be a good way to refinance your credit card debt and lower your credit utilization.Decrease your spending. When you’re trying to get out of credit card debt, be strict about your spending. Cut back on unnecessary expenses so you can pay more toward your credit cards.

3. Dispute mistakes you find on your credit report

It’s widely recommended that you review your credit report every year for errors. Do most people actually do that? Probably not. You might assume that everything is going to be correct anyway.

That’s not always true. About 13% of consumers have errors on their credit reports that are affecting their credit scores, according to Consumer Reports. With those kinds of odds, it’s in your best interest to double check that everything on your report is correct.

Credit reports from each credit bureau (Equifax, Experian, and TransUnion) are available on AnnualCreditReport.com. You can request free reports every week, although reviewing yours once per year is fine. If you see any mistakes, you can dispute them online with the credit bureau that issued the report.

If the dispute goes in your favor, it can have a significant impact on your credit. A friend of mine raised her credit score by over 100 points by disputing negative items on her credit report.

A better credit score without the wait

Patience can be a good thing, but when it comes to your credit score, there are financial benefits to raising it as quickly as possible. If you have high credit utilization or errors on your credit report, fixing those could have a near-immediate impact.

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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.

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