Credit Card Interest Rates Remain at Record Highs. Here’s Why

3 Good Reasons to Put Money in Savings Instead of CDs

Thanks to a higher federal funds rate (due to the efforts of the Federal Reserve), now is a really great time to have cash savings in the bank. If you have extra money on hand and need a new and virtually risk-free place to keep it, you’ve got options: high-yield savings accounts and certificates of deposit (CDs).You might assume that a CD is a better choice — after all, according to the FDIC, the average APY on a 12-month CD (which is the highest of all the rates the Fed keeps track of) is currently 1.76%, while the average savings account APY is just 0.45%. But you should consider more factors than just APYs when picking a deposit account. Let’s discuss the advantages a savings account has over a CD.1. You likely won’t need a minimum depositMany of the best CD rates are available to you only with a minimum deposit amount — in most cases between $500 and $2,500. Conversely, you can open many of the best high-yield savings accounts with $0.This makes savings accounts a lot more accessible, and since the rates on the best ones available are comparable to the rates you’d get with a CD, it makes a lot more sense to opt for a savings account if you have only a small amount of money to start with.2. You can keep adding to your balanceYour savings account balance might start out small, but you’ll have the flexibility to add to it whenever you want. With a CD, on the other hand, you’re locking your money in place for a period of time. In addition to being unable to withdraw any of it early without penalties (more on that below), you also can’t add more money during the term.If you open a savings account linked to an existing checking account, funding it couldn’t be easier — you can transfer money from checking to savings in a matter of seconds if it’s only moving between accounts at the same bank. Even having a savings account at a different bank isn’t a hurdle to saving. I have my main checking and main savings at different banks, and money transfers quickly in one direction (checking to savings) and slowly going back the other way — this slight inconvenience actually gives me more incentive to not tap my savings.3. You have easier accessGoing back to my earlier point, part of the deal with a CD is that you must agree to leave your money alone for the duration of the term, lest you lose some of the interest you’ve accrued. Penalties vary, and you could lose a few months’ worth or more — for example, one of the best CD issuers charges an entire year’s worth of interest as a penalty for breaking into a CD term of 12 months or fewer early.Keep in mind that a savings account will have some limits on accessing your money. Many banks still have a cap of six convenient withdrawals per month, per Regulation D (this rule was suspended as a result of COVID-19, but it’s up to banks to change their own rules — or not). Plus, you’re not likely to get a debit or ATM card to access your savings. This makes a certain amount of sense, as ideally you’re leaving money in the account to grow with interest until you need it.And “need” is the key word here. A CD is a terrible place for important cash like your emergency fund. When it’s an emergency, you need that money sooner rather than later. So even if you opt to put some savings into a CD, always keep your emergency fund in an unrestricted account, like a savings account or a money market account.If you’ve got cash saved, you’re in an excellent position. Just be sure to find the right home for that money. For all the reasons above, opting for a savings account over a CD could be your best bet.

Why Your Checking Account Should Contain as Little Money as Possible

By: Natasha Etzel |
Updated
Oct. 4, 2023 – First published on Oct. 4, 2023

A bank account is an excellent place to keep your money so it’s organized and readily available when needed. Many people keep their cash in a checking account. But, while you want to stash enough money in your checking account to cover your bills and everyday expenses, you want to avoid keeping all of your cash there. I’ll explain why here, and suggest a better place to stash your extra savings.Don’t miss out on interestThe average checking account doesn’t accrue interest. That means you won’t get rewarded for keeping money in your bank account. Instead of keeping all your cash in your checking account, you should only keep enough to cover your monthly expenses. You may want to keep a bit more than just enough to cover your bills. That way, you’ll be covered if you have an unexpected charge or a more costly bill than anticipated. How much extra should you have? It depends. For some people, a couple hundred extra dollars may be ideal. But for others, it may be a good idea to include a few hundred or up to an extra $1,000 in their checking accounts for extra wiggle room.But don’t keep every last dollar you have in your checking account. If you do, you’ll miss out on interest. Instead, move your extra savings into a bank account that accrues interest. With an interest-earning bank account, you’ll get rewarded as your cash sits in the bank.  You could earn money with a savings accountMany people keep extra cash in a savings account. Review the bank’s annual percentage yield (APY) when considering a new savings account. This rate is the amount of money or interest you’ll earn over a year. The higher the APY, the more money you can make. You can take advantage of an attractive interest rate by opening a high-yield savings account. At the time of writing, the bank accounts on our best high-yield savings accounts list offer APYs ranging from 4.30% to 5.26%. If you have a significant amount of extra cash and keep it in an account like this, you can earn money without doing extra work. $5,000 in savings accumulates this much interest To determine how much interest you can earn by moving your extra cash to a savings account, multiply your initial deposit by the APY your bank account offers. This will show you how much interest you can earn by keeping your money in the bank for a year. Let’s imagine you have $5,000 extra sitting in your checking account right now. If you instead move that money to a high-yield savings account with an APY of 5% and you keep it in the bank for an entire year (and your APY doesn’t change; note that banks can raise or lower APYs at any time), you’ll earn $250. That’s much better than making $0 by keeping your savings in a checking account that doesn’t accrue interest. Now you can see why it pays to avoid keeping all your money in a checking account. You can earn extra money from interest by keeping your spare cash in a savings account that offers interest. For additional tips like this, check out our free personal finance resources. 

3 Reasons I Don’t Like Aldi as Much as I Used To

By: Maurie Backman |
Updated
Sept. 13, 2023 – First published on Sept. 13, 2023

At some point in 2022, I discovered Aldi and began shopping there weekly. I found that I was able to save money on my grocery bill by purchasing certain produce items there. And since I happen to have an Aldi adjacent to my local Costco, it wasn’t particularly out of my way.But over the past few months, I’ve become less enamored with Aldi. Here’s why.1. The selection is just too limitedAldi — at least near me — is a minimally stocked grocery store. The shelves aren’t loaded the way they are at my nearby ShopRite and Stop & Shop.To be fair, this was the case when I first started shopping there. But because there’s just not a lot of selection, I’m generally limited to only buying a few items when I pop into Aldi.Not so long ago, I was running into Aldi for some fruit, which I usually buy there, and I needed to grab shredded cheddar cheese. Normally, I get that at Costco, but I didn’t want to run next door to Costco and wait in a line for cheese alone. Unfortunately, though, Aldi didn’t have the cheese I needed, so I had to make an extra stop anyway.2. The inventory is too inconsistentNot only is there a limited selection of food items I can buy at Aldi, but sometimes, I can’t even find the five or six things I’m looking for. Aldi was once my go-to source for avocados, since it’s an expensive purchase and Aldi tends to sell them for less than Costco (at least in my area). But the last few times I stopped at Aldi, avocados weren’t in stock.And that’s happened to me with other things, too. Over the past several months, I’ve struggled to find everything from cucumbers to strawberries at Aldi as well.3. What the store saves me on groceries, I lose via lost working hoursShopping at Aldi still has the potential to save me a little money on groceries. At a time when supermarket prices are up 3.6% on an annual basis, that helps.The problem, however, is that even though Aldi is right near Costco in my neighborhood, thereby allowing me to combine those trips, it still takes time to visit an extra supermarket. I have to find parking, wait in a checkout line, and spend time searching the shelves.While it’s nice to save $2 here and $3 there, the reality is that a stop at Aldi might cost me 20 or more minutes of work — especially when I don’t manage to find the things I need. And losing out on that work time often means forgoing more than $2 or $3 of income. So from a time perspective, it’s just not worth it.Shopping at Aldi could make sense for a lot of people. If you’re someone with flexibility in your schedule and grocery list, and you’re not so picky about the brands you bring home, then it could pay to spend the time visiting Aldi, even if you don’t always manage to find all the things you need. But I’ve reached the point where shopping at Aldi makes less and less sense for me, so I’ll most likely stop going there unless it’s a one-off basis.

5 Amazing Costco Buys for Less Than $10

Costco is a favorite among bargain hunters. But because it’s a place where you typically buy in bulk, it’s often not great when you only want to spend a few bucks. Believe it or not, though, there are some deals at Costco for $10 or less. Here are five amazing Costco finds that will set you back no more than $10.1. Rotisserie chickenNot surprisingly, the $4.99 rotisserie chicken tops this list. Costco debuted its famed bird for $4.99 way back in 1994. It briefly raised the price by $1 during the Great Recession in 2008, then knocked it back down to $4.99 one year later. Had Costco raised its prices to keep up with inflation since 1994, that chicken would cost $10.48 today.Costco’s rotisserie chicken will always be a fan favorite for those looking for an effortless dinner. Just be aware: Costco keeps the prices low because its rotisserie chicken is what’s called a loss leader. The warehouse giant is willing to lose money selling them because it knows it can get customers into stores, where they’ll probably buy more than just a chicken.2. Hot dog and soda comboCostco has raised the prices of many of its food court items in recent years, but the price of one perennial favorite shows no signs of budging: the hot dog and soda combo, which has cost $1.50 since it debuted in 1985. Adjusted for inflation, the hot dog and soda combo should cost $4.28. Last year, during a quarterly earnings call, Costco chief financial officer Richard Galanti said the warehouse giant could keep the $1.50 price point “forever.”3. Kirkland Signature Creamy Almond ButterYou can use almond butter as a salad dressing ingredient, slather it on toast, put it in baked goods, or just eat it straight from the jar. If you’re the type who likes to devour almond butter by the spoonful, you don’t want to pass up a 27-ounce jar of Kirkland Signature Creamy Almond Butter, available for just $7.99. That works out to less than $0.30 per ounce. By comparison, a 16-ounce jar of Trader Joe’s Creamy Almond Butter Salted costs $6.99.4. Olde Thompson Kosher Sea Salt, 5 lbsSea salt has plenty of uses that go beyond cooking. You can use it for cleaning, as an exfoliant for your skin, and sprinkle it around your garden to keep unwanted bugs away. For just $5.99, you can score a 5-pound jar of Olde Thompson Kosher Sea Salt and keep it handy for all your household and kitchen needs.5. Bisquick Pancake & Baking Mix, 96 OuncesBisquick is another one of those things that’s handy to keep in your pantry. You can use it to whip up a quick batch of pancakes or waffles for breakfast or keep it on hand for a variety of baked good recipes. A 96-ounce box of Bisquick is available at Costco for $8.89. It’s normally priced at $10.99, but there’s a $2.10 manufacturer’s discount that’s good through Oct. 8, 2023.What are the best deals at Costco?Since Costco tends to sell large quantities, you’ll typically find that a lot of the best deals cost well above $10. Regardless of the exact price, it usually makes sense to buy products at Costco that have a long shelf life. For example, even if you find great deals on fresh produce and milk, you probably don’t want to load up on these items unless you’re feeding a large crowd, as they’ll go bad quickly.Also, make sure you look beyond the grocery department for savings. For example, getting your prescriptions from Costco Pharmacy or using Costco to fill up your gas tank could also save you money.If you want to maximize the benefits of your membership, try shopping with a Visa credit card that offers rewards. (Costco only accepts Visa credit cards.) That way you can earn travel rewards or cash back when you load up on groceries and other necessities.

Here’s How to Get Costco to Pay for Your Annual Membership

By: Maurie Backman |
Updated
Oct. 3, 2023 – First published on Oct. 3, 2023

Many people love Costco and find shopping there to be a giant source of savings. But then there are those people who grumble about the membership fees — to the point where those fees deter them from joining.A basic Costco membership costs $60 a year, while an Executive membership costs $120. These levels are slightly higher than Sam’s Club, which charges $50 for a basic membership and $110 a year for a Plus membership.Plus, Sam’s Club commonly offers discounted memberships as promotions throughout the year. That’s a practice Costco doesn’t tend to employ. So if you’re looking for a cheaper Costco membership, it’s going to be hard to come by.That said, there’s one trick you can employ to get Costco to pay for your annual membership. It’ll require you to spend a certain amount of money at the store during the year, but it can be done.When your cash back covers your Costco membership feeThe reason Costco’s Executive membership costs twice as much as a basic one is that it gives you 2% cash back on your Costco purchases. And if you do a lot of shopping at Costco, that cash back can really add up.If you spend $3,000 a year at Costco, you’ll get $60 back from your Executive membership. That’s enough to cover the cost of your upgrade from a basic membership. But if you spend $6,000 a year at Costco, your Executive membership will give you $120 back. And that’s enough to cover the cost of your upgraded membership in full.Hitting the $6,000 mark may be easier than expectedYou may be thinking, “How on earth am I going to spend $6,000 a year at Costco?” And to be clear, you should not force yourself to spend money on things you don’t particularly need or want simply to snag cash back that covers your membership fee. However, you may find that making certain purchases through Costco allows you to hit that threshold pretty easily.For one thing, travel packages booked through Costco are eligible for cash back. So are purchases of appliances and electronics. So if you have a number of bigger-ticket items on your list, buying them at Costco could make sense not just from a cash back perspective, but also, because Costco offers great prices and service (like a second-year warranty on all laptops, for example).Costco also offers a wide range of furniture — and if you don’t see something you like at your local store, you can look online for a much wider range of inventory. If you’ve been saving for a new living and dining room set, buying those things at Costco could get you to $6,000 in spending.Plus, if you have a larger family to feed and shop at Costco weekly, you might easily spend $120 per trip on groceries and household essentials alone. At 50 weeks a year (because it’s fair to assume you’ll skip a couple of weeks), that’s $6,000 right there.A Costco membership could offer you and your family a lot of value. And while you may not get a discount on that membership when you sign up, if you spend enough at Costco, you might be able to effectively get the cost of your membership covered in full — especially if you’re strategic in the way you shop.