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Strategies to Save

Understanding the Differences Between Credit Unions vs Banks

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Credit unions vs banks

Credit unions are known for having more flexibility in their offerings and lower rates for some financial products.

Because credit unions generally don’t pay state or federal taxes and are nonprofits, they can offer their members loans at relatively low interest rates; many people turn to credit unions when they need financing for a big purchase like a car or a home renovation.

Yet for all the benefits they carry, credit unions remain underused. In 2018, big banks still hold 77% of all household savings. Credit unions, on the other hand, struggle to chip away at holding a measly 10% of household savings, according to the Credit Union National Association.

The grassroots, low-fee structure of credit unions can be appealing to consumers who want to save money on banking services. However, if you’re thinking of transitioning to a credit union, make sure you’re aware of the drawbacks, too.

Main differences between credit unions vs banks

Product offerings

If you’re looking for an institution that can act as a one-stop shop for most if not all of your financial needs, consider looking at a bank. Many banks — especially the big-name banks — can offer many different product types simply because they have more capital than a little neighborhood credit union.

One exception to this rule might be internet-only banks, which by definition have no physical branch locations you can visit. These banks tend to run the gamut in terms of what products they offer. Some of these banks, such as Live Oak Bank and Marcus by Goldman Sachs®, only specialize in one or two things that they do really well — an online savings account, for example. Still, other online-only banks like Ally Bank do offer a range of product offerings like investment services and mortgages.

Fees

Because credit unions are nonprofits, they often don’t have to worry as much about gouging their members with high fees that you might find at traditional banks. However, that’s not always the case. In fact, a March 2017 survey of 57 different rewards checking accounts from banks and credit unions listed on DepositAccounts, another LendingTree-owned company, showed that credit unions actually charged slightly higher fees than their traditional bank counterparts. Here are how the fees panned out in the survey:

Institution

Overdraft fee

Third-party ATM fee

Monthly service fee

Credit Union

$29.83

$1.15

$2.52

Bank

$28.67

$0.56

$0.96

In general, if you are looking for low fees, we recommend starting your search with a credit union. Don’t discount banks, however — as the above case shows, sometimes banks offer lower fees than credit unions, especially internet-only banks.

Yield and rewards

Credit unions are often able to pass off their profits to you in the form of higher deposit account rates because they aren’t as driven as big banks to increase profits to benefit shareholders. Indeed, in the same March survey of rewards checking accounts mentioned above, credit unions came out slightly ahead with an average interest rate of 1.99% APY. Banks, on the other hand, only offered 1.71% APY.

Although credit unions offer better interest rates in general, one area where they lag behind is in sign-up bonuses. Many big banks will offer up to $500 or more in sign-up bonuses; something you’re unlikely to see with a small credit union.

Eligibility

There’s no doubt about it: Credit unions do take some work getting into. Since they’re formed around a common purpose or a common segment of the population, they can afford to be picky about who they accept as members. In many cases, you can join a credit union you’re interested in simply by making a donation to a particular charity. With some credit unions, however, you don’t have this option and you might just be plain out of luck if you don’t qualify.

“Credit union membership typically requires you to open and maintain a savings account. No other accounts can be opened without the ‘membership’ savings account,” said Ken Tumin, founder of DepositAccounts, another Lending Tree company. “This savings account requirement doesn’t exist at banks.”

Banks, on the other hand, will work with almost anyone who walks in the door as long as you have the relevant account setup information, like a government-issued ID, a Social Security number etc.

Branch locations

If it seems like there’s a local bank branch on just about every corner, you’d be right. According to an 2016 analysis by DepositAccounts, there are almost four bank branches in the U.S. for every credit union branch.

Moreover, if you belong to a small local credit union and move away or travel, you can be plain out of luck for finding any branches near you. Big banks like Wells Fargo and Chase, on the other hand, are widespread in just about every community. If walking into a local branch — wherever you might end up — is most important to you, then a bank may be the way to go.

ATM access

At first glance you might think credit unions would also be at a disadvantage when finding in-network ATMs due to their small size compared with banks. To get around this particular disadvantage, many credit unions have joined a network of ATM providers. One of the most popular is the CO-OP Financial Services network, and you’ve probably heard of it if you’ve ever been a member of a credit union.

If your credit union is a part of the Co-Op network, you’re eligible to use any of 30,000 different ATMs nationwide (and even in a few foreign countries) without paying any surcharge fees. Compare that with a big bank like Wells Fargo, which only offers 13,000 ATMs, or PNC Bank, which only offers 9,000 ATMs in 19 states — fewer than half of what most credit unions offer. If using ATMs is more your style, credit unions are the clear winner.

Operating hours

Operating hours vary widely between credit union vs banks, even within different branches. If you’ll be going in to visit a branch, the best suggestion might be to research potential banks and credit unions in your area to see which ones offer hours that will work with your schedule.

One exception is online banks, many of which offer 24/7 phone service. After all, it’s still cheaper for these banks to staff a call center to serve the entire country rather than hire someone to man a branch 24/7 in the middle of nowhere. If you don’t mind calling in to chat with a teller rather than visiting them face-to-face when you have a question, an online bank might be just the thing for you.

Technology

Because credit unions pass off their savings onto members in the form of cheaper loans and higher-yielding products, many don’t have enough cash to invest in the latest and flashiest technology like big banks.

That’s not always the case. There are some credit unions like AlaskaUSA® Federal Credit Union and PenFed® Credit Union which offer modern technology like mobile phone apps with remote check deposit. This nifty feature lets you deposit a check anywhere with the snap of your smartphone camera. But, more often than not, many credit union websites you’ll visit offer antiquated technology that looks like it could be your little brother’s first coding project.

If the latest, hottest bank technology is what you seek, consider starting your search with a bank rather than a credit union.

Autonomy and governance

One of the major benefits of credit unions is that they’re owned by members — including you. When you join a credit union, you generally need to put at least $5 in some type of “share savings” account. This establishes your membership in the credit union, and it even allows you to vote in board elections. In short: You are a member, not a customer, of a credit union. As a member, you get a say in terms of who’s in charge.

Banks, on the other hand, view you as a customer, just like any other business. Banks are usually privately owned, unless it’s a publicly-traded company. With a bank, you generally get no say in how the institution is run. Banks can — and do — set policies that’ll earn their owners and shareholders money made off your back, rather than redistributing it to other banking customers like credit unions do.

If being a member and not a customer is important to you, a credit union is your best bet.

Bottom line: Credit unions vs Banks

There are a lot of differences between credit unions vs banks. We recommend searching for the best financial institution based on what’s most important to you.

A bank might be best for you if you:

  • want to visit a branch in-person to conduct your banking
  • want the latest technology
  • aren’t as concerned about fees and using ATMs

A credit union might be best for you if you:

  • want a good selection of ATMs wherever you go
  • want higher rates and lower fees
  • want to be a member of your financial institution, not a customer

Searching for only banks or credit unions can help narrow down your search, but don’t be afraid to consider other options as well. “Credit unions, especially large ones, have taken on many of the traits of banks,” said Tumin.

In other words, even though these differences generally hold true, there are often exceptions. For example, some banks offer much higher rates on their savings accounts than any credit union, or some credit unions might have unscrupulous business practices despite their nonprofit status.

But by starting your search with either credit unions or banks, you can help narrow down a seemingly infinite amount of choices to a reasonable amount and find the best financial institution for you.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Reviews, Strategies to Save, Uncategorized

American Express® Personal Savings Account Review: A Solid Choice for Online Banking

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

American Express National Bank
If you’re working hard to stay disciplined and stash away a portion of your income, you’ll want to earn the highest interest rate possible on your money. Unfortunately, that’s difficult as bank savings accounts earn an average of 0.07% in interest annually, according to April 30, 2018 data from the FDIC. Our advertiser, American Express National Bank, offers a rate on the American Express Personal Savings high yield savings account that is nearly 20 times that rate. It’s currently advertised (as of 5/24/2018) at 1.60% annual percentage yield (APY). What’s better, the high yield savings account does not require a minimum deposit or charge fees, so you don’t need anything but your personal information on hand to open the account.

LEARN MORE Secured

on American Express National Bank’s secure website

Member FDIC

American Express Personal Savings Account

This account is a great option for anyone who wants the flexibility of earning a high interest rate without the withdrawal restrictions that come with a CD.

APY (%)

1.60% Variable

Minimum Deposit Amount

$0

Account Minimum

$0

Permitted Monthly Withdrawals

6

Annual Fee

$0

FDIC Insured?

Yes

Mobile App?

No

Transfer Time

Deposits will be available within five business days.
Transfers from savings to a checking account
take one to three business days.

As of 5/24/2018

In an American Express® Personal Savings account, your money earns 1.60% variable APY. It’s currently one of the best rates you can earn from an online savings account. The account does not have a monthly fee and they don’t require a minimum deposit, which makes it an affordable account to open. You will have to fund your account within 60 days of applying, and the FDIC insures your deposits up to full legal limit.

How the American Express Personal Savings account works

The American Express savings account compounds daily at a variable 1.60% APY, and interest earned is credited to your account on your monthly cycle date. The rate is variable, so American Express can raise or lower the interest rate at any time without notice to you before or after the savings account is opened.

Account holders must fund the account within 60 days, which you can do by setting up a bank transfer or direct deposit to the savings account, as well as by sending a check.

What we like about the American Express Personal Savings account

  • High interest rate The 1.60% variable APY is better than what you would earn putting your money in the accounts most brick-and-mortar banks offer. While there are higher rates to be had, American Express has a good offer.
  • Automatic savings It’s easy to make saving automatic when you have an online savings account. With the American Express Personal Savings account, you can easily set up a recurring deposit to pull funds from an external savings or checking account. To make it even easier to resist touching your savings, you can even have a portion of your paycheck directly deposited to the account.
  • Discourages spending With your money in an online account like the American Express Personal Savings account, you can only get your cash after making a transfer to an external checking account to which you have debit card access. The inconvenience makes it that much more difficult to spend your savings.

What we don’t like about the American Express Personal Savings account

  • No ATM card Not having card access is great when you need to prevent yourself from spending your savings, but the hassle of setting up and making an ACH transfer from your online American Express Personal Savings account can be problematic in a pinch. (American Express says transfers will take one to three business days for funds to become available in your checking account.) If you’re worried about this, you can instead turn to an online bank like Synchrony Bank that makes it easier to access your savings by issuing an ATM card tied to your high yield savings account.
  • Variable interest rate The annual yield rate American Express is offering on this savings account is high at 1.60%, but the bank can change that rate at any time for any reason, as the rate is variable. If you’re looking for a more predictable rate of return, consider a certificate of deposit.
  • Limited withdrawals Because this is a high yield savings account, banks are limited by Federal Reserve Board Regulation D to a maximum of six withdrawals and/or transfers from your online savings account per statement cycle without penalty. With that in mind, before you decide how much you’ll put away each month, make sure it’s not more than you can afford to, so you aren’t repeatedly reaching into your savings.

How the American Express Personal Savings account compares

American Express vs Other Online Banks


American Express


Goldman Sachs Bank USA


Synchrony Bank


Barclays Bank

APY

1.60%

1.70%

1.65%

1.65%

Minimum Amount to Open

None

None

None

None

Minimum Balance Amount

None

$1

None

None

Permitted Monthly Withdrawals

6

6

6

6

Annual Fee

None

None

None

None

FDIC Insured?

Yes

Yes

Yes

Yes

Mobile App?

No

No

No

No

LEARN MORE Secured

on American Express National Bank’s secure website

Member FDIC

LEARN MORE Secured

on Goldman Sachs Bank USA’s secure website

Member FDIC

LEARN MORE Secured

on Synchrony Bank’s secure website

Member FDIC

LEARN MORE Secured

on Barclays’s secure website

Member FDIC

As indicated earlier, the American Express Personal Savings account offer is strong, but how does it compare to other savings accounts?

Goldman Sachs Bank USA – 1.70% APY and $1 minimum balance

Goldman Sachs Bank USA

Goldman Sachs Bank USA currently offers an APY of 1.70% on their Marcus Savings Account. You don’t need to deposit a minimum amount to open the account, but you will need to have a minimum balance amount of $1 to earn the APY.

Interest on the Marcus Savings Account starts accruing the business day you deposit funds into the account. Goldman Sachs Bank USA doesn’t apply any service charges to their savings accounts.

Synchrony Bank – 1.65% APY and no minimum balance

Synchrony Bank

With $0 to open the account, you can earn an annual yield of 1.65% on savings account balances through Synchrony Bank and there are no monthly fees.

Savings accounts through Synchrony interest is compounded daily and is credited to the account monthly. An ATM card is offered through this account and you can still easily transfer or deposit funds through an ACH transaction or online.

Barclays Bank – 1.65% APY and no minimum balance

Barclays

With $0 to open the account, you can earn an annual yield of 1.65% on savings account balances through Barclays. While there are no monthly fees, an account that has a balance that is less than $1 for 180 days or more may be closed by Barclays. Savings accounts through Barlcays will start accruing interest the day your initial deposit posts to your account, and interest is compounded daily. While an ATM card is not offered through this account, you can easily transfer or deposit funds through an ACH transaction or online through your account.

Online banks vs. brick-and-mortar banks

Online banks have been having a moment not only because of the rise in mobile banking among consumers, but also because they can simply offer consumers more benefits because they don’t have to worry about as many overhead expenses as brick-and-mortar banks. An August 2017 study by DepositAccounts.com shows the annual percentage yield internet banks offer on savings accounts is more than four times what brick-and-mortar banks or credit unions offer. The same analysis shows annual percentage yields on internet bank savings accounts have surged 29 percent since January 2016.

Simply put, the main benefit of putting your money in an online savings account is your money does more for you. To show this, DepositAccounts provided an example, based on the average APYs in those savings categories: If a saver were to put $100,000 in a savings account and leave it alone for 10 years, they would earn $8,338.79 at an online bank versus $1,747.04 in a brick-and-mortar bank and $1,895.28 in a credit union, assuming a fixed APY.

The bottom line

Overall, the American Express Personal Savings Account is a solid online savings option. The interest rate they offer is high and the features of the account are comparable to other online banks’ savings accounts. While there are certain aspects of the Personal Savings account that could use improvement, other online banks present the same obstacles. As was mentioned earlier, the American Express Personal Savings account is one of the best options available.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Advertiser Disclosure

Strategies to Save

How Retirement Planning Can Help You Save for the Future

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Retirement planning
iStock

Retirement planning, like any other long-term goal, requires some forethought and intention. Slow and steady wins the race when it comes to padding your nest egg, but many Americans are struggling to adequately prepare for their golden years.

Almost 50% of families in the U.S. have nothing at all set aside for retirement, according to research from the Economic Policy Institute. It’s little wonder that three in 10 workers say the topic stresses them out.

The truth is that it’s never too late to up your savings game. Whether you’re right on track or way behind schedule, retirement planning can make saving for the future a little easier. Here’s what you need to know.

What is a retirement plan?

A retirement plan is exactly what it sounds like — a strategy for shoring up your financial security when you’re no longer in the workforce. This begins with figuring out how much money you’ll actually need in retirement. (We’ll dive into this shortly.) From there, it’s about earmarking a reasonable amount of monthly income for your future self.

It would be wonderful if our income divided itself evenly between all our financial goals, but that’s rarely the case. Throughout your life, it’s normal to alternate between hitting your retirement savings goals and pulling back in order to fund other financial priorities, like paying down debt or building your emergency fund. Effective retirement planning usually requires some trade-offs, a little bit of effort and the ability to tweak and course-correct along the way as life happens. In other words, retirement planning is dynamic.

“The plan that gets you to retirement is more than likely not going to be the plan that gets you through retirement,” Jim Brogan, a Knoxville-based certified retirement financial adviser, told MagnifyMoney. “Until you retire, you’re in a saving phase of life; after you retire, you’re in a spending phase.”

Retirement plans take many forms. If you don’t know your 401(k)s from your IRAs, rest easy. Let’s unpack the details.

Types of retirement plans

401(k)s

This employer-sponsored retirement account automatically takes a percentage of each paycheck and earmarks it for retirement. The beauty of a traditional 401(k) is that your contributions are tax-deductible, which is a nice perk come tax time. The lower your taxable income is, the lower your tax liability will be. On top of that, because your retirement savings aren’t taxed when you contribute them, that means your money can grow tax-free. When it comes time to pull that money out for retirement, it’ll then be taxed as ordinary income.

401(k)s come with a number of perks, the biggest being if your employer offers any sort of match — that’s free money. Every company is different, so you’ll want to contact your HR rep to clarify the details. Some employers, for example, will match 100% of your contributions up to 3% of your salary. Others might match half of your contributions up to 3% to 5% of your earnings. That means you’ll cash in on your employer making regular deposits into your account, which is the most effective way to leverage all that 401(k)s have to offer.

Just keep in mind that the IRS does put a cap on how much you, as an individual, can kick into your 401(k). For 2018, you can contribute up to $18,500, unless you’re 50 or over, in which case you can contribute up to $24,500.

Side note: 403(b)s are similar to a 401(k). They’re essentially the same, except that instead of being sponsored by private companies, they’re available to certain employees at public schools, nonprofits and churches.

Individual Retirement Account (IRA)

This kind of retirement account has nothing to do with your employer. You open it independently and can load it up with a maximum of $5,500 every year. (If you’re 50 or over, that number jumps to $6,500.) There are two main types of IRAs: traditional and Roth.

You can open an IRA at many major banks, investment firms or any of the new robo-advisory services that have cropped up over the years.

Traditional IRA

Roth IRA

Like 401(k) contributions, what you put in counts as a tax deduction. Your money also grows tax-free, but it is taxed as ordinary income when you make withdrawals during retirement.

Just keep in mind that if you tap into it prior to age 59½, you'll typically have to pay taxes on it, plus a 10% penalty.

The Roth IRA works a little differently. You won't enjoy that tax break when putting money in, but your cash does grow tax-free and you won't get hit with taxes when you withdraw during retirement.

In fact, you can pull from it whenever you want, even prior to retirement, without any penalties. The only time you'll be penalized is if you tap into the appreciation (i.e. your investment returns) before age 59½.

One other thing worth mentioning is that Roth IRAs also come with income limits. If you’re single, your annual earnings have to be under $135,000; it’s under $199,000 for married folks filing their taxes jointly.

Pensions

If your employer offers a pension, they’ll kick money into your plan during the years you’re still working. Then when you retire, that money comes your way either in a lump sum or as a monthly payment — think of it as a retirement paycheck of sorts that’ll likely be considered regular taxable income.

How much you’ll get depends on a number of factors, like your salary and how long you worked for the company. A pension provides peace of mind because the money is guaranteed to be waiting for you in retirement, which makes retirement planning a little easier.

Health Savings Accounts (HSAs)

Don’t let the name fool you. Health savings accounts (HSAs) can double as retirement-saving vehicles that go beyond medical expenses and are offered by certain employers.

If offered by your employer, you can make contributions before taxes are taken out, typically via automatic withdrawals from your paychecks. (If you open an HSA yourself, any contributions you make can be claimed as a tax deduction, which lowers your taxable income.)

You can tap into this fund tax-free to cover qualified medical costs at any time, but the reason it’s great for retirement is that once you hit 65, that money is yours for whatever you like — free and clear, tax-free, whether it’s for medical expenses or not.

HSA rules: The main catch is that you have to be enrolled in a high-deductible health plan to qualify. This translates to a deductible that’s at least $1,350 for individuals; $2,700 for families. Contribution limits apply. For 2018, they cap out at $3,450 for single individuals; $6,850 for families. There’s also a catch-up contribution for 55+ folks, which allows you to kick in an extra $1,000. Check to see if your employer offers an HSA; if they don’t, anyone can open one if they meet the eligibility requirements.

Taxable investment accounts

Tax-advantaged accounts, like 401(k)s and Roth IRAs, are by far the best way to maximize your retirement planning efforts over the long haul. If you have some extra income leftover, directing it toward a taxable investment account is another way to build up your nest egg.

Brokerage firms offer these accounts as an additional way to save for retirement. Sure, they don’t come with tax benefits, but they also offer more freedom since you aren’t handcuffed to contribution limits, salary restrictions or early withdrawal penalties.

That said, you’ll have to ask yourself if it makes better financial sense to max out your 401(k) and/or IRA before looking to an investment account. Either way, you’ll definitely want to at least contribute enough to recoup any 401(k) employer match. Every case is different, but don’t be so quick to dismiss investment accounts because of the tax factor.

How to plan for retirement at every age

No matter what stage of life you’re in, you can always be working toward your retirement goals. Here’s what our experts have to say.

Retirement planning in your 20s:

“Your 20s is the best time to get into the habit of paying yourself first by automatically saving a portion of every paycheck,” Mark Wilson, an Irvine, Calif.-based certified financial planner, tells MagnifyMoney.

Time is on your side. Thanks to the magic of compounding interest, your early saving years are most powerful. Because you have more time to recover from any market setbacks, most experts recommend investing aggressively in stocks vs. safer, low-yield investments like bonds. A simple way to do that without getting too in the weeds is to sign up for a target-date fund.

Let’s say you open a Roth IRA and add just $50 a month starting at age 25. Assuming an average of 7% annual returns, you’ll have accumulated over $128,000 by the time you turn 65.

But how do you manage retirement savings if you have debt or can barely cobble together an emergency fund?

“For most 20-somethings, the number one goal isn’t saving for retirement,” Douglas Boneparth, a New York City-based certified financial planner, told MagnifyMoney. “Your 20s is really the time where you need to focus on equipping yourself with a strong foundation in personal finance.”

You may need excess income to help fund your financial goals, whether that be building a three- to six-month emergency fund, paying down high-interest debt or whatever matters most to you. That said, if your employer will match your 401(k) contributions in some way, passing on it means leaving free money on the table.

“Taking that match is a no-brainer; you could immediately get maybe a 25% or even 100% return on those first dollars,” said Wilson.

This certainly isn’t to say you shouldn’t get a jump on retirement planning — it just means that getting yourself on solid financial ground should be top of mind. Begin by getting a firm grasp on your income and expenses, then creating a realistic budget that feels doable for your lifestyle. After all your monthly bills are paid, how much is left over? This is what Boneparth refers to as “mastering your cash flow.”

How much should you save? He says earmarking 10% to 15% of your income for retirement is the ideal scenario, but if this isn’t feasible, the idea is to squirrel away at least enough to get an employer match. The most important thing is getting into the routine of saving. You can always dial up your efforts as you start earning more.

The main takeaways for your 20s:

  • Establish a strong financial foundation — track your income and expenses, and create a realistic budget.
  • Identify your financial goals, then use excess monthly income to fund them little by little.
  • If your employer offers a 401(k) match, try to contribute enough to lock down this free money.
  • Get into the habit of setting aside some portion of every paycheck for retirement. A little can go a long way when it comes to compounding interest.

Retirement planning in your 30s:

By this point, most people are earning more than they did the decade before, of course many also have new expenses — a mortgage, kids, child care bills etc.

Having competing money goals never really goes away, but padding your retirement fund should be a priority at this point. Brogan says that if you’re just starting to save for retirement now, you should aim to sock away 10% to 15% of each paycheck.

“This can feel overwhelming for someone who’s already established in their work life and used to spending that money, so I suggest starting small,” he said.

For example, begin by saving just 2% of your income, then increase it gradually every year. You can also direct, say, 50% of every work bonus or a percentage of every tax refund or raise to your retirement accounts. Using cash windfalls feels less painful since they’re separate from your monthly budget.

Also, if you don’t have life insurance, it’s time to seriously consider it. This is doubly important if you are a primary breadwinner or you have children who depend on you. Check out our guide to life insurance here.

The main takeaways for your 30s:

  • Shoot to set aside 10% of your income for retirement. If this feels overwhelming, start small and gradually work your way up.
  • If you’re short of your goal, boost your efforts by leveraging cash windfalls like work bonuses, raises and tax refunds.

Retirement planning in your 40s:

Our financial priorities are always evolving, but many people in this phase of life feel particularly torn between two biggies: college savings versus retirement. Parental instincts often nudge us to take care of our children before ourselves, but our experts actually say that your retirement should come before financing your kids’ education.

“Unlike college, there are no scholarships or loans you can get for retirement,” warned Wilson. “If you’re behind on retirement savings, this is the time to kick it up because by the time you get into your 50s, it’s only going to get harder.”

On that note, Wilson says those just getting started should strive to save no less than 15% of their income for retirement at this point. This obviously may require some budgeting overhauls. Tracking your expenses may help you reveal areas of wasteful spending. Can you negotiate down any bills or go without cable, for example? Can you pick up a side gig or consolidate high-interest debt to free up more money for retirement? Every little bit helps.

The main takeaways for your 40s:

  • If you haven’t started saving at this point, strive to earmark 15% of your income for retirement. This may require reworking your budget. Remember: Something’s always better than nothing, even if it’s short of that 15% mark.
  • Retirement savings on track? If possible, up your account contributions.

Retirement planning in your 50s

Now you’re really on the home stretch. Once you get five to 12 years out from retirement, Brogan suggests really sitting down and asking yourself what your income needs will be like once the time comes. This is important as fewer than 50% of Americans have actually calculated their retirement number, according to the U.S. Department of Labor.

Begin by clarifying how much guaranteed income will be provided. Social Security benefits and pensions, for example, fall into this category. To ballpark your Social Security benefits, check out this handy guide. According to the Department of Labor, these benefits, on average, are equal to roughly 40% of your pre-retirement earnings.

If, for instance, you’ll be getting $40,000 in Social Security between you and your spouse, and you’ve decided you need about $65,000 a year to live comfortably, that means you’re going to have to draw $25,000 from savings each year to maintain that lifestyle. (Just be sure to adjust for inflation.)

Those who aren’t quite hitting their savings goals can contribute more to 401(k)s and IRAs once they turn 50, at which point the IRS allows for higher contribution limits. The same goes for Health Savings Accounts once you turn 55.

The main takeaways for your 50s:

  • Think about what your income needs will actually be like in retirement. Then pinpoint any guaranteed income like Social Security benefits, pensions and so on. How much will you actually need to draw from your retirement accounts each year?
  • Continue kicking into your retirement accounts.
  • If you’re behind, consider leveraging catch-up contributions.

Retirement planning in your 60s

The average retirement age in the U.S. is 63, according to the Statistic Brain Research Institute. The good news is that those who are behind still have some time to shore up their finances before leaving the workforce. One of the best strategies is having a practical retirement date.

“Working an extra two years is the easiest way to make a big impact on your nest egg,” said Wilson.

Another workaround is to delay when you start taking your Social Security benefits. According to the Social Security Administration, you can begin cashing in on them at age 62, but how much you get increases every year that you get closer to what’s considered full retirement age (67). Here’s how the SSA breaks it down:

Age you start collecting Social Security

How much of your monthly benefit you'll get

62

70%

63

75%

64

80%

65

86.7%

66

93.3%

67

100%

One other tidbit: About five years before you retire, Brogan recommends beginning to set aside whatever money you’ll need during your early years of retirement — say, the first five years or so — into stable investments. If you find yourself in the middle of a market downturn right after you step away from your job, having some money in a traditional savings account, for instance, means you won’t have to liquidate money in the market while it’s down.

The main takeaways for your 60s:

  • Be reasonable about your retirement date. Staying in the workforce could majorly boost your nest egg.
  • Consider delaying your Social Security benefits, if necessary.
  • About five years before you retire, start setting a few years’ of retirement income into an account that’s separate from the stock market.

Final thoughts on retirement planning

Retirement planning is far from a one-size-fits-all approach, but some general rules of thumb do apply. Read up on which type of retirement account feel right to you. Then set yourself up for long-term success (and reap the benefits of compound interest), by beginning to save as early as possible. If your employer offers free money by way of a 401(k) match, all the better.

Once you get into your 60s, you can ratchet up your savings even more by settling on a reasonable retirement date and delaying your Social Security benefits, if possible. Of course, you’ll have to tweak and adjust along the way as life happens, but accommodating other financial goals doesn’t have to be an either/or situation.

The most important thing is to nurture the habit of routinely earmarking some portion of your earnings for your nest egg — in good times and bad.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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Earning Interest, Reviews, Strategies to Save

Review of Live Oak Bank’s Deposit Rates

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Year Established2008
Total Assets$2.7B
LEARN MORE on Live Oak Bank’s secure website
Chances are you haven’t heard of Live Oak Bank. After all, this lender, based mostly on the web, has only been around since 2008, and it mostly focuses on giving out small business loans to businesses in specific industries, such as veterinary practices or craft breweries.That’s no reason to pass it up for your personal banking needs, however. In fact, this little gem of a bank has one of the best-kept secrets in the personal banking world: it has one of the highest savings account interest rates you’ll find from an online bank. (More on that below.) And, most of its other personal deposit accounts offer relatively high rates as well.Let’s take a more in-depth look at its deposit accounts to see if they’re right for you.
Live Oak Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

1.70%

Savings

Live Oak Bank Savings Account

2.20%

CD Rates

Live Oak Bank 1 Year CD

2.60%

CD Rates

Live Oak Bank 3 Year CD

2.70%

CD Rates

Live Oak Bank 5 Year CD

Live Oak Bank’s savings account

When it comes to the best savings accounts with high interest rates, Live Oak Bank currently has one of the highest rates.

APY

Minimum Deposit

1.70%

Up to $5 million

(but only up to $250,000 is FDIC-insured)

Rate current as of 5/1/2018

  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $0
  • ATM fees: None
  • ATM fee refunds: None

Live Oak Bank currently has one of the best savings account rates available. This means that Live Oak Bank is lowering the bar and allowing anyone to take advantage of these high interest rates, no matter how much is in his or her pocket right now.

Live Oak Bank wants you to use your savings account, and use it often, which is one reason why it has no monthly maintenance fee. If there is no activity on your account for 24 months and your balance is less than $10.01, Live Oak Bank will take the remainder of your balance as a Dormant Account Fee and close your account.

Getting money into a Live Oak Bank savings account from an external bank account can take a little bit of time depending on how you do it. If you request the money through Live Oak Bank’s online portal, the funds won’t be available for up to five or six business days. But if you opt instead to send the money to Live Oak Bank from your current bank, the money will be available as soon as it’s received. Your Live Oak Bank savings account will start earning interest as soon as the money posts to your account.

You can easily withdraw your money at any time via ACH transfer. Simply log into your Live Oak Bank savings account and electronically transfer it to whichever bank account you wish. It’ll be available in two to three business days.

You are limited to making just six withdrawals per month with this savings account. That’s not a Live Oak Bank thing; that’s a federal regulation imposed upon savings accounts in the U.S. If you absolutely can’t wait until next month to make another withdrawal past your allotted six per month, you’ll be charged a $10 transaction fee for each additional action.

Live Oak Bank CD rates

Live Oak Bank also has some of the best CD rates with a decent deposit amount.

Term

APY

Minimum Deposit

6-month CD

1.85%

$2,500

1-year CD

2.20%

$2,500

18-month CD

2.35%

$2,500

2-year CD

2.45%

$2,500

3-year CD

2.60%

$2,500

4-year CD

2.65%

$2,500

5-year CD

2.70%

$2,500

Rates current as of 5/9/2018

  • Minimum opening deposit: $2,500
  • Early withdrawal penalty:
    • CD terms that are less than 24 months — 90 days’ interest penalty
    • CD terms that are more than 24 months — 180 days’ interest penalty

Live Oak Bank currently offers the highest CD rates. This bank’s minimum deposit requirements also seem to be right on par with other bank’s minimum deposit requirements. Currently, the best CDs out there have minimum deposit requirements both above and below Live Oak Bank’s $2,500 benchmark.

Only U.S. citizens and permanent residents are eligible to open these accounts. It’s a relatively straightforward process to open a CD: Simply complete the forms online, provide any needed documentation (such as your current bank account details), and wait for an account approval. Once your account is open, you can transfer over your deposit, where it will be held for five days before officially launching your CD.

If you need to take out your deposit early, bad news: As with many CDs, you’ll face an early-withdrawal penalty at Live Oak Bank. If your original CD term was for six months, one year or 18 months, you’ll be charged 90 days’ worth of interest. If your original CD term was for longer than that, you’ll be charged a higher rate of 180 days’ worth of interest.

If you are able to resist the urge to withdraw your money early, congratulations! Your CD will automatically renew into a second CD with the same term length. However, don’t panic if that’s not what you want: You have up to 10 days after the CD has matured to withdraw your money penalty-free and park it in your own bank account (whether it’s with Live Oak Bank or not).

It’s easy to overlook Live Oak Bank for other larger, more established consumer banks like Ally or Discover Bank. But Live Oak has some of the best CD rates around, and the best savings account available on the market today.

Lest you be scared away by its smaller name, consider this: This tiny-but-growing bank is getting rave reviews from customers and employees alike. It carries an “A” health rating, and has a top-notch online banking portal. About the only thing missing is a checking account to let you seamlessly do all of your daily banking with this great company.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Reviews, Strategies to Save

BB&T CD Rates and Review

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Trying to find BB&T CD rates
Source: iStock

As you may know if you’ve done a search for BB&T CD rates, their website is not a helpful place to turn for information. Beyond a basic overview of their CDs on their website stating that they have CDs with terms ranging from seven days to five years, they do not give details on their current rates. BB&T did not respond to email and phone inquiries from MagnifyMoney asking why the bank does not publish its CD rates online. When we called their customer service number, a representative said BB&T’s CD rates change on a daily basis and said the best way to learn about CD rates is to call or visit a local branch.

So that’s what we did.

We reached out to BB&T branches on May 1st. After conducting this research, it’s not surprising BB&T makes their CD rates hard to find — they’re terrible.

BB&T CD rates and products

BB&T offers CD terms ranging from as short as seven days to as long as five years. They have eight CD options, each with different investment goals.

7-day to 60-month

For short-term investments, BB&T offers CDs ranging from seven days to 60 months. These personal CDs offer a fixed rate of return along with the flexibility to focus on developing either a short- or long-term investment.

BB&T CD Term

APY

Minimum Deposit Amount

3 Months

0.03%

$1,000

6 Months

0.05%

$1,000

1 Year

0.10%

$1,000

18 Months

0.15%

$1,000

2 years

0.20%

$1,000

3 Years

0.40%

$1,000

4 Years

0.45%

$1,000

5 Years

0.50%

$1,000

Rates as of May 1, 2018

Not only can you find better CD rates at other banks and credit unions for each of the terms BB&T offers, you can get those better rates with smaller minimum deposits. BB&T’s offerings are far from the best in every term length above — you can see some of the top options in our monthly roundup of the best CD rates.

With the seven-day to 60-month BB&T CDs, there are no penalty-free options for withdrawing your funds prior to the CD reaching maturity. The early withdrawal penalty is the lesser of $25 or 12 months of interest for longer-term CDs. So with smaller initial deposits, early withdrawal penalties will negate any interest you may have earned.

Can’t Lose

As the name of this CD implies, whether rates go up or down, you can’t lose. Well, actually, you can: The APY is so low, you’re almost certainly going to lose money to inflation.

At the 12-month mark of the CD’s term, you may make one withdrawal without paying any fees. So if the market rate is higher than what you’re currently getting, simply withdraw the money and reinvest at the higher rate.

If, however, the interest rate you’re receiving is better than what’s currently available, you also have the option of making a second deposit into the Can’t Lose CD, up to $10,000. This locks in the rate for the new investment amount for the remainder of the term. So whether rates go up or down, you’ll lock in the higher rate.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

30-month "Can't Lose"

0.25

$1,000

No penalty for one
withdrawal after 12 months

As of May 1, 2018

Still, you can find many CDs with better APYs than BB&T’s Can’t Lose, whether you’re looking for a 12-month investment or longer.

Stepped Rate

Laddering is a way to stagger your CD investments so you’re able to take advantage of increasing rates. With the Stepped Rate option from BB&T, laddering is built into the CD product. The initial CD starts out at a lower rate and increases each year. For example:

Months

APY

12

0.30%

24

0.40%

36

0.55%

48

0.75%

As of May 1, 2018

This product also allows you to make an additional deposit each year (up to $10,000). So if the interest rate you’re receiving is better than the market, you can invest more money into your existing CD to make a higher return. But if the current CD market is offering better rates than your existing CD, you can simply take advantage of that offer and still make a higher return.

In addition, you may make a withdrawal from what you initially deposited into your Stepped Rate CD after two years. So, again, if the market changes dramatically, you may withdraw your money with no penalty and reinvest in a better option.

Or you could create a CD ladder on your own, choosing CDs with better rates than BB&T’s — higher rates are certainly available.

Add-on

The Add-on CD option from BB&T offers a 12-month CD at 0.10% and an opening deposit of $100. You’ll need a BB&T checking account and a $50/month automatic deposit from your checking account into the CD. To get a personal account, you’ll just need to set up direct deposit or maintain a $1,500 balance.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

12-month Add-on

0.10%

$100

Greater of $25 or
6 months’ interest

As of May 1, 2018

Home Saver

If you’re in the market for a new home, and you want to earn a little more interest on the money you’re saving, consider the Home Saver CD. Starting with as little as $100, you’ll be able to deposit money earmarked for your new home every month and earn 0.40% APY. With this CD, as long as you’re withdrawing the money for use toward the purchase of your new home, you won’t pay any penalties for the withdrawal. But you will need a BB&T checking account set up for a monthly deposit of $50 into your Home Saver CD.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month Home Saver

0.40%

$100

No penalty for
home purchase

As of May 1, 2018

College Saver

Similar to the Home Saver CD, the College Saver CD is meant for parents or students saving for college. It offers the benefit of starting at a higher APY (0.40%) with the flexibility of withdrawing the money up to four times per year to pay for the cost of attending school. As with the Home Saver, you’ll need to have a BB&T checking account with an automatic monthly deposit of $50. The College Saver offers terms of 36, 48, and 60 months.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month College Saver

0.40%

$100

No penalty for
school costs

48-month College Saver

0.45%

$100

No penalty for
school costs

60-month College Saver

0.50%

$100

No penalty for
school costs

As of May 1, 2018

Treasury

This CD offers the ability to make additional deposits of at least $100 into your CD at any time and one monthly withdrawal without penalty. The CD has a six-month term with a variable interest rate tied to the U.S. Treasury Bill — if the rate goes up, you’ll make more money, but if the rate declines, you’ll make less. Right now, rates start at 1.86% and adjust quarterly. Throughout 2016, Treasury Bill rates increased almost every month and have continued to rise in 2017, reaching 1.035% in August. So this is a great option if you have the $5,000 minimum deposit amount and want a short-term investment with the option to add or remove funds from the CD.

CDARS

CDARS stands for Certificate of Deposit Account Registry Service and protects your principal and interest by making sure your money is placed into multiple CDs across a network of banks to keep your CDs insured by the FDIC (maximum limit for each CD is $250,000).

Other things to know about BB&T CDs

Does BB&T allow customers to take advantage of rising rates once they’ve opened a CD?

BB&T has two CD options that allow you to take advantage of rising rates: the 30-month Can’t Lose CD and the 48-month Stepped Rate CD. Both allow you to make a withdrawal before the CD comes to maturity in case rates increase (terms apply). They also allow additional deposits in case rates drop and you want to invest more at the existing rate of your CD. However, the current rates on those products are very low, negating the value of their flexibility.

About BB&T

BB&T (Branch Banking and Trust Co.) is a North Carolina-based bank with locations in 16 states and the District of Columbia, including Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and West Virginia.

BB&T offers a mobile app for both iOS and Android. While their website is easy enough to use, finding specific information, particularly about rates, is impossible. Their customer service number isn’t much help in that regard either, with most questions answered with a suggestion to visit a branch location. As a result, if you don’t live in an area with a branch, we don’t recommend using BB&T’s CDs. To find the BB&T branch closest to you, use their branch locator.

Pros and cons of CDs

A certificate of deposit (CD) may offer a higher return than you’ll get with your savings accounts, without the risk of loss that accompanies other investment options with higher return rates. The drawbacks associated with CDs are the inability to access your funds during the term of the investment without suffering a penalty and the risk of interest rates increasing while your money is locked into a CD for a specified term.

The bottom line: Are BB&T CDs right for you?

BB&T does offer some flexible deals to its customers, but in general, better CD rates can be found at both banks and credit unions with comparable terms. You can find them on our list of the best CD rates, which we update every month.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

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Strategies to Save

How to Save at Disney: Families Who Go Every Year Give Their Best Tips

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Going on a family vacation to “the most magical place on earth” costs a pretty penny for families, and the price has gone up yet again. This year, Disney increased the price of admission into its U.S. theme parks by about 9% on average. Forbes reports that Disney increased prices “to help regulate crowd sizes throughout the year in hopes of reducing the wait at the parks,” which are the most highly attended theme parks in the world.

They are also among the most expensive theme parks to visit in the U.S. A five-day trip for a family of four could easily cost $4,000, including park admission, lodging and food — and that’s without any travel costs or extras, like souvenirs.

In contrast, American vacationers planned to spend an average of $2,936 on their summer trips, according to our 2017 survey. But the high costs don’t keep the Disney faithful away, and many Disney enthusiasts have devised savings strategies when making the trip to Disney World in Orlando every year. We spoke to some of these families to get their best savings tips with us for anyone planning a Disney World vacation.

Top savings strategies

  • Use points to book flights or use a rewards credit card
  • Book your next stay before you leave or keep an eye out for hotel promotions
  • Wait to buy souvenirs
  • Split meals or find other ways to save on food
  • Use discounted gift cards

Christine & John Meade

Long Island, N.Y., couple Christine Meade, 35, and her husband John, 38, have already taken their 18-month-old son, Mason, to Disney World twice and have plans to take their next trip for his second birthday. Christine has visited Disney World every year — sometimes twice a year — since 2005.

“Before we had [Mason] we loved going. It’s a lot more than just a kid vacation,” says Christine, adding that there are “so many things to do” at Disney World. “It’s just an escape from everyday life. Now that we have the baby its almost like a natural thing to take him.”

“Now it’s like a different kind of fun. Watching him enjoy all of these things and experience all of these things is a different kind of experience,” says Christine.

Saving with Swagbucks

The trips aren’t cheap for Christine, who works as a waitress, and John, an installation technician with a home security company. Christine says the family now spends a little more than $3,000 for the entire vacation — travel and food included. Mason is still younger than 3 years old, so he doesn’t need a child pass.

Now with a toddler to budget for, Christine has been trying out apps that help her save money, like Ibotta, and earning money through side gigs like mystery shopping. She credits websites like Swagbucks, among others, and says she finds them helpful towards earning some extra income.

“I’m always making the extra money with going to Disney in mind,” says Christine.

Since November 2017, when she began using the app, the couple has earned more than $2,000 between their Swagbucks accounts. You can redeem Swagbucks for prizes, PayPal cash or Mastercard gift cards that you can use just about anywhere. This year, the couple may have enough money from Swagbucks to cover all the costs of their trip, except airfare to Orlando.

Use points on flights

But, they likely won’t pay for flights either, because they’ve earned plenty of points using their JetBlue Card**. They got the card about two years ago and earned enough points to entirely cover their last two round-trip tickets to Orlando.

To make sure the rewards program is worthwhile, Christine generally pays off the card’s balance weekly to avoid interest charges. She also tracks flight prices to make sure the couple makes the most of their points.

Book with a bounceback offer

The couple books their next Disney vacation before they leave the Disney hotel. Their proactiveness generally earns them a discount, called a bounceback offer. On their last trip in November 2017, they booked the day they were checking out and saved 25% on their room for their next vacation, Christine tells MagnifyMoney.

The bounceback promotions fluctuate. Sometimes it’s a different discount, or a free dining plan, which the couple has received in the past. If it’s not offered to them, the couple says there is sometimes a pamphlet left in the hotel room with information about a bounce back offer or you can dial x8844 from your hotel room to find out about the bounceback offer.

Split a Memory Maker

A final tip: Christine tells MagnifyMoney they may also search Facebook for another family going to Disney World around the same time and agree to split the cost of a Disney Memory Maker. The Memory Maker costs $169 for the length of your trip and gives you unlimited downloads of all your Disney PhotoPass photos and video taken by Disney’s photographers.

Other savings

The couple finds additional savings by using perks that come with staying at a Disney hotel, like free transport to and from the airport, extra FastPasses (for shorter wait times at the parks), MagicBands (radio-frequency enabled bracelets that serves as your park pass, hotel key and more) and extended park hours, called Magic Hours. They also have a Disney® Premier Visa® Card* that grants entry to opportunities to meet and take photos with Disney or Star Wars characters and 10% off some merchandise and dining purchases, in addition to other savings.

Cora & Benson Helton

Cora Helton, 33, and her husband Benson, 30, of Columbus, Ohio, have gone to Disney World at least once a year since 2014.

In 2017 they went four times, and three times in 2016, and in 2018, Cora says she thinks they’ll go twice because Benson has to do some continuing education for his work as a web developer. They say they love Disney in part because has so much to offer adults.

“You are in what we call the Disney bubble,” says Cora, a voice-over artist. “You’re not checking your Facebook, you’re not watching the news, all of this turmoil and political upheaval. You are completely in this magical world of Disney.”

Use discounted Disney gift cards

She says her main savings hack is the “gift card hack,” where she purchases Disney gift cards at a discount to pay for her trip.

“You can plan your whole trip in advance and pay it all off with gift cards,” says Cora.

Several retailers sell discounted Disney gift cards. At Sam’s Club, for example, Disney gift cards valued at $500 are often sold at a discount. Target, too offers a 5% discount on Disney gift cards for its REDcard holders.

“The better option is to get them at my local grocery store, Kroger, because they have a fuel perks program,” says Cora.

Shopping with a Kroger Plus Card, Kroger’s free membership program, you earn 1 fuel point for every dollar you spend. Sometimes Kroger does a special where they offer four times the fuel points per purchase — that’s when Cora stocks up on gift cards.

Buying a $500 gift card, Cora says she can earn 2,000 fuel points, which earns her $2 off per gallon of gas, up to 35 gallons. She goes a step further to maximize her savings by making the purchase with a 3% cash back credit card; she calculates her savings at $85 with this method.

Try a Disney travel agent

The Coras also use a Disney travel agent to make the most of their trip. It generally won’t cost you any additional fee to book a Disney vacation through a certified Disney travel agent, as Disney compensates them for their work.

“It saves money because they know all of the best bargains,” says Cora. “They know when the best deals will drop; they can be up at midnight when the FastPasses become available.”

Having another set of eyes looking out for deals can be helpful as FastPasses, dining reservations and discount resort rooms go fast.

“You can tell them tell them what you want to do in advance and they do all of the hard work and you don’t have to do anything,” says Cora.

Become an annual passholder

The Heltons have annual passes, which they say helps them save money.

There are two tiers of annual passes for access to Walt Disney World’s four main parks: the Disney Platinum Pass ($849 per person) and the Disney Platinum Plus Pass ($949 per person). The Platinum Pass offers a 20% discount on some dining and merchandise purchases. It also rolls in things like a park hopper pass, which allows you to go visit multiple parks in a day, and rolls in Disney photopass downloads.

“Do the math on how much value it would be for the number of times you would go a year and the amount the discount will save you,” advises Cora.

Plan and split meals

Cora recommends choosing your restaurants carefully at Disney World and sharing meals when you can. She tells MagnifyMoney there are a couple of different places in the park that they know are inexpensive and can feed them both.

Cora says she and Benson go through the entire menus of their restaurant options while they are at the park and choose what they’d like before they decide to go. You can start even farther ahead — during your planning. You can preview Disney World dining options online and you can filter the restaurants by park. Disney also provides each restaurant’s menu online and you can filter this search by price-per-person for an easier time budgeting for food.

Andrea & Brian Tucker

Baltimore residents Andrea Tucker, 48, and her husband, Brian, 49, go to Disney World once a year with their two daughters, ages 12 and 13.

Their whole family adheres to a gluten-free diet, and Disney is one of the easiest places for them to vacation with their dietary restrictions. Andrea, a health educator and the owner of Baltimore Gluten Free, is strictly gluten free for an autoimmune disease. Her youngest daughter has Celiac Disease, an autoimmune disease that causes the body to attack the small intestine after ingesting gluten.

“We go to Disney so frequently because it is the safest place for us to go to eat and it really is a true vacation because of that,” says Andrea. “They are just really great with dietary restrictions and lots of dining options everywhere.”

Use a rewards card to save

Andrea says her family finds their main savings through cashback earned using their Disney® Premier Visa® Card* on all of their purchases throughout the year. She says it helped them to save more than $1,000 on their last trip.

The card charges a $49 annual fee. It earns 2% cash back on purchases made at gas stations, grocery stores, restaurants and most Disney locations, and 1% back on all other purchases. An introductory bonus offers a $200 statement credit after the cardholder spends $500 within the first three months of opening the card.

Book Disney hotel rooms on promotion

Their family likes to stay at the three Disney resort locations closest to the theme parks, which are slightly more expensive than Disney’s other options, so Andrea is always on the lookout for a hotel room promotion.

“We wait for that sale to come up. It requires a bit of checking and vigilance to get those rooms when they go on sale because when it does, it goes fast,” says Andrea. “It’s important to be ready to act on it because there are only a limited number or rooms and people are waiting on it.”

You can find Disney’s current hotel rates and discounts on the company’s website. Andrea says that ideally she looks for a 30% room discount and generally sees discounts crop up in the early spring, for example. As of this writing, Disney is offering 20% to 25% discounts.

Save on food and drink where you can

Because they splurge on dining at Disney, the family cuts spending on food in a handful of other ways throughout the day.

They cut spending on one meal a day by getting groceries and eating breakfast in their hotel room. Andrea says they use a delivery service to order food ahead of time and have it delivered to their room, and they get staple items like cheese sticks, milk, yogurt, bananas, water and things they can heat up in a microwave in their hotel room.

The family also brings a free carry-on bag on their flight filled with their favorite snacks to eat throughout the trip. They bring water bottles to fill up at the parks to drink throughout the day.

Wait until the last day to buy souvenirs

One lesson the family learned on their first trip to Disney World: Only buy souvenirs after you’ve seen all of your options.

“Especially when my kids were younger, you’d go, ‘Oh my gosh, this is so cool,’” says Andrea, who says they wasted some money on souvenirs early on. The next day, they’d inevitably see something they wanted more than what they’d already purchased.

Now, they buy souvenirs only after visiting all of the parks. They use a park hopper pass so they can visit the same park multiple times.

“We kind of just remind everybody before the trip that it’s going to be exciting and so many cool things and we have time to look around and think about the best options,” says Andrea.

Bottom line

These tips can help you save some money on your trip if you use them, but at the end of the day, it’s your vacation. Getting a good sense of what you want from your trip before you book will help you save overall.

For example, none of these families would consider staying off-site, in a hotel near the park but not a Disney Resort hotel, although it’s an easy savings option.

“We have stayed off property in the past. You do save, but it’s just not the same,” says Christine.
“I like the magic of staying on property. You walk into that world of Disney, it’s fun and happy and everyone is in a good mood.”

But if staying on Disney property isn’t important to you, you can save — and use your savings on things you’d personally value more.

The lowest rates for a standard room for two adults at one of Disney’s value stay resorts from Aug. 5 to 11, 2018 are, as of this writing, selling at $120.53 a night, on a 20% discount promotion. That’s a premium to pay for the full Disney experience, even at a discount, compared to a room that costs less $100 a night at a nearby hotel with a free shuttle to the Disney theme parks and free breakfast, which the Disney resorts do not provide.

Ticket prices also vary by day and theme park, so if it’s not important to you to go during peak times (which you can see when buying tickets online), visit all of the parks or upgrade to park hopper passes, you can save there, too. When it comes to saving at Disney, all about setting your priorities and doing research in advance.

*The information related to the Disney® Premier Visa® Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

**The information related to the JetBlue Card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Strategies to Save

The Ultimate Guide to CD Ladders

Editorial Note: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

The Ultimate Guide to CD Ladders

Certificate of Deposits (CDs) are some of the highest-yielding deposit accounts offered at most banks and credit unions. But, they come with a catch: your money is locked away for a certain period of time, and generally you can’t unlock it without paying an early withdrawal penalty.

It’s also no secret that interest rates are changing these days. That can also affect the returns you get from saving with CDs.Things only get more complex if you’re attempting to create what is called a CD Ladder, which can be used to take advantage of higher APYs while staggering investments so all your cash isn’t tied up for a very long time.

If you want to save money by creating your own CD ladder, you need to juggle your own financial goals with shifting interest rates and early withdrawal penalties. It’s possible that CDs may not even be the right investment tool for you. How are you supposed to decipher what’s the best course of action when there are so many competing possibilities? Fear not. We’ll help you decide whether CD ladders are the right investment tool for you and how to get the most out of them in this guide.

What is a CD ladder?

A CD ladder is a series of several CDs that are structured with varying terms. By staggering the terms, you ensure that each CD finishes its term at regular, predictable intervals. That way, you’ve got access to a steady stream of cash while still earning higher rates than you might through a regular savings or checking account.

The main disadvantage of CD ladders is that your money is locked away for a certain length of time. This differs for each CD and is called its term. CD terms can range all the way from one month to ten years. Generally, the longer the CD term, the higher the interest rate you can get.

Logically, you’d think that the best thing to do would be to put all your money in long-term CDs, right? Unfortunately, doing so has two specific risks.

You could miss out on rising rates. If the Federal Reserve raises interest rates (as they have been doing for the past two years), many banks and credit unions soon follow by raising the rates on their own deposit accounts. But, if you’re locked into a long-term CD, you could be stuck in a high-interest rate environment with the poor interest rates from yesteryear. That means you won’t be earning the maximum amount of interest possible.

It’ll be hard to tap into your savings in a pinch. Secondly, what if something happens and you need access to that cash? Can you predict what’ll happen in five years—a home purchase, major medical bills, or some other unexpected large expense? If your money is locked away in long-term CDs, you could be out of luck unless you pay a potentially-substantial early withdrawal penalty.

Luckily, there’s an easy solution that lessens these two risks: a CD ladder.

How to create a CD ladder in 3 easy steps

A CD ladder is a pretty intricate strategy. You split your money up into equal parts and match each pot of cash to a partnering CD. Then, you line them all up in a precise order and wait for the interest to accumulate.

Sound confusing? Let’s break it down with an example to show you exactly how it works with a basic five-year, five-CD ladder.

To start, let’s assume that you have $5,000 that you want to invest in a CD ladder (although this will work with any amount of money).

Step 1: Open up five separate CDs

Divide your cash into five equal parts. What we’re going to do is open five separate CDs. So, divide your cash into five equal pots of $1,000 each.

Search and compare to find banks with the best rates on CDs. Go to your bank of choice, either in-person or online. It’s possible to open up accounts at different banks or credit unions if they offer better rates on some CDs, but keep in mind that that will increase the complexity of this strategy. Open up five separate CDs with each pot of cash all at once and on a staggered schedule. Here’s what you’ll have when you leave the bank:

  • $1,000 in a one-year CD
  • $1,000 in a two-year CD
  • $1,000 in a three-year CD
  • $1,000 in a four-year CD
  • $1,000 in a five-year CD

Mark the date that you open all of these CDs on your calendar so that you can keep up with the CDs’ maturity dates.

Step 2: Each year when a new one-year CD matures, renew it ….and convert it into a five-year CD

Every year on your CD maturity date, one of your CDs’ terms will be up. For example, if you open a CD on May 26, 2018, then your one-year CD will come due on May 26, 2019. Your two-year CD will come due on May 26, 2020, and so on.

With most banks, when a CD becomes due, it will automatically roll over into another CD of the same term length (a one-year CD will automatically roll over into another one-year CD when it matures, for example). After it automatically rolls over, you will have a grace period of around one to two weeks where you can withdraw the money, add more money, and/or change the CD to a different term length — penalty-free.

Instead of letting your CD roll over into another one-year CD, you’re going to want to switch it up. Before the grace period ends, you’ll want to renew it into a five-year CD instead. Then, in 2020, you’ll do the same thing: you’ll renew the now-mature two-year CD into a five-year CD, and so on.

If you open up all of your CDs in 2018, it’ll look like this:

  • 2019: renew the one-year CD into a five-year CD
  • 2020: renew the two-year CD into a five-year CD
  • 2021: renew the three-year CD into a five-year CD
  • 2022: renew the four-year CD into a five-year CD
  • 2023: renew the five-year CD into another five-year CD

The reason we do this is because the five-year CDs pay out vastly higher rates of interest than the shorter-term CDs. If you can keep all of your money in the highest-earning CDs, you’ll get the maximum amount of cash possible.

Step 3: Decide whether you need to pull the money out or not

The other reason we do this strategy is because if we need to withdraw the money, we get free access to one new CD per year on our CD maturity date. In our example, that means you can withdraw $1,000 (plus whatever interest the CD earned) once per year without paying an early-withdrawal penalty.

Each time a CD becomes due, you should ask yourself: Do I need to withdraw this cash for any reason? If the answer is no, then keep your money in a CD ladder. If it’s not already invested into a five-year CD, then go ahead and renew it into a five-year CD. If it already is invested into a five-year CD, then just let it auto-rollover into another five-year CD. As long as you don’t want to withdraw the cash, your CD ladder will be fully on autopilot from this point forward.

Mini CD ladders: Explained

The five-year CD ladder sounds great, but if you’re like a lot of other people, you might need more frequent access to your money than once per year. That’s where a mini CD ladder might come in handy.

Rather than setting it up so that a new CD becomes due once per year, you can choose shorter term CDs and stagger them so that they mature every few months instead.

Let’s look at another example—the three-month, four-CD ladder.

You would divide your cash into four equal pools and open up four new CDs with these terms:

  • Three-month CD
  • Six-month CD
  • Nine-month CD
  • Twelve-month CD

One new CD will become due every three months. When it does, you would renew it as a 12-month CD with a higher rate. That way, you can access your money once every three months instead of once every year.

If you want even more frequent access to your money, it might be possible to restructure this in a different way. Some banks have one-month CDs, although they’re not as common as three-month CDs. If you open 12 one-month CDs and renew each of them into 12-month CDs, then you could even get access to your cash every single month instead of every three months. The downside of the mini CD ladder is that you won’t earn as much, because five-year CDs carry better rates than a twelve-month CD.

What is the best CD ladder strategy for me?

CD ladders are already pretty straightforward. Open CDs of different lengths, and renew them to longer-term CDs when they come due.

But, it might surprise you to know that there are a lot of different CD ladder strategies. Whichever strategy works best for you depends on your individual situation, and what financial possibilities keep you up at night.

For example, do you worry that you’ll make a mistake by locking your money away in low-rate, long-term CDs if interest rates start to rise (a fair concern, given recent decisions by the Federal Reserve)? Or are you the type of micro-manager who optimizes every little decision so that they can maximize their monetary returns?

If so, good news. These are some of the best CD ladder strategies for different people.

Best if you don’t need frequent access to cash:

The five-year, five-CD ladder

This is the baseline CD ladder strategy we outlined above. You open up five CDs with staggered term lengths so that one new CD comes due each year, and then renew it into a five-year CD. After four years, all of your CDs will be in five-year CDs earning the maximum amount of interest.

This type of CD ladder strategy works best for folks who know they won’t need very frequent access to their money. If you choose this strategy, it’s a good idea to keep a separate emergency fund of three to six months’ worth of expenses tucked away in a high yield savings account. You definitely don’t want to find yourself in a situation where you can’t access money for a year when you really need it.

Best if you need frequent access to your cash:

The five-year CD ladder with low early withdrawal penalties

One of the main reasons to invest in CD ladders is so that you don’t have to pay steep early withdrawal penalties. These penalties are typically tallied up as a certain number of months of interest depending on the term of the CD. For example, TD Bank will charge you 24 months’ worth of interest if you take your money out early from a five-year CD

These early withdrawal penalties are pesky enough, but high fees like this could actually eat into the principal you’ve deposited into the account, especially if you haven’t earned enough interest to at least cover the early withdrawal penalty. This means you might actually end up with less money than you deposited into the account at the end of the day—not to mention how it’ll hurt your returns even if you have earned enough interest to cover the penalty.

One way to get around this is to search for CDs with low early withdrawal penalties. What exactly is a low early withdrawal penalty? According to Ken Tumin, founder and editor of DepositAccounts.com (also a LendingTree-owned company), a below-average early withdrawal penalty for a five-year CD is six months or less.

Searching for CDs with low early withdrawal penalties is the best strategy if you want to earn the most money possible but also think that there’s a high likelihood you might need to break into one of your five-year CDs outside of the once-yearly maturation date. With this strategy, you will minimize your loss if and when you need to withdraw the money early.

Maximum work for higher yields:

Juggling CDs at multiple banks

It’s very possible that the top prize for highest CD rate for each term length in your CD ladder is held by a different bank. For example, Bank A might have the highest rate for one and two-year CDs, while Bank B might have the highest five-year CD rate.

If you’re an intrepid optimizer, it’s possible to earn the most money by splitting up your CDs among different banks, according to Tumin.

If it sounds a bit complicated, it is. “Each year, you’ll have to worry about transferring the money to the [bank with the] best five-year rate,” says Tumin. It also requires a lot of organization to remember the details of your many accounts. But, there is a way to limit the chaos.

Tumin’s recommendation is easy. “Choose at least two or three internet banks, but no more than three to keep things simple,” he says. “If one bank no longer becomes competitive, you can easily keep the CD ladder going with the other banks.”

It’s also a good idea to maintain a savings or money market account at the same bank for each of your CDs — as long as the account has no minimums and no monthly fees, since it will probably be empty much of the time. This bank account is strictly meant to be a temporary holding account for the CD money you hold within the same bank.

“If you need to access the money before maturity, it’s much easier to have the CD funds (minus the early withdrawal penalty) transferred to a savings or money market account that is at the same bank,” Tumin advises. “Once it’s in the savings/money market account, it’s easy to open a new five-year CD at another bank.”

Hedging your bets against rising interest rates:

The barbell CD ladder

The barbell CD ladder is the best CD strategy if you’re worried about rising interest rates while most of your money is locked away into lower-rate CDs. With this strategy, you divide your money yet again: half into a high yield savings account (a separate savings account from your emergency fund), and half into a five-year CD ladder.

The advantage of keeping your money in a high yield savings account is that if interest rates rise, you can immediately withdraw that cash when you see fit and invest it into CDs.

Of course, the trick is knowing when to pull the trigger and move your money from the savings account into a CD. If you do it too soon, interest rates may rise again, and if you’re too slow, you may lose out on potential gains. It’s a balancing act and since it’s impossible to predict the future, there’s no way you can really know when the right time is for sure. You just have to do it and hope for the best.

How do CD ladders hold up to other investments?

CD ladders are just one of many investment choices you can make. To see how they stack up compared to other common options, we’ll show you what you can theoretically earn in 10 years with a $10,000 deposit using each of the following choices: a five-year, five-CD ladder, the stock market, a high yield savings account, and just keeping the cash stuffed under your mattress.

Five-year, five-CD ladder

For this scenario, let’s assume that you start out with the standard five-year, five-CD approach. You will start by putting $2,000 each into five CDs of the following term lengths: one year, two years, three years, four years, and five years. Each year when a CD comes up for renewal, you renew it into a five-year CD.

After the fifth year, we’ll assume that you continue keeping all of the CDs in five-year terms for another five years. According to Ken Tumin, the average yield on a 5-year CD ladder is about 2%, so we are using that as the hypothetical return on investment. Of course, rates ebb and flow all the time, so this is merely an estimation.

Risk:

One of the safest options. The FDIC and NCUA insures your money up to $250,000 at each bank or credit union, respectively.

Reward:

$1,290

The stock market

For long-term investments (retirement, for example), the stock market remains the gold standard for investing. Over the last six decades, the S&P 500 (one of the most common measures of the stock market as a whole) has returned about 7% per year.

We can’t predict the market’s returns, obviously, but we’re going to assume that someone investing in a broad-based S&P 500 stock market index fund would earn 7% on their investments each year for 10 years. Here’s how they would fare.

Risk:

Very high. People can and do lose significant amounts of money in the short term while investing in the stock market.

Reward:

$9,671.51

High yield savings account

High yield savings accounts offer the maximum amount of liquidity. If you might need your cash at any moment, it’s a good idea to keep it in a high yield savings account. The tradeoff is that you’ll earn less interest than you might with the five-year, five-CD ladder.

We used the highest rate (1.50% APY; current as of 12/12/17) for personal savings accounts available nationwide that were listed on DepositAccounts.com. We assumed a $10,000 deposit saved up over a 10-year period.

Risk:

Very safe. Anything you keep in a bank (including CDs or savings accounts) is insured up to $250,000 by the FDIC or NCUA for banks and credit unions, respectively.

Reward:

$1,605.41

Under your mattress

Who hasn’t heard stories from their grandparents about saving up their extra cash in a hidden mason jar or under their mattress? Back in the days when banks failed in the Great Depression, losing your life savings was a real concern. Thankfully, these days the FDIC and NCUA programs make your deposits safe at each bank or credit union up to $250,000.

Now, the danger lies in not earning any interest on your money. Inflation eats away your money’s value at a rate of around 3% or more per year. That means if you’re not earning at least 3% interest, your money is probably losing value rather than gaining value.

If you started out with $10,000 in 2007 and kept it stuffed away in your home for ten years, here’s what would happen.

Risk:

Very unsafe. That money could easily be stolen or lost in a fire, not to mention what’ll happen as inflation erodes its value.

Reward:

$1,805.67

Is creating a CD ladder worth it?

Whether or not a CD ladder is worth it depends on your individual situation and what your goals are.

According to Tumin, there are four things you need to keep in mind when deciding if a CD ladder is worth it for you: liquidity (how easy it is to access your cash), simplicity (how much work do you want to put into pulling off a master-CD-ladder?), maximizing your yield, and your investment time frame (do you want to invest indefinitely, or complete the CD ladder at a certain point in time?).

We’ve outlined several CD ladder strategies above that you can use to meet your goals. Compare them to your other options: will keeping your money in a high interest savings account, the stock market, or some other investment option work better for you?

In general, CDs today are earning far below what they used to. In July 1981, for example, you could get a one-month CD on the secondary market (i.e., buying it from an individual who has a CD, rather than a bank or credit union) with a whopping interest rate of 17.68% APY. Today the rates for a similar three-month CD are averaging 0.240% APY—quite a difference!

That means that today, CDs are generally not going to be your highest-earning option. This is especially true if you hold a large number of short-term CDs, as the mini CD ladder strategy calls for.

“I don’t think other CD ladders with shorter-term CDs are worth it,” says Tumin. “They don’t really provide much more liquidity,” especially if you opt to invest in five-year CDs with low early withdrawal penalties.

In fact, almost all CDs except for five-year CDs earn even less than a high yield savings account. Currently, banks are offering as high as 1.50% APY on high yield savings accounts—just under the current average interest rate for five-year CDs (1.57% APY).

If your CD investing strategy involves anything other than holding long-term five-year CDs (not counting the start of the CD ladder strategy when you hold CDs of several term lengths), then CDs may not be worth it when compared to a high yield savings account.

FAQ: CD ladders

If you really are terrible at saving money, CD ladders can be a great way to keep you disciplined. The extra sting with the early withdrawal penalty might be enough to help you overcome the urge to pull the money out before its term has ended.
Yes. CD ladders work well as a savings strategy for large purchases. You will need to do a lot of planning, however, to start the CD ladder and make sure all of your cash is outside of the CDs by the time you need it.
Yes. The money you earn in interest from your CD ladders is taxable. Your bank or credit union will issue you a Form 1099-INT at the end of the year for you to report on your tax return.

A grace period is the amount of time you have to withdraw, add funds, or change the CD to a different term length after it has matured. You typically have a one to two-week grace period after your CD matures.

It’s called a “grace” period because usually your CD will automatically roll over into another CD of the exact same term length. Normally this means you would then owe early withdrawal penalties if you take the money out early. Instead, banks offer you a “grace” period where you can withdraw the money without paying any early withdrawal penalties.

There are several other types of CDs:

  • Callable CDs offer higher interest rates, but the banks may cash them out for you at any time if they desire.
  • Bump-rate CDs offer staggered, increasing interest rates over time.
  • No-penalty CDs have lower interest rates, but no early withdrawal penalties.

It is possible to use them in your CD ladder, however you need to choose these CDs carefully. For example, what kind of monkey wrench would be thrown into your plan if you invest in a callable CD and it is indeed cashed out by the bank early? Or, would a no-penalty CD really offer rates that beat out a high yield savings account?

A jumbo CD is just a regular CD, but for a very large amount of money. Each bank or credit union has their own definition of what a “jumbo” CD is. For example, to invest in a USAA jumbo CD, you’ll need to bring at least $95,000 to the table. CIT Bank, on the other hand, requires a slightly larger minimum deposit of $100,000 to qualify for a jumbo CD.

Jumbo CDs typically offer much higher rates than regular CDs and can help you earn even more money in a CD ladder if you’re able to take advantage of them.

It depends on the type of CD ladder you use, and the savings account you’re comparing it with. In general, though, the five-year, five-CD ladder strategy will beat out even a high yield savings account in the long run.

For most people, no. We compared the outcomes from a five-year, five-CD ladder above with the typical returns you could expect from a stock market. A hypothetical $10,000 investment in a CD ladder earns $1,531.11 in interest over a 10-year period.

Compare that to typical stock market returns for the same amount of time and money: $9,781.51. The stock market far, far outperforms the CD ladder. If you’re saving for a very long-term goal like retirement, it makes more sense to grow your money in a high-yielding investment like the stock market, even if it is riskier.

This post has been updated. It was originally published Dec. 19, 2016.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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