MoneyHL Archives | Page 59 of 91

Sep

2022

Guide to Savings Clubs

By Jacqueline DeMarco | Budgeting & Goals, money | Comments Off

Spending money is typically fun, while saving money is hard — all that temptation to buy cool new things or try the latest restaurant. Which is why we can all use a little extra motivation to stash away some cash, and a savings club can play a role in that process.

What is a savings club? Basically, savings clubs are a type of bank account in which the account holder contributes to the account over time to meet a specific goal. It can be a valuable option vs. breaking out your plastic and running up credit card debt.

Keep reading to learn more about savings clubs, including:

• What is a savings club?

• How does a savings club work?

• What are the pros and cons of savings clubs?

• How can you open a savings club?

What Is a Savings Club?

So, what is a savings club? A basic savings club definition is that it’s a bank account that the account holder uses to hold funds to meet a specific savings goal. For example, some people set up what are known as “Christmas clubs” in which they make regular contributions throughout the year to save for holiday gifts, travel, decor, and parties. By saving gradually in advance, they may be able to avoid the wallop of that major end-of-year credit-card bill.

Usually, savings clubs accounts that can be opened at a bank or credit union. They can be a good idea in terms of where to put short-term savings, as they typically earn interest. Often these savings clubs have other incentives attached to them to encourage account holders to follow through on their savings goals. There can also be penalties associated with savings clubs — such as forfeiting earned interest for withdrawing funds from the account early — to help motivate people to keep saving.

Recommended: How Much Money Should I Save a Month?

How Do Savings Clubs Work?

Usually, savings clubs create a schedule the depositor can follow to make regular deposits of a certain amount. So, say you open a savings club account to gather cash for a vacation next summer. If you want to save $1,200 over one year, the club would guide you through depositing $100 a month to meet that goal. Typically, the end date associated with a savings club aligns with your goal, whether that’s heading to Hawaii, getting married, or celebrating the holidays.

Deposits for savings clubs can be drawn from the account holder’s paycheck, which can make it easier to steadily progress towards meeting a savings goal. Automatic savings transfers can be a real helping hand because you don’t see the money in your checking, as if it’s available to be spent.

Some savings clubs allow multiple people to contribute to it — similar to another type of savings account, the joint account — so they can work together towards a savings goal. While usually only couples share a bank account, friends, or family members can choose to contribute to a savings club together to save up for a group vacation, present, or family reunion. Or some financial institutions will allow parents to help a child open a holiday savings account. In all cases, this can be a good strategy, since savings club accounts may offer higher interest than a typical savings account, though there can be penalties for early withdrawal.

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Benefits of a Savings Club

There are quite a few benefits attached to savings clubs, including:

• Saving on a schedule towards a specific goal

• Offering saving incentives

• Creating discipline in a savings routine

• Teaching children about financial literacy and the value of saving

• Paying higher interest rates than typical savings accounts

Drawbacks of a Savings Club

There are also some downsides associated with savings clubs worth being aware of:

• Withdrawing funds early can lead to penalties

• Not contributing on schedule can lead to penalties

• Some savings clubs can be scams if not hosted by a financial institution such as a bank or credit union (beware “money board” and “circle game” schemes)

• Investing money elsewhere may lead to more growth

Savings Club vs Savings Account: What’s the Difference?

There are many reasons why you would put money in a savings account, and savings clubs offer a specific financial product to serve a specific goal. Let’s look at some differences between these two account types.

Savings Clubs Can Offer Higher Interest Than a Traditional Savings Account

One of the reasons savings clubs can be so motivating is because they often offer a higher interest rate than traditional savings accounts do. Knowing your money can grow faster can be an exciting prospect.

Savings Clubs Have Penalties for Premature Withdrawal

There are no penalties when someone withdraws money from a standard savings account. Nor is there a set period of time they have to keep their money in the account.

With a savings club, however, there can be penalties (such as losing the interest accrued) for actions such as withdrawing funds before the predetermined end date or for not making a contribution according to the savings club schedule. These penalties can be an incentive to save, but they can also create a challenging savings environment.

Savings Clubs Often Require a Minimum Deposit and Term Lengths

While basic savings accounts don’t usually have strict requirements attached to them, savings clubs often have minimum deposit requirements. These requirements may be as low as $1 or can be much higher. Savings clubs can also come with predetermined term lengths — usually six months to a year — and may require automatic weekly or bi-weekly deposits. Some people don’t like feeling “locked in” in this way.

Recommended: How Do Savings Accounts Work?

Starting a Savings Club

In most cases, you’ll start a savings club that’s hosted at a bank or credit union, review the terms, make an initial deposit, and continue funding the account.

Some people may choose to set up social savings clubs with friends and/or relatives by taking the following steps.

• Define a savings goal for the club

• Find people to join the savings club

• Create savings club rules and structure

• Commit to the planned schedule and follow through

Where the funds are actually kept can be decided by the group; an interest-bearing savings account will offer the nice perk of having your money earn money.

Banking With SoFi

Savings clubs can offer a motivating way to stockpile cash, thanks to their usually higher interest rates (compared to traditional savings accounts) and their structured schedule.

If you’re looking to earn money on your savings, another path is to open an online bank account with SoFi. When you start a Checking and Savings account with direct deposit, you’ll earn a competitive APY and pay zero account fees, which can help your money grow faster. Plus you’ll spend and save in one convenient place, have fee-free access to 55,000+ Allpoint ATMS, and get tools that help you organize your money, set money goals, and save your change with Vaults and Roundups.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Why would someone join a savings club?

Savings clubs can help you efficiently save towards a specific short-term goal, like accumulating money for the holidays or for a vacation. Benefits of saving this way include a motivating format and often a higher interest rate vs. traditional savings accounts do. Also, the potential penalties associated with not sticking to the schedule can also motivate people to save.

Should I have a savings club or savings account?

Whether or not you should have a savings club vs. a standard savings account depends on your personal goals and preferences. If you benefit from having a savings schedule and are offered a good interest rate, it may be a great fit. If, on the other hand, you want the ability to withdraw funds from your account penalty-free, it may not be the right move.

Can I use a savings club for long-term savings?

Savings clubs are usually designed to meet short-term goals, not long-term savings goals. They typically last for six months to a year. Those looking for long-term growth may find that investing money elsewhere can lead to more growth than a savings club can offer.

Photo credit: iStock/MicroStockHub

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SOBK0622028

Sep

2022

Will Dogecoin Ever Be Capped?

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

When evaluating a cryptocurrency, such as Dogecoin, it’s important to know whether it has a supply cap, since that can have an impact on the long-term value of the coin.

Bitcoin, the first and largest cryptocurrency by market cap, is known for having a 21 million coin hard cap, meaning there will only ever be 21 million BTC in existence. Similarly, XRP has a cap of 100 million. However, all cryptocurrencies are different and many do not have a supply cap.

Here’s what you need to know when it comes to the Dogecoin cap.

What Is a Cap in Crypto?

A supply cap, or cap, refers to the upper limit of the amount of new cryptocurrency coins that can be created.

Once miners have mined a certain number of coins, the protocol will stop distributing block rewards, and miners will only collect transaction fees. For Bitcoin, this point is estimated to be reached by about the year 2140, for other types of crypto the cap will be reached at different times.

💡 Recommended: How Many Bitcoins Are Left?

Does Dogecoin Have a Cap?

No, Dogecoin does not have a cap, meaning there is no Dogecoin supply limit. But there is a fixed reward of 10,000 DOGE for each block of transactions added to the Dogecoin blockchain (more on that below).

Thus, miners have an incentive to mine for Dogecoins. After they mine Dogecoin, they can move it from their wallets onto a crypto exchange where other investors can buy it. But as more miners come online, more of them will dump new coins onto the market, causing the price to fall.

Either way, it’s important to understand how the lack of a Dogecoin cap (i.e. the fact that there is no Dogecoin supply limit) can affect this crypto’s long-term value.

How Dogecoin Works

Developers Billy Marcus and Jackson Palmer launched Dogecoin as a low-stakes way for people to learn about cryptocurrency. The meme coin or joke coin, with its famous Shiba Inu logo, traded at a tiny fraction of a penny so people could send it to each other for fun while learning how to use crypto wallets.

In 2018, as cryptocurrencies caught the attention of mainstream investors, the altcoin reached more than $0.01. In 2021, Dogecoin attained record highs around $0.70 before crashing down to about $0.06, as of September 7, 2022.

DOGE is a proof-of-work (PoW) crypto, which means that mining Dogecoin involves running powerful computers known as nodes that process transactions for the network. In exchange for this work, miners receive block rewards of 10,000 newly minted DOGE.

A new block of transactions is mined roughly every minute on the Dogecoin network. The block reward is 10,000 DOGE, or about $600 as of September 7, 2022. Unlike Bitcoin, which has a hard cap of 21 million and releases fewer coins over time, there is no Dogecoin supply cap.

Is There a Limit to the Dogecoin Supply?

Is Dogecoin unlimited? Yes, as of September 7, 2022, there is no Dogecoin supply limit. But the reality is that 10,000 DOGE are mined every minute, which adds up to about 14.4 million DOGE per day, and over 5 billion DOGE per year added to the supply.

Although some argue that the vast number DOGE may depress the price.

Will Dogecoin Ever Have a Cap?

It’s hard to say for certain whether there will ever be a Dogecoin cap. In theory, DOGE developers could choose to implement a cap on the creation of new coins, but to date there hasn’t been much discussion about this.

Sometimes the crypto community decides to alter the protocol of a currency. An active cryptocurrency needs periodic upgrades to its software to remain functional, relevant, and secure.

For now, it seems reasonable to work from the assumption that there might never be a Dogecoin cap limit.

Has Dogecoin Ever Been Capped?

In the eight years since Dogecoin’s creation, there’s never been a cap on the crypto. In fact, for much of those eight years, no one thought much about DOGE at all and it traded for less than a penny.

In 2017 when cryptocurrency began reaching the masses in a big way, the valuation of DOGE hit $1 billion. Many investors considered this a sign of irrational exuberance in the crypto markets, as DOGE had no special features (it’s simply a clone of Litecoin, which is a clone of Bitcoin), and hadn’t had a developer update in three years at that time.

Nonetheless, in 2021 DOGE took a seat among the top 10 cryptocurrencies by market cap, a feat few would have thought possible just a year earlier.

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3 Reasons Why Dogecoin Doesn’t Have a Cap

Some say the decision to not cap the supply of DOGE was intentional on the part of developers. They wanted to create a currency that people would be more likely to spend. DOGE was created as a joke, but it was also intended to be used for transactional purposes.

The DOGE developers set out to create a cryptocurrency that would differ from Bitcoin in several key ways. Most if not all of those ways stem from the fact that there is no Dogecoin max supply.

Here are three reasons that are thought to have been big factors contributing to the decision to never implement a cap on Dogecoin.

1. Cheap Transactions

Dogecoin is an altcoin that developers created for spending meant to be spent, so they intentionally made it inflationary (meaning that the supply of DOGE increases, or inflates over time).

By contrast, Bitcoin is deflationary (the supply of BTC decreases over time), which makes its value relative to inflationary currencies likely to continue rising. As a result, BTC has become more of a store of value investment, making many investors want to HODL it.

If you think your Bitcoin might be worth twice as much next year, you’re less likely to use it to make purchases in the short term. But a currency like DOGE, with no supply cap, is more likely to be spent. People will use it today, while it still has value, and be less likely to hold it for the long-term as they know it’s unlikely to increase in price.

2. New Coins Forever

It’s estimated that about 20% of all the Bitcoins mined to-date have been lost forever. This happens when people forget their wallet password or lose a piece of physical hardware they used to store Bitcoin. This makes the supply of BTC even more deflationary, as those coins won’t be replaced. Meaning: A deflating supply means that the value may rise over time, assuming demand doesn’t decrease.

With Dogecoin, there will always be plenty of new coins. Even if someone loses millions of DOGE, the long-term impact is minimal, since there are constantly new coins going into circulation. With no supply cap, lost coins don’t matter as much.

3. Mining Longevity

At some point, there will be no more Bitcoins left to mine. When that happens, the only monetary incentive for mining BTC to keep the network secure will be transaction fees.

In theory, this could sustain miners interest in mining DOGE.

Pros and Cons of a Capless Cryptocurrency

Should there be a Dogecoin cap? It’s a good question, given the relative successes and failures of DOGE thus far. Here are some advantages and disadvantages.

Pros

By keeping DOGE as an inflationary currency, it’s more likely that people will spend it rather than hold it as a store of value.

With no Dogecoin cap, theoretically miners will always be able to mine more DOGE and keep earning Dogecoin as a reward.

Cons

Because it’s inflationary, DOGE has less appeal for buy-and-hold investors.

With its unlimited supply, the value of DOGE may never rise much above $1.00. At its peak in May of 2021, it was worth about $0.70.

Pros	Cons
DOGE has value as a transactional currency.	Low demand from buy-and-hold investors.
Miners can always mine more DOGE and get rewards.	Price unlikely to rise above historic high of $0.70.

How Many Dogecoin Are in Circulation?

According to CoinMarketCap data, there are about 132.6 billion DOGE in circulation as of Sept. 7, 2022. Keep in mind, 10,000 new DOGE are mined every minute, so the number will be higher by the time you read this.

It’s also worth noting that more than half of DOGE’s total supply is held by only about 20 different wallet addresses, making it one of the most unevenly distributed of the different types of cryptocurrency.

How Many New Dogecoin Are Created Every Day?

Every time a new block of transactions is added to the Dogecoin blockchain, 10,000 DOGE are mined. That’s about 14.4 million DOGE added per day, or about 5.26 billion per year.

How Much Dogecoin is Left?

There is an unlimited amount of DOGE left to be mined. Just like U.S. dollars or any other national fiat currency, there’s no upward limit on the creation of Dogecoins.

There are some key differences between DOGE and fiat currencies, of course, like the fact that anyone can mine Dogecoin, but only central banks can print money.

The Takeaway

The answer to the question, Will Dogecoin ever be capped? is likely a “no.” Nothing is for certain, as developers could decide to alter the Dogecoin protocol, but the history of the coin and the ethos of the community surrounding it suggest that they will not enact a cap.

Just as the Bitcoin community tends to value scarcity and a fixed supply cap, the Dogecoin community tends to value low transaction fees, large block rewards, and the other benefits that can arise from not having a supply cap. For investors, there may be a place for both types of cryptocurrency in their portfolio.

FAQ

Is there a cap on the supply of Dogecoin?

No, Dogecoin does not have a cap on its supply.

Will DOGE be capped at $1?

At the moment, there are no signs that DOGE will have a price cap or a supply cap.

Is the supply of Dogecoin infinite?

In theory, the supply of Dogecoin could be infinite. In reality, though, the annual supply is somewhat limited by the block reward, which is 10,000 DOGE per minute.

Photo credit: iStock/Amax Photo

²
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

²Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0822018

Sep

2022

Leveraging Credit Cards to Build Wealth

By Jennifer Calonia | Credit, credit card, Growing Wealth | Comments Off

If you have strong credit, leveraging your credit cards as part of your wealth-building strategy might be possible. Whether you’re looking to use them toward shrewd investments or through tactically accumulating rewards, your credit card can be a powerful tool.

However, before you worry about how to leverage credit to make money, it’s crucial that you understand the high risk involved in leveraging your credit line as investment capital. If you don’t have cash flow ready to immediately repay large credit card purchases, you’re putting yourself in danger of getting buried in debt.

Strategies for Leveraging Credit Cards

Depending on your risk tolerance, how much cash you have on hand for repayment, and your financial goals, you have a few options for how to leverage credit cards. Here’s a look at some of the ways you could leverage your credit to help pave your path toward building financial freedom.

Upgrading Your Property

If you’re looking for new investment options outside of your online trading platform, you could leverage credit cards toward your existing home. Using your card as a cash flow tool to fund renovations and upgrades can help you increase your property’s value.

According to Realtor.com, homeowners who update their kitchen can typically expect a return on investment (ROI) of about 83%. The approximate ROI on a bathroom remodel is 66%. Your ROI will depend on many factors, such as the quality of materials and appliances used, but in general, updating your home can improve its value.

Utilizing 0% Credit Promotions

If you’re wondering how to use good credit to make money, another option is a 0% promotional offer. A 0% APR credit card promotion lets you leverage your credit line at no additional cost for a limited period of time. The temporary promotion is typically reserved for those with excellent credit and is available for a short time frame, such as from six months to 18 months.

You can use your card toward other wealth-building strategies and repay your purchases within the promotional period to avoid interest charges. The main caveat is ensuring that you can realistically afford to repay your card charges within the promotional period. If you don’t, some cards charge deferred interest on any remaining balance after the promotion expires.

Recommended: What is a Charge Card

Turning Your Credit Card Debt Into Good Debt

Credit cards can be used as a tool to increase your credit profile. A higher credit score earns you access to lower, more competitive interest rates and a higher borrowing limit when you need a loan in the future.

Practicing sound borrowing habits on a credit card, like maintaining an on-time payment history, keeping your credit utilization ratio low, and not opening too many new accounts in a short period are some factors that can positively impact your score. Keep in mind that the better your credit, the better the terms you may receive to then use toward investments.

Recommended: When Are Credit Card Payments Due

Flipping Items for More Cash

Retail arbitrage is one way people leverage credit cards to increase their wealth. As an example, let’s say you purchased a vintage Windsor chair from a thrift store for $20 using your credit card. If you successfully sell it on Etsy or eBay for $250 before interest accrues on the purchase, you’ve effectively leveraged your credit to earn a $230 profit.

Before you leverage your credit card in this way, do your due diligence by researching high-value items that can be flipped in a short period of time. Having inventory that’s taking up space in the corner because it’s not a hot item, or too niche, might result in getting hit with interest charges before a profit is made.

Recommended: How to Avoid Interest On a Credit Card

Making Use of Available Discounts

Another way to leverage credit cards is by using a credit card to save money on planned purchases. Many rewards and travel credit cards offer discounted rates on vacation packages or trip costs like flights and accommodations.

Taking advantage of discounts that already come with your card is another way to save money. You can then reallocate this discretionary cash flow toward more lucrative investments.

Maximizing Big Welcome Bonuses

Some credit cards offer lucrative sign-up bonuses for consumers who open a new account. For example, a credit card might offer 60,000 bonus points (that’s valued at $750) to new cardholders who make a minimum of $4,000 in purchases within the first three months of opening the account.

Keep in mind that this option is likely best for cardholders who have a large purchase coming up, or already use a card for everyday expenses that will allow them to hit the minimum purchase requirement.

If you meet the requirements of the sign-up bonus offer, you can use your earned rewards toward a statement credit, travel, and more, effectively freeing up cash flow that otherwise would have come out of your pocket.

Recommended: Can You Buy Crypto With a Credit Card

Racking Up Cash Rewards

You can also strategically leverage credit card rewards. If your card offers cash-back rewards, use that card to cover your day-to-day expenses rather than your debit card. That way, you can earn money back on each dollar you spend.

For example, you can use a cash-back rewards card for groceries, school supplies, gas, dining, entertainment, vacations, and more. Depending on your rewards program, you could accumulate a sizable amount of cash back that could end up covering a portion of your monthly statement balance or even a trip. Or, you could get your rewards as cash that you then put into the market, allowing you to effectively invest with credit card rewards.

Investing in Yourself

Buying stocks with a credit card may seem like the more obvious investment opportunity, but using your credit card to enhance your skills or education can actually be a powerful way to leverage your credit. For example, learning additional coding language might make you a more competitive candidate for a higher paying job.

In this situation, using your credit card toward online courses could potentially boost your long-term wealth and career opportunities.

The Takeaway

Responsible credit card habits are key to leveraging credit cards to build your wealth. If you can confidently repay your credit card charges in full every month, a credit card can earn you rewards while leveraging your credit toward investment opportunities.

When leveraging credit cards to build wealth, it’s important to avoid credit card fees and take advantage of any perks offered.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

What does it mean to leverage your credit card?

Leveraging your credit card to increase your wealth means using your card as a cash flow tool. It’s best when used by cardholders who practice responsible borrowing habits, such as paying off monthly balances in full to avoid finance charges.

How do you make money leveraging credit cards?

Different ways to leverage credit cards include using your card toward a home remodel that increases your home value, or capitalizing on credit card rewards on purchases you already make.

Is leveraging credit a good idea?

Leveraging your credit can be a good strategy if you maintain positive financial habits, like making on-time payments and paying off your full credit card balance each month. If you don’t have the cash to pay back your purchases, this strategy can quickly backfire through accumulated debt and interest charges.

What is credit card arbitrage?

Credit card arbitrage is a strategy that involves borrowing credit from your card, and then using those funds toward a higher-interest investment vehicle. This is commonly seen using promotional 0% APR credit cards. After you’ve earned dividends from your investment during the temporary no-interest period, you’d repay your credit card balance, and keep the investment profit.

How do I turn my credit into cash?

One option to turn your credit into cash, without costly cash advance APRs, is if you have a friend who needs to make a large purchase and has cash in hand. You can offer to make the purchase using your credit card in exchange for the cash, which you can then put toward the investment purpose of your choice. Similarly, you could purchase gift cards using your credit card for the balance you need. Just make sure you can realistically repay your credit card statement at the end of the month.

Photo credit: iStock/Delmaine Donson

Sep

2022

Guide to Buying Real Estate With a Credit Card

By Jennifer Calonia | Credit, credit card, Home Ownership | Comments Off

Investing in real estate can be a lucrative endeavor, especially in today’s hot real estate market. But if you don’t have hundreds of thousands of dollars saved in cash to put toward a property, using a credit card to secure a real estate investment might be an option.

There are ways to execute this investment approach. However, there are also serious caveats to consider before moving forward with using a credit card to invest in real estate.

Can You Buy Real Estate With a Credit Card?

You can’t purchase a physical real estate property outright with a credit card the way you would when using a credit card to buy lunch or a new television. One reason for this is because a typical consumer credit card likely doesn’t offer a credit line large enough to cover the entire home price.

Even if you do qualify for a credit line to cover all or a significant portion of the home price, you’ll face another challenge. The title company or real estate agency that’s facilitating the deal requires that payment is provided using bank-certified funds — such as a cashier’s check, certified bank check, or wire transfer — to finalize your investment transaction. Given what a credit card is, it won’t meet those standards.

How to Finance Real Estate Investments With a Credit Card

While you can’t swipe your credit card to purchase real estate, there are ways that you can leverage your credit card to help fund your real estate investments.

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Through a Cash Advance

If you have a high enough credit limit, a viable way to buy real estate with a credit card is by getting a cash advance against your card. By doing this, the funds you borrow from your credit card will become quickly available for use on a real estate investment, which might be helpful if you’re buying real estate in a red-hot market.

Keep in mind that fees typically apply for cash advances. Typically, you’ll pay a fee in the range 3% to 5% of the transaction amount, depending on your particular card.

Also know that cash advances typically come with interest rates that are higher than the card’s standard annual percentage rate (APR). Plus, interest begins to accrue immediately rather than at the end of the grace period like it does on regular credit card purchases.

Recommended: What is the Average Credit Card Limit

For Related Real Estate Costs

Some investors also use credit cards to invest in real estate by using their card for renovation project expenses. If you purchased a low-cost investment property and want to update it for passive rental income, for example, you might be able to invest in your property by putting charges for contractors and materials on your credit card.

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By Using Credit Card Rewards

Another unconventional approach to buying real estate with credit cards is directly redeeming earned rewards as cash. Cash redemption values are typically lower compared to redeeming rewards toward travel, for example, but this approach can still unearth the capital you need to invest in your next property.

This strategy is particularly effective if you’ve already amassed years of rewards through a business credit card, and are willing to pool earned rewards from your personal credit card rewards programs, too.

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Advantages of Using a Credit Card to Invest in Real Estate

Although buying real estate with a credit card is an unconventional approach, there are some benefits in doing so. In particular, the advantages include that:

• You can invest faster: If you don’t have a lump sum of cash savings ready, it might take years to save up enough capital to get your foot into real estate investing. Using a credit card to invest in real estate can help you realize your investment goals faster.

• You’ll have fewer costs at closing: Since you’re not financing through a mortgage lender, there are fewer fees to worry about. Unlike when buying a home as your primary residence through a mortgage loan, costs like origination fees, appraisals, and escrow fees aren’t a required part of a real estate investment transaction done in cash.

• You might earn rewards in the process: Most card issuers don’t let you earn credit card rewards from cash advances. However, you can accelerate your rewards earnings by using your card for spending associated with your property investment. For example, materials and contractor costs for renovation projects, like a kitchen update or a room addition, can help you rack up rewards faster.

Downsides of Using a Credit Card to Buy Real Estate

There are major disadvantages to using a credit card to invest in real estate. If you’re considering how to buy rental property with credit cards, keep in mind the following drawbacks:

• You’ll have a hard time using credit cards directly to invest in real estate: A notable downside to buying real estate with credit cards is that you’ll likely be unable to throw a credit card onto the table to close a real estate transaction. You’ll have to undergo the extra step of getting a credit card cash advance. But be aware that card issuers might set a lower available limit for cash advances and will impose a higher APR. Plus, you’ll pay cash advance fees.

• You’ll face high interest rates: If you have to draw a cash advance against your credit card to buy real estate, you’ll face expensive APRs, compared to other financing sources, like a personal loan. According to the latest Federal Reserve data, the average credit card rate across all account types is 15.13%. By comparison, the average personal loan rate for a 24-month term is 8.73%.

• You’re taking on a lot of risk: How credit cards work is that they let you purchase goods and services, even if you don’t have the cash to cover the full amount, immediately. The caveat, however, is that you’ll need to repay the amount either in a lump sum when your statement is due or over time.

If you successfully buy real estate with a credit card, you’re legally liable for that debt and must repay it based on the rate and terms of your credit card agreement. This holds true regardless of whether your investment turns a profit. Plus, if you choose to pay back the funds you borrowed over many months, you’ll incur exorbitant interest charges in addition to the principal balance.

Recommended: How to Avoid Interest On a Credit Card

Factors to Consider Before Using Your Credit Card to Invest in Real Estate

After assessing the pros and cons of investing in real estate using a credit card, also consider the following factors that might impact your investment:

• Whether you’ll need additional funding sources: If your credit card doesn’t provide a sufficient amount for your real estate investment, you’ll need to seek funds elsewhere.

• What the local real estate market is like: Whether your goal is buying a property to flip and sell, or buying rental real estate, do your homework. This includes finding a desirable neighborhood and a suitable property, as well as assessing renovation projects and other repairs necessary to set your investment up for profitability.

• If you can repay your credit card bill: At best, consider your credit card as a short-term loan tool. Plan to put profits you’ve earned toward paying down your debt ASAP.

Alternatives to Buying Real Estate With Credit Cards

If you don’t have hard cash stowed away for your next real estate investment, but aren’t ready to leverage your credit cards for the investment, you have a couple of other options:

• Personal loans: A personal loan is another financing option, particularly if you have strong credit. It offers a higher borrowing limit and longer repayment timeline compared to a credit card. Also, as mentioned earlier, personal loan interest rates are generally lower than credit card APRs.

• Personal savings: Another option is using cash and avoiding credit cards and other methods of borrowing altogether. If you have personal savings that you can tap into or are willing to hold off on investing in real estate until you’ve built up enough savings, you can potentially avoid costly finance charges.

The Takeaway

Tread carefully when using a credit card (i.e. borrowed money) to fund any investment, including real estate. Adhering to important credit card rules — like staying on top of your credit utilization and paying your credit card statements in full — can help you avoid going into debt for your investment.

If you’re looking for a possible real estate investment card, a SoFi Credit Card lets you earn rewards from eligible purchases.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

How can I buy rental property with a credit card?

If done strategically, you can use a credit card to buy rental property either through a credit card cash advance or by using the credit card to finance renovations on an investment property flip.

Can I use a business credit card to buy real estate?

Yes, you may be able to use a business credit card to invest in real estate. Doing so separates the debt from your personal credit profile, so the high credit utilization on the business credit card doesn’t affect your personal credit score.

Is it a good idea to buy real estate with a credit card?

Whether buying real estate with credit cards is a good idea depends on your investment risk tolerance. A credit card might work as a short-term funding option, but plan on repaying the debt with your profits quickly to avoid an underwater investment.

Photo credit: iStock/SDI Productions

Sep

2022

Tips for Investing in Gold With a Credit Card

By Dan Miller | Credit, credit card, Growing Wealth | Comments Off

For millennia, people have used precious metals like gold and silver to store their wealth. And while there are other options in the modern world, investing in gold is still quite popular. If you’re wondering, ‘Can you buy gold with a credit card?,’ the answer is yes — but it may not be the best choice.

One of the biggest drawbacks to doing so are the credit card charges for gold purchase on credit cards. If you buy gold with a credit card, you’ll likely owe a processing fee on top of your purchase price. This can make investing in gold with a credit card a less desirable option, and it may make it worth considering alternatives.

Can You Buy Gold With a Credit Card?

It is possible to buy precious metals with a credit card, but it may not be the best investment option for you.

Part of what a credit card is includes processing fees, which are charged to merchants and often get passed down to the consumer. These fees typically range from around 3% to 4% of the purchase amount. If you have to pay processing fees in order to buy gold with a credit card, you may want to consider other investment options.

Guide to Buying Gold With a Credit Card

If you decide to buy gold with a credit card, here are a few steps to help guide your journey.

Searching for Reliable Dealers

First, you’ll want to look around for reliable gold dealers. There are many different websites where you can buy gold online with a credit card, and each site has its own pros and cons. Whether investing in gold or bitcoin — or anything really — it’s smart to read up on the company to help ensure you’re choosing a reliable dealer.

Comparing Prices and Reviews

Once you’ve found a few dealers appear reliable, you can start comparing prices and reviews. Reading reviews from other investors can give you a sense of what you’re likely to go through with this particular dealer. You’ll also want to compare gold prices at different sites, since the price may vary from dealer to dealer.

Completing the Checkout Form

Once you’ve settled on a dealer, you can go through their checkout process. Before you enter your credit card or other financial details, you may need to enter in additional information. This will likely include your name and address or other identifying information.

Submitting Your Credit Card Details

You’ll then likely be taken to the checkout screen to complete your purchase. If you are using a credit card, you’ll enter your credit card information. Make sure to read the terms and conditions for your purchase, as some dealers charge a market loss fee if you cancel your order.

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Completing the Purchase

Once you complete the purchase, you can await the delivery of your gold. If you’re taking physical hold of your gold, it will be shipped to your address on file. If you have made other arrangements, your gold will get delivered per the instructions you entered during the purchase process.

After the purchase is added to your credit card balance, make sure to follow essential credit card rules. This includes making on-time payments and attempting to pay off your balance in full each month to avoid paying interest.

Recommended: How to Avoid Interest On a Credit Card

Other Ways to Buy Gold

Besides investing in gold with a credit card, there are a few other ways to buy gold.

Debit Card

You may be able to buy gold with a debit card, depending on the dealer that you choose. Investing in gold with a debit card may also come with processing fees. However, it’s common that debit card fees are less than those associated with using a credit card, given how credit cards work compared to debit cards.

ACH or Wire Transfer

Another option to consider is sending the money electronically through your bank. You may be able to fund your purchase using ACH or a wire transfer. Just make sure you understand any fees associated with buying gold in this manner.

Money Order

You also may be able to use a money order to invest in gold. How to do this will depend on the dealer you use. Generally, you’ll need to mail a money order to the dealer. Once your funds are deposited, you’ll be able to use them to make a gold purchase.

Cash Deposit

If you live near the physical establishment of a gold dealer, you may also be able to use cash to invest in gold. You can deposit your cash funds and then use that amount to purchase gold.

P2P Apps

Peer-to-peer (P2P) payment apps like Cash App, Venmo, and Zelle may serve as additional ways to invest in gold. Check with your dealer to see if these (or any other) P2P apps are options to fund your investment. Also make sure you look at the terms and conditions to understand any additional fees that you may owe.

Recommended: Can You Buy Crypto With a Credit Card

The Takeaway

While it is possible to invest in gold with a credit card, it may not be the best investment option. Not all dealers allow you to buy gold with a credit card, and many that do charge processing fees of 3% to 4%. These additional fees mean that you may be better off with another type of investment or a different funding source.

If you’re looking to earn rewards with a credit card, you might consider a cash-back rewards credit card like the SoFi Credit Card.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

Does it still pay to invest in gold?

If you’re wanting to invest in gold, it can still make sense, depending on your individual financial priorities. The price of gold varies from day to day (and even within the same day), so just like any other type of investment, you’ll want to make sure you understand the underlying value and if or when buying gold makes sense for you.

Can you buy precious metals with a credit card?

You can buy precious metals like gold with a credit card, but it may not be the wisest investment option. Many credit card processors charge a fee to merchants using a credit card, and in many cases, that fee is passed down to consumers. This additional cost can mean it may not be worth it to buy gold with a credit card.

What are the charges for gold purchases on a credit card?

The exact list of fees and charges for buying gold with a credit card will depend on the exact dealer you use to make your purchase. It’s common for dealers to charge a processing fee of 3%-4% if you use a credit card to buy gold.

Photo credit: iStock/Talaj

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details, please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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