It’s wise to periodically look at the credit cards you hold and gauge the value they provide. Sometimes, cards you may have opened for specific benefits stop being useful. And other times, bonus categories can become less (or more) valuable if there’s a shift in your spending habits. If you’re paying an annual fee, a card you no longer use may not be worth keeping.
However, before you make a final decision to cancel or downgrade as your card renewal approaches, you should talk to a customer representative to see if you can score a retention offer that makes the card worth keeping for another year.
Here’s what you need to know about these valuable incentives to hold onto your top credit cards.
What are retention offers?
Once a credit card issuer has spent hundreds of dollars (with a welcome bonus in cash back, points or miles) to entice you to open a card, it needs to find a way to recoup that investment. If you close your card after only a year or two — especially if you aren’t using it regularly — the issuer will likely lose money on you.
So some (but not all) issuers will extend targeted retention offers to encourage customers to keep a card open longer. These offers can take the form of bonus points, statement credits, reductions or outright waivers of an annual fee — anything that helps persuade you to keep the card open (and, in the issuer’s eyes, keep spending on the card).
For example, multiple cardholders of The Platinum Card® from American Express have reported the $695 annual fee (see rates and fees) being partially waived with a statement credit, or they were offered a points bonus when they call or chat using the app to tell a representative that they are considering canceling. One TPG reader has told us they got an offer for $95 credit after spending $95 on the Citi Premier® Card (see rates and fees).
While you’re not guaranteed a retention offer just because you ask for one, it’s not uncommon to receive one when you know how to do it.
Related reading: Here’s why you should never close your credit cards before the one-year mark
How to ask for a retention offer
One common misconception about retention offers is that you can only get them if you’re trying to close a card. Indeed, you’ll generally have the most success asking for a retention offer right around the time your annual fee posts (since that’s when many people decide to cancel a card), but you can try your luck at any time.
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Related reading: My Amex Platinum retention bonus: 20,000 Membership Rewards points
With more companies using automated systems, how you phrase your request is very important. Instead of saying, “I’d like to close my credit card” and hoping the agent makes you an offer, you need to say, “I’m considering closing my card,” or, “I’m not sure I want to keep paying the annual fee on my card.” I’ve heard horror stories of people who said they wanted to close their card, and the automated system shuttered the account before they could ever speak to a human being about it.
Each issuer handles retention offers differently. Some, like American Express, have a dedicated retention department to which you can ask to be transferred. You can also use the chat feature online or on the mobile app with Amex. For other cards, a front-line customer service representative might be able to help you. You can adapt the script to suit your own needs, but my calls or online chats usually go something like this:
“Hi, I noticed that the annual fee on my ______ card just posted, and I’m really not sure I can justify paying it for another year. I really like (insert your favorite benefits), but I’m just not sure about this annual fee. I was wondering if you could check if there were any retention offers available on my account that might help me make up my mind?”
At this point, you can expect the corporate marketing to kick in, and the agent will read you some talking points about why the card is so great and worth keeping. You’ll need to deflect, which you can do by bringing the discussion back to the annual fee you don’t want to pay.
Try mentioning that you have other cards with similar perks (especially if you have multiple Marriott, Delta or Hilton cards, for example), or consider saying that you don’t find yourself spending much on the card. Remember, at no point should you actually say, “I want to close the card” — only that you’re thinking about it.
This is purely anecdotal, but I’ve found American Express to be the most generous with retention offers. I’ve received retention offers on three Amex cards in the past year. Chase rarely gives them out (though it’s more common on cobranded Chase cards than the issuer’s Ultimate Rewards-branded cards). As a data point, I was denied a retention offer on my Chase Sapphire Reserve and decided to downgrade it. Other card issuers may do so, but much less frequently.
What types of offers are there?
Depending on the issuer, there are three different offers you might receive:
Annual fee reduction or waiver: Depending on the card, this can be as good as cash. Even if you don’t plan to use the card much, if you get an annual fee waiver, you can keep the card open for another year, which could boost your credit score. When you factor in perks like statement credits or elite status, an annual fee reduction may be enough to push the card past its break-even point.
Bonus points or miles: Sometimes you’ll be awarded points for agreeing to keep the account open, though more often than not it will be an offer similar to an initial welcome bonus: spend a certain amount of money in a specified period to earn bonus rewards.
Statement credits: Same as above, sometimes applied directly to the account but more often come with a spending requirement.
It goes without saying that the more you spend on a card, the more likely you are to receive an offer. Issuers want to keep their most valuable customers. Sometimes you might even be given a choice between a statement credit or bonus points, in which case you can quickly pull up TPG’s monthly valuation series and decide which offer is better.
As an example, I recently received a retention offer on my Amex Platinum after saying I didn’t feel like I was receiving good value from all of the benefits to justify the high annual fee. I was given the choice between 40,000 Membership Rewards points after spending $3,000 in the next three months, a $400 statement credit for $3,000 in spending or a $150 statement credit with no spending requirement. TPG values those 40,000 points at $800, so it was a no-brainer for me to pick the 40,000 points.
Some TPG staffers also shared some retention offers they’ve received recently:
Marriott Bonvoy Brilliant® American Express® Card: “I got an offer of 20,000 points for $2,000 in spending in three months — was hoping for a bit more since I was on the fence about keeping the card but decided to keep it for one more year!” — Becca Manheimer, senior director of marketing and communications
The Platinum Card® from American Express: “Renewal came up, and they offered a $150 statement credit.” — Tom Grahsler, director of video
Marriott Bonvoy Business® American Express® Card: “I was given the option to earn a $200 statement credit for adding an authorized user and spending $2,000 on the card in the next six months — effectively a return of 10%.” — Nick Ewen, director of content
The Platinum Card® from American Express: “I had just one offer, which was 50,000 Membership Rewards points after spending $4,000 in the next three months, so I immediately jumped on it! — Danyal Ahmed, credit card writer
Bottom line
Every time an annual fee hits on one of your cards, you have to make the decision to keep it open, downgrade or cancel it. Even if you think you know what you want to do, you can’t be sure until you have all the information in front of you.
Spending five to 10 minutes on the phone might net you enough points for a one-way flight to Europe or South America on a card you already wanted to keep open. In terms of pure return on time, there aren’t many deals better than that.
For rates and fees of the Amex Platinum, please click here.
Additional reporting by Danyal Ahmed, Ethan Steinberg and Madison Blancaflor.
“What’s the safest possible thing that I can do with my money?” wonders Afroblanco over at Ask Metafilter:
I take bearishness to an extreme. Having witnessed the 2000 tech crash, I have no faith in the stock market or the US economy. I keep all of my money (USD) in a savings account. However, with the recent financial turmoil, I have a few questions:
Is it conceivable for the FDIC to fail?
If so, is there a place where I can put my money that will be safer than a savings account?
What’s the safest, most risk-free way for me to save money and not get killed by inflation and the tanking US dollar?
If there is a safe way for me to save money and not be punished by inflation and the depreciating dollar, is there a way that I can do this without having to stress out and micromanage my finances? I don’t want to be checking the finance page and making adjustments every day.
Even though I follow finance news, I’ve never done any investing or money management other than socking money away in my savings account. I’m a n00b, I admit it.
Afroblanco is willing to forego potential market gains so long as he does not lose money. He is risk-averse. He’s not alone. A rocky economy makes many people nervous. You can assess your risk tolerance with one of several online tools:
If your risk tolerance is low, then the stock market may not be right for you. You should consider less volatile investments until you’ve researched the market’s historical performance. In response to Afroblanco’s question, AskMetafilter member Pastabagel wrote:
The best thing you can do with your money is invest it in yourself of your children, if you have any. Go to school, get new training, start a business, etc. After that, the next best thing to do with it is to eliminate your debt (excluding mortgage). Typically people have formulae for determining how much savings you should spend to pay down debt, but I think you’d be a happier person if you just eliminated all credit card debt, car payments, etc. you have outstanding.
Barring those things, here’s the basic story:
Your money in a savings account is insured up to $100,000, but earns little interest and may actually result in your losing money to inflation. Certificates of Deposit pay more, but you can’t touch your money for the duration of the CD.
Bonds are safe, but you have to know which ones to buy, what to watch for, etc. And bonds fluctuate in price.
The rule-of-thumb is that the more interest, or yield, something offers, the more risk is involved. Interest is essentially what is exchanged for you risking your money. Also, low-risk equals low-reward. But you sound like you want something extremely safe, so I’m not going to preach to you about the S&P 500’s long-term performance.
Gold and commodities are not so good, because while a two-year chart looks great now, a two-year chart two years from now might look like a nightmare. Gold lost $100/ounce since Monday — about 10%. Did anybody call that? So not exactly a rock solid investment.
You want safe, here is safe:
What you really want is some kind of short-term bond mutual fund (the “short-term” refers to the kind of bonds it holds). Mutual funds are great because you can put in and take out your money whenever you want, unlike bonds and CDs. I would recommend VFSTX from Vanguard. It has a decent yield (which is sort of like interest) and also can appreciate in value. This particular fund has had one down year in the last 24 years, and that year it was only down 0.08%.
In the alternative, you can get a fund that invests in inflation-protected treasuries (TIPS), like VIPSX from Vanguard.
These two funds are very much buy-and-forget. You talk about the economic turmoil, VFSTX fluctuated less than 1% from October to January (when the shit really hit the fan) and VIPSX fluctuated by no more than about 4%. They are very very safe, but won’t appreciate much, but it sounds like that would be okay for you. Keep in mind that these funds also pay you interest along the way, which is typically reinvested, so the charts you see on Yahoo!, which track price only, don’t show you the full story.
When you pick a mutual fund, however, you need to be very careful because different fund companies fund often charge expenses, loads and fees, which are basically ways for the fund company to take your money out of your investment. Vanguard has built its entire company and every one of the hundreds of funds they manage on the principle of no-load, and rock-bottom expense ratios. All of the money I cannot afford to lose for the rest of my life I keep there. This is not a slick Wall Street operation — Vanguard will collapse when the world ends, not a moment sooner.
The people who started and who ran that company are very old-school personalities — they personally live frugally, invest very conservatively, and their business model is based on lifetime relationships with their investors, not on clever financial wizardry. You don’t see Vanguard people on TV as much as Warren Buffet because these people aren’t the type to have publicists. This is the place where your crusty great-grandfather who grew up in the Depression would keep his money. Slow and temperate. They also offer very low-cost financial advisory services, which you might need if/when you ever get married, have kids, etc and don’t feel like trying to figure out how to buy life insurance.
On a psychological note, though, I would encourage you to read The Millionaire Next Door. The book is not really about personal finance, though it does discuss it a little. What the book will do is reset your social attitudes about money and wealth, and how wealth is accumulated.
These recommendations are appropriate for somebody who is very conservative and risk-averse. If you’re more worried about losing money than eager to gain it, then consider these tips. Via e-mail, Pastabagel suggested that those with slightly more risk tolerance should consider a total-market index fund (such as VTSMX) as part of an IRA.
Pastabagel also notes — correctly — that it’s difficult to answer a question like, “How should I invest?” The answer depends more on psychology than finance. “The only answer,” he writes, “is to take as much risk as you can stand before you start losing sleep over it.”
The latest issue of Consumer Reports (October 2008) has an article about the new credit card jungle. The faltering economy and the ongoing mortgage crisis may be affecting your credit cards; issuers are raising rates, changing terms, and lowering credit limits. The magazine notes: “Now is an essential time to do a credit-card checkup to make sure your accounts haven’t changed for the worse.”
I like the idea of a credit-card checkup, but I don’t think it’s something you should do just once in a while. To avoid the dangers lurking in this credit card jungle, it’s important to foster a set of survival skills that will help you avoid danger spots before you blindly stumble upon them. Here are a few:
Learn to read the fine print. Read the legal stuff when you fill out the application, when you receive the card, and on any future mailings. Credit card terms and conditions can be confusing. This credit card glossary can help. If you don’t understand something, ask for help.
Similarly, review your statement every month. Due dates, fees, and interest rates are subject to change. Reconcile transactions and keep an eye out for fraud. Many people — and I’m one of them — actually check their statements online several times a month. By paying attention, you can prevent small annoyances from becoming large hassles.
As always, don’t be afraid to speak up. If you notice something strange on your bill, call customer service. If you want to dispute a charge, call customer service. If you want a rate reduction, call customer service. It never hurts to ask.
Be wary of the special offers your credit card company sends you. Understand the teaser rates. Beware offers to skip a payment. Be suspicious of other products the company tries to push: insurance, fraud protection, etc. Many of these are bad deals for consumers.
Finally, pay your bill on time and in full every month. If you are not yet in credit card debt, don’t start. Don’t rely on credit cards to support a lifestyle you cannot afford. Don’t resort to using a credit card because you can’t afford to pay cash for something — use a credit card because you can.
Remain vigilant against the scourge of credit card debt, the quicksand of personal finance. Credit cards are not a source of free money — don’t treat them as such. Credit cards are tools that allow you to use the money you already have in different, more efficient ways.
For example, I save 1% on my utilities by paying with my cash-back credit card. These are expenditures I’d make anyhow, but the card saves me money. (As a bonus, using the credit card helps with my quest for a paperless personal finance system.)
For more on this subject, check out these past Get Rich Slowly articles:
What do you consider essential credit card skills? What sort of credit card basics do you think people should know?
A variety of significant mortgage rates inched upward over the last seven days. The average interest rates for both 15-year fixed and 30-year fixed mortgages both were driven higher. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also climbed.
As inflation surged in 2022, so too did mortgage rates. To rein in price growth, the Federal Reserve began bumping up its federal funds rate — a short term interest rate that determines what banks charge each other to borrow money. By making it more expensive to borrow, the central bank’s goal is to reduce prices by curtailing consumer spending.
After hiking interest rates 10 times since March 2022, the Fed pumped the brakes at its June meeting. The central bank’s federal funds rate will remain at a range of 5.00% to 5.25% for the time being, although the Fed hasn’t ruled out the possibility of further increases if inflation doesn’t continue to moderate. The Fed will decide whether or not to raise rates at its next meeting on July 26.
The most recent Consumer Price Index, a popular gauge of price growth, shows that the Fed’s string of rate hikes is having its intended effect. Annual inflation is now at 3.0% for the 12-month period ended in June, which is the lowest it’s been in more than two years.
The Fed doesn’t set mortgage rates directly, but it does play an influential role. Mortgage rates move around on a daily basis in response to a range of economic factors, including inflation, employment and the broader outlook for the economy. A lower inflation rate is good news for mortgage rates, but the potential for additional hikes from the central bank this year will keep upward pressure on already high rates.
“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree.
Rather than worrying about mortgage rates, though, homebuyers should focus on what they can control: getting the best rate they can for their financial situation.
To increase your odds at qualifying for the lowest rate available,take the steps necessary to improve your credit score and to save for a down payment. Also, be sure to compare the rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you make an apples-to-apples comparison among lenders.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 7.19%, which is an increase of 1 basis point from one week ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most frequently used loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but often a higher interest rate. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.52%, which is an increase of 1 basis point from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a bigger monthly payment. But a 15-year loan will usually be the better deal, as long as you can afford the monthly payments. You’ll usually get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 6.25%, a rise of 6 basis points compared to a week ago. You’ll usually get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But since the rate changes with the market rate, you might end up paying more after that time, as described in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an ARM may be a good option. If not, changes in the market could significantly increase your interest rate.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions to ease. But that’s only part of the home affordability equation.
“Interest rates have been much higher in the past and people bought homes and financed homes at those rates,” said Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University. “But it’s been hard for people to react to such a rapid increase in just a short amount of time.”
Even though the Fed hit pause on rate hikes in June, mortgage interest rates will continue to fluctuate on a daily basis. That’s because mortgage rates aren’t tied to the federal funds rate in the same way other products are, such as home equity loans and home equity lines of credit, or HELOCs.
As long as inflation continues to trend downward, though, mortgage rates should decline slightly towards the end of 2023. The most recent housing forecast from Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at around 6.3%.
“Mortgage rates have been volatile for some time now and while they could eventually start trending down over the next six months to a year as inflation growth continues to cool, their path is probably going to be bumpy,” Channel said.
We use data collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the country:
Current average mortgage interest rates
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.19%
7.18%
+0.01
15-year fixed rate
6.52%
6.51%
+0.01
30-year jumbo mortgage rate
7.21%
7.20%
+0.01
30-year mortgage refinance rate
7.34%
7.33%
+0.01
Rates as of July 24, 2023.
How to find the best mortgage rates
You can get a personalized mortgage rate by connecting with your local mortgage broker or using an online calculator. When looking into home mortgage rates, think about your goals and current financial situation.
Things that affect the mortgage rate you might get include: your credit score, down payment, loan-to-value ratio and your debt-to-income ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider other costs such as fees, closing costs, taxes and discount points. Be sure to speak with multiple lenders — like local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.
How does the loan term impact my mortgage?
One important factor to consider when choosing a mortgage is the loan term, or payment schedule. The mortgage terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Another important distinction is between fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are stable for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only stable for a certain amount of time (usually five, seven or 10 years). After that, the rate adjusts annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, you should consider how long you plan to stay in your house. Fixed-rate mortgages might be a better fit for people who plan on living in a home for a while. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable in the long term. However, you may get a better deal with an adjustable-rate mortgage if you only intend to keep your house for a couple years. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. It’s important to do your research and understand what’s most important to you when choosing a mortgage.
Care homes operators have warned that a recent surge in mortgage rates and a delay to government reforms will sound a “death knell” for some UK providers.
The number of registered care homes fell to 12,224 on May 31 from 12,280 at the start of the year, according to data shared with the Financial Times by carehome.co.uk, a care home review site.
The rate of closures in England slowed in the first half of 2023, compared with the same period in 2022. However, a rise in mortgage rates threatens to increase the burdens on the care sector, compounding rising food and fuel prices and funding shortfalls.
“We are facing some extremely challenging times,” said Nadra Ahmed, chair of the National Care Association, a professional body. “There are vulnerable providers out there right now and there are a lot [of homes] that will be on the market.”
The challenges encountered by some operators would make their businesses “unviable”, she added, citing Pelham House in Kent as one of the latest to hit financial trouble. “Sadly they had to make the decision after 40 years to shut their doors,” she said.
“If you’ve got mortgages that’s going to have an impact on your ability to repay your borrowings.”
The Bank of England increased interest rates by 0.5 percentage points to 5 per cent in June in an effort to tame inflation, leading to rises in monthly mortgage repayments for borrowers on variable rates.
While interest rates are not expected to climb by as much as previously estimated following better than expected June inflation data last week, care providers are already feeling the heat.
Jay Dodhia, chief executive and co-founder of Serene Care, established with his wife Palvi, renovates and runs failing care homes. He said its model had been resilient but cautioned that rising interest rates could be particularly challenging for new builds.
“Most care homes are [on] variable rates — even when rates were very low it was very hard to get fixed rates on care home mortgages,” he said. “As the variable rate or the underlying BoE rate crept up, so have our interest payments.”
“Everything in isolation will affect you, if you put it all together — the rising inflation, utilities, food costs, staffing challenges . . . it could be a death knell for several [providers],” said Dodhia.
The number of councils in England reporting care home closures in their area rose to about 44 per cent at the end of May 2023, according to the Association of Directors of Adult Social Services, a charity.
Natasha Curry, deputy director of policy at the Nuffield Trust, said in 2019, before the coronavirus pandemic, the level was about a third.
“With borrowing rates also rocketing, it’s not a surprise that we’re seeing more closures of care homes and I think it’s inevitable that trend will continue,” said Curry.
During the Covid crisis, an injection of emergency government funding had helped to stabilise the market, cushioning the impact of falling occupancy rates. But that funding had ended.
Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said councils had a duty to provide “continuity of care” for residents if a home closed.
But a decade of austerity, Brexit, the pandemic and staff shortages compounded by surging living costs had contributed to “a considerable lack of resilience” in the sector.
Where care places existed, “it tends to be because they’re in the wrong place or the wrong kind of care home or the quality is not good enough”, she added.
Health leaders warned of the effect of diminishing capacity in social care on the wider health system. Matthew Taylor, chief executive of the NHS Confederation which represents health organisations across the UK, said health leaders knew “all too well the impact that a lack of social and residential care has on the NHS”.
The support provided to residents in care homes could prevent avoidable hospital admissions. Moreover, a lack of available care home places for patients who could otherwise have been discharged from hospital could create “a log jam effect in A&Es with long ambulance waits”, Taylor added.
“The good news is we can see the rate of closures slowing in England and Wales although unfortunately Scotland has seen a rise,” said Richard Stebles, head of business intelligence at carehome.co.uk.
“In order to stay sustainable, we are likely to see care providers trying to attract more privately funded residents who pay higher fees than those funded by the local authority.”
Dodhia said the average fee for publicly funded social care bed should be £900 per week. But local authorities are often paying about £600 to £700 a week; some are willing to spend just £490 a week.
Care home operators had hoped for more funding from local authorities following a “cost of care exercise” that sought to generate a shared understanding of the cost of adult social care. But some councils struggled to increase payment and reforms were pushed back to October 2025.
Providers have also fought to access the £200mn earmarked for the NHS crisis plan, which aimed to move patients from hospitals to care homes.
A “winter discharge fund” had been announced, said Dodhia, but “local authorities didn’t really want to spend it”. He added: “They knew that as soon as that funding ran out then the residents would be left vulnerable, because they can’t continue to fund [the scheme].
“We heard about all these great support plans but we didn’t see any of it,” he said.
The Department of Health and Social Care said it was investing up to £7.5bn in social care over the next two years — “the biggest funding increase in history” — to boost capacity in social care, including £1.4bn that local authorities could use flexibly, including to pay social care providers more.
It added: “Despite the pressures the adult social care market faces, the number of adult social care locations registered with the Care Quality Commission has remained stable, and there are 6,600 more home care agencies in England now compared to 2010.”
A 401(k) loan allows you to borrow money from your retirement savings and pay it back to yourself over time, with interest. While this type of loan can provide quick access to cash at a relatively low cost, it comes with some downsides. Read on to learn how 401(k) loans work, when it may be appropriate to borrow from your 401(k), and when you might want to consider an alternative source of funding.
What Is a 401(k) Loan & How Does It Work?
A 401(k) loan is a provision that allows participants in a 401(k) plan to borrow money from their own retirement savings. Here are some key points to understand about 401(k) loans.
Limits on How Much You Can Borrow
The Internal Revenue Service (IRS) sets limits on the maximum amount that can be borrowed from a 401(k) plan. Typically, you can borrow up to 50% of your account balance or $50,000, whichever is less, within a 12-month period.
Spousal Permission
Some plans require borrowers to get the signed consent of their spouse before a 401(k) loan can be approved.
You Repay the Loan With Interest
Unlike a withdrawal, a 401(k) loan requires repayment. Typically, you repay the loan (plus interest) via regular payroll deductions, over a specified period, usually five years. These payments go into your own 401(k) account.
Should You Borrow from Your 401(k)?
It depends. In some cases, getting a 401(k) can make sense, while in others, it may not. Here’s a closer look.
When to Consider a 401(k) Loan
• In an emergency If you’re facing a genuine financial emergency, such as medical expenses or imminent foreclosure, a 401(k) loan may provide a timely solution. It can help you address immediate needs without relying on more expensive forms of borrowing.
• You have expensive debt If you have high-interest credit card debt, borrowing from your 401(k) at a lower interest rate can potentially save you money and help you pay off your debt more efficiently.
When to Avoid a 401(k) Loan
• You want to preserve your long-term financial health Depending on the plan, you may not be able to contribute to your 401(k) for the duration of your loan. This can take away from your future financial security (you may also miss out on employee matches). In addition, money removed from your 401(k) will not be able to grow and will not benefit from the effects of compound interest.
• You may change jobs in the next several years If you anticipate leaving your current employer in the near future, taking a 401(k) loan can have adverse consequences. Unpaid loan balances may become due upon separation, leading to potential tax implications and penalties.
How Is a 401(k) Loan Different From an Early Withdrawal?
When you withdraw money from your 401(k), these distributions typically count as taxable income. And, if you’re under the age of 59½, you typically also have to pay a 10% penalty on the amount withdrawn.
You may be able to avoid a withdrawal penalty, if you have a heavy and immediate financial need, such as:
• Medical care expenses for you, your spouse, or children
• Costs directly related to the purchase of your principal residence (excluding mortgage payments).
• College tuition and related educational fees for the next 12 months for you, your spouse, or children.
• Payments necessary to prevent eviction from your home or foreclosure
• Funeral expenses
• Certain expenses to repair damage to your principal residence
While the above scenarios can help you avoid a penalty, income taxes will still be due on the withdrawal. Also keep in mind that an early withdrawal involves permanently taking funds out of your retirement account, depleting your nest egg.
With a 401(k) loan, on the other hand, you borrow money from your retirement account and are obligated to repay it over a specified period. The loan, plus interest, is returned to your 401(k) account. During the term of the loan, however, the money you borrow won’t enjoy any growth.
Recommended: Can I Use My 401(k) to Buy a House?
Pros and Cons of Borrowing From Your 401(k)
Given the potential long-term cost of borrowing money from a bank — or taking out a high-interest payday loan or credit card advance — borrowing from your 401(k) can offer some real advantages. Just be sure to weigh the pros against the cons.
Pros
• Efficiency You can often obtain the funds you need more quickly when you borrow from your 401(k) versus other types of loans.
• No credit check There is no credit check or other underwriting process to qualify you as a borrower because you’re withdrawing your own money. Also, the loan is not listed on your credit report, so your credit won’t take a hit if you default.
• Low fees Typically, the cost to borrow money from your 401(k) is limited to a small loan origination fee. There are no early repayment penalties if you pay off the loan early.
• You pay interest to yourself With a 401(k) loan, you repay yourself, so interest is not lost to a lender.
Cons
• Borrowing limits Typically, you are only able to borrow up to 50% of your vested account balance or $50,000 — whichever is less.
• Loss of growth When you borrow from your 401(k), you specify the investment account(s) from which you want to borrow money, and those investments are liquidated for the duration of the loan. Therefore, you lose any positive earnings that would have been produced by those investments for the duration of the loan.
• Default penalties If you don’t or can’t repay the money you borrowed on time, the remaining balance would be treated as a 401(k) disbursement under IRS rules. This means you’ll owe taxes on the balance and, if you’re younger than 59 1 ⁄ 2, you will likely also have to pay a 10% penalty.
• Leaving your job If you leave your current job, you may have to repay your loan in full in a very short time frame. If you’re unable to do that, you will face the default penalties outlined above.
Alternatives to Borrowing From Your 401(k)
Because withdrawing or borrowing from your 401(k) comes with some drawbacks, here’s a look at some other ways to access cash for a large or emergency expense.
Emergency fund Establishing and maintaining an emergency fund (ideally, with at least three to six months’ worth of living expenses) can provide a financial safety net for unexpected expenses. Having a dedicated fund can reduce the need to tap into your retirement savings.
Home equity loans or lines of credit If you own a home, leveraging the equity through a home equity loan or line of credit can provide a cost-effective method of accessing extra cash. Just keep in mind that these loans are secured by your home — should you run into trouble repaying the loan, you could potentially lose your home.
Negotiating with creditors In cases of financial hardship, it can be worth reaching out to your creditors and explaining your situation. They might be willing to reduce your interest rates, offer a payment plan, or find another way to make your debt more manageable.
Personal Loans Personal loans are available from online lenders, local banks and credit unions and can be used for virtually any purpose. These loans are typically unsecured (meaning no collateral is required) and come with fixed interest rates and set terms. Depending on your lender, you may be able to get funding within a day or so.
The Takeaway
Borrowing from your 401(k) can provide short-term financial relief but there are some downsides to consider, such as borrowing limits, loss of growth, and penalties for defaulting. It’s a good idea to carefully weigh the pros and cons before you take out a 401(k) loan. You may also want to consider alternatives, such as using non-retirement savings, taking out a home equity loan or line of credit, or getting a personal loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
There’s more to banking than low monthly fees, high yield savings, and a large ATM network. More Americans today seek banks and credit unions that align with their values when it comes to sustainability and social responsibility.
The U.S. banking system tends to disregard lower income and rural communities, with traditional banks establishing multiple branches in the country’s largest and wealthiest cities. The most socially responsible banks, on the other hand, provide online banking, low monthly fees, and no minimum deposit requirements, making them accessible to lower income individuals and families. They may also support efforts to help lower income individuals qualify for personal loans, auto loans or mortgages at fair interest rates.
But that’s not all that comes with socially responsible banking. Socially responsible banks emphasize financial literacy for those in their local community. They might also consider their organization a green bank, committed to fighting climate change and avoiding projects that support fossil fuels.
10 Best Socially Responsible Banks and Credit Unions
The best socially responsible banking institutions combine sustainability, accessibility, transparency and ethics to help make the world a better place. Yet, you won’t sacrifice top-notch personal checking and savings or even high-quality business banking when you choose one of the financial institutions on our list. You can have the best of all worlds – and do what’s best for the world – by choosing a socially responsible bank or credit union.
1. Aspiration: Best for Online and Mobile Banking Services
Aspiration is not a bank. But it’s one of the best cash management accounts offered anywhere online, with no monthly fee and a host of money management features. The Aspiration Plus Spend Save account that offers 3% interest on savings.
Aspiration is a certified B-Corp that shows its commitment to socially responsible banking with a variety of programs. Aspiration will plant a tree each time you round up a debit card purchase to deposit the difference in your Save account. It pays 3% to 5% cash back on debit card purchases with companies that are members of the Conscience Coalition, a group of small businesses devoted to social responsibility and sustainability.
Aspiration offers two accounts: One asks members to “Pay-What-Is-Fair,” which means you can use the account for free if you choose. Aspiration Plus costs $7.99 monthly or $71.88 annually (save $24 when you pay upfront.) Save accounts in the Pay What Is Fair model earn 1% APY, while Aspiration Plus savings accounts earn 3% APY.
2. Amalgamated Bank: Best for Investment Planning
Amalgamated Bank has branch locations in the nation’s largest cities: Boston, New York, San Francisco and Washington D.C. The bank offers personal checking and savings accounts with no monthly fees.
Amalgamated Bank offers four checking account tiers, including three interest bearing accounts. Two of the accounts have no minimum opening deposit. If you choose the interest earning Give-Back Checking account, you’ll earn a high APY of 0.90% – 0.95%, with an additional contribution of one-half of your interest earnings going to the charitable organization of your choice.
In addition to its choices in checking and savings accounts, Amalgamated Bank stands out when it comes to helping new retail investors choose ESG companies to invest in and plan for their future.
3. Spring Bank: Best for New Yorkers
Hailed as New York’s first B Corp bank, Spring Bank offers personal and business banking online and at branches in Harlem and the Bronx. The Green Checking account offers no monthly fee with direct deposit, paperless statements and no overdraft fees. If you need an account to write checks, you’ll want to choose the Basic Checking account.
Spring Bank deposits are insured by the Federal Deposit Insurance Corporation, up to $250,000 per depositor, per account. But the bank works with the IntraFi Network to also insure multi-million dollar deposits across multiple reputable U.S. banks.
Spring Bank offers CDs with terms from 90 days up to five years with a minimum deposit of just $250 and interest rates ranging from1.50% APY up to 3.25% APY. The bank also has a high-yield Vacation/Club savings account for short-term savings.
Spring Bank ranks in the top 5% of all 3,000 B Corps across the world and earned awards for its Governance and Customer Service in 2022. The company strives to provide affordable financial products, enabling its customers to avoid what it calls “fringe” financial products like check-cashing services and payday loans.
The bank also supports small businesses in New York and beyond with business checking accounts, money market accounts, and business loans.
4. Beneficial State Bank: Best for West Coast Residents
With seven locations across California, Oregon, and Washington, Beneficial State Bank is the B Corp bank of choice for those on the West Coast. The bank’s majority owner is Beneficial State Foundation, a nonprofit organization serving the public interest.
Beneficial State Bank offers three checking accounts, all with a $50 minimum opening balance and a low monthly service charge. eChecking waives the monthly fee if you sign up for eStatements. Checking and Interest Checking products have low monthly service charges that are easy to waive if you meet certain criteria. The bank also has savings, money market, CD, and IRA accounts to help you meet your long-term and short-term savings goals.
With an emphasis on ethical, equitable banking, Beneficial State Bank is a green bank that does not support or lend fossil fuel companies. The bank shows where every percentage of your deposit goes and says that 75% of its lending occurs within its mission categories. The other 25% supports other categories, but never to projects or organizations that cause harm to the planet or the people on it.
Some of the bank’s top lending categories for businesses and consumers include environmental sustainability, affordable housing, auto loans with fair interest rates, and health and well-being. The bank is also a preferred lender for clean vehicle programs in the state of California.
5. City First Bank, A Subsidiary of Broadway Federal Bank: Best for Commercial and Nonprofit Banking
City First Bank is part of a family of companies devoted to socially responsible lending and personal and business banking in low to moderate income communities. City First Bank, based in Washington, D.C., is a black-led, minority depository institute (MDI), as well as a B Corp and a member of Global Alliance for Banking on Values.
City First Bank offers a variety of personal and business banking products, as well as accounts for nonprofit organizations. The personal checking account has no monthly fee if you meet any of four criteria:
One monthly direct deposit
10 debit card transactions
eStatement enrollment
Minimum monthly balance of $100
The bank also offers a personal savings account, CDs, money market accounts and savings accounts for minors.
6. Sunrise Banks: Best for Mortgages
Sunrise Banks offers a full range of personal banking products, including personal checking, savings accounts, credit cards, and a pre-paid Mastercard. But it is best known for its Pathway2Home affordable mortgage product, as well as other mortgages with down payments as low as 3%. The bank also writes VA loans with no down payment required.
By supporting affordable housing and helping Minnesota residents get into homes of their own and begin building generational wealth, Sunrise Banks shows its commitment to socially responsible banking. Like many of the socially responsible banks on this list, Sunrise Banks is a member of GBAV, a Community Development Financial Institution, and a B corporation.
7. Clean Energy Credit Union: Best for Clean Energy Loans
Most of the banks on our list support efforts to reduce climate change, do not help fund or support fossil fuel companies, and run their organization sustainably. Clean Energy Credit Union works to fund renewable energy through personal loans for electric bicycles, solar electric systems, geothermal heat pump systems, and green home improvements. Clean Energy Credit Union also offers auto loans for electric vehicles.
While the credit union specializes in funding renewable energy and other loans, it also offers options for personal checking and savings accounts. Checking accounts offer dividends from .01% APY to 3.56% APY with a minimum opening balance of just $25 and no monthly fees if you meet certain requirements, including having a Clean Energy loan.
Savings accounts include a bank account with a 0.15% APY and a minimum opening deposit of $100, certificates, and a money market account with dividends ranging from 0.95% up to 1.61% APY, with a minimum deposit of $2,500.
As part of its commitment to green living, the credit union offers bio-based, compostable debit cards that are eco-friendly. It is also one of the few banks or credit unions on our list that offers a Carbon Zero Teen Account online, which shows your teen the carbon offsets their deposits can fund.
8. National Cooperative Bank
National Cooperative Bank offers high yield CDs, and money market accounts, as well as checking and savings accounts and business products. The bank offers an interest earning checking account with a 0.90% APY and no minimum opening deposit. There is a $15 monthly fee if the balance falls below $500.
The money market account has a high 2.28% APY, with a minimum balance of $5,000 to avoid the $25 monthly fee. You will need just $100 to open the account. You can earn a 4.34% APY on with a 12-month CD with a $2,500 minimum opening deposit.
While the bank is committed to helping its customers earn money through high interest rates, it is equally committed to its duties as a socially responsible bank. The bank has donated $8 billion to support underserved communities nationwide, and provided loans and investments of $475 million to low and moderate income families, including mortgage loans.
9. Clearwater Credit Union: Best for Previously Unbanked Consumers
Clearwater Credit Union is a certified Community Development Financial Institution and a member GBAV. While most credit unions are devoted to serving their local communities, Clearwater takes it a step further by donating $1.6 million to 290 non-profit organizations in 2022. Employees donated more than 1,340 volunteer hours within their local communities, and the credit union awarded $20,000 in scholarships to students in the credit union’s home state of Montana.
Clearwater CU offers multiple choices in bank accounts, including a basic checking with no monthly fee, a premium checking that pays dividends, and a SmartSpend checking account with a low, $5 monthly fee for previously unbanked consumers.
The SmartSpend account can help lower income individuals and families avoid the fees that come with check cashing services or prepaid debit cards. It also gives them the opportunity to avoid overdraft fees while gaining the convenience of a deposit account, debit card, and access to mobile banking.
10. Carver Federal Savings Bank: Best for Small Business Banking
Many of the banks on our list devote time and money to sustainability, equality, and other social causes. But they don’t necessarily offer the highest interest rates available in online banking today. Carver Federal Savings Bank, however, is a Black-operated, socially responsible bank that also delivers high-yield savings of 4.00% APY.
But there is a catch. You’ll need a $5,000 minimum opening deposit. This might make the Carver savings account inaccessible to many in underserved communities seeking personal checking and savings accounts. However, for those on firm financial footing who want to support a socially responsible bank, Carver’s high yield savings is a solid choice.
Beyond the high yield savings, Carver is known for an array of checking and savings products for small business owners, including a money market account with 2.00% APY and a business interest checking account.
Start-up businesses or those with low-to-moderate balances might prefer the Carver Community Business Free Checking with no minimum balance, no monthly fee, and 200 free transactions per month. The bank focuses on Black- and Minority-owned businesses as well as women-owned businesses across New York City.
Carver is a designated CDFI and has reinvested 80% of every dollar deposited into NYC communities. It also donated $149 million in New Market Tax credit and more than $259 million in leveraged loans across the New York metro area.
How to Choose Socially Responsible or Sustainable Banks and Credit Unions
When you’re shopping around for a socially responsible bank, first consider what aspects of ethical banking are most important to you. Are you looking for a bank committed to serving low income communities, or one that puts a focus on renewable energy? Maybe sustainability is the most significant aspect to finding a socially responsible bank that aligns with your values.
Of course, you also want to think about all the other elements that you would consider for your personal banking needs. These include low fees, online banking capabilities and an intuitive mobile app, early availability of your direct deposits, and a high yield savings account.
Our list of the best socially responsible banks takes all these factors into consideration and showcases banks that back up their values with investments – in their communities and in the environment.
Organizations That Support Sustainability and Social Responsibility
The best socially responsible banks often showcase their commitment to ethical banking through certifications or membership in organizations that support and reflect their values. If a bank is a member of the Global Alliance for Banking on Values, recognized as a community development financial institution (CDFI) or a Certified B corp, you know the bank has demonstrated its commitment to ethical banking.
Global Alliance for Banking on Values (GABV)
The Global Alliance for Banking on Values (GABV) is a worldwide network of socially responsible banks committed to ESG values. GABV banks focus on three pillars:
Finance change
Do no harm
Sustainable products and services
To join the Global Alliance for Banking on Values (GABV), banks must show their commitment to sustainability, and have a balance sheet of at least $50 million. They must be a full service bank and show financial stability and stable governance. Many of the best socially responsible banks are members of the Global Alliance for Banking on Values (GABV).
Community Development Financial Institutions (CDFIs)
A Community Development Financial Institution is a bank, cash management account, or credit union that is certified by the U.S. government. It’s a bank that has shown a commitment to providing banking services in low income communities and underserved communities across the U.S.
Unlike many other financial institutions, Community Development Financial Institutions focus on areas such as economic development, affordable housing and supporting small businesses in their local community.
Certified B Corp
A Certified B Corp is any organization or socially responsible financial institution that successfully balances purpose and profit. Organizations can apply for B Corp certification if they demonstrate transparency, social responsibility, and show high social and environmental sustainability standards. Banks and credit unions must pass rigorous certification standards to become recognized as a B Corp.
FAQs
Still have questions about the best socially responsible banks? Check out some commonly asked questions below.
Which banks are eco-friendly?
Many U.S. banks meet eco-friendly requirements in a variety of ways. Some, like Clean Energy Credit Union, refuse to support fossil fuel companies. Aspiration plants a tree whenever customers round up their debit card purchases to deposit into a savings account.
To find eco-friendly banks, you can look up their ESG (Environmental, Social & Governance) ratings on their websites, in their financial statements, or on a website like Sustainalytics.
Remember, ESG ratings are derived from many factors, including a company’s diversity & inclusion practices, sustainability, charitable donations, and more. You may have to dig deeper to see which banks employ sustainable practices to reduce their carbon footprint.
How Can You Determine Which Banks Are Committed to Ethical Banking?
A search on a company website should help you find the best socially responsible banks committed to ethical banking. Check online to see if the bank helps underserved communities or the unbanked or underbanked population. Ethical banks may be recognized as a community development financial institution.
What is responsible banking?
Responsible banking or ethical banking typically focuses on three key areas:
Banking access and community development
Environmental impact and climate change
Holistic social responsibility
What is an ESG bank?
An ESG bank focuses on environmental sustainability, social responsibility and ethical governance.
From rent to the security deposit to utilities to the million other costs and living expenses involved, renting an apartment is an expensive endeavor. Saving up enough to afford everything can seem like a daunting task, especially if you’re not good with savings or it’s your first apartment. But fear not. This complete guide to budgeting for an apartment will give you a framework to follow, allowing you to easily start budgeting and reach your financial goals.
How to budget for apartment expenses in 5 easy steps
While there are all sorts of ways to save, creating or following a budget system will help keep you accountable, motivated and consistent. Here’s how to create a budget and start setting aside money for your apartment. These easy-to-follow steps will help everyone, whether you have to budget for your first apartment and you’re doing this process for the first time or you’re a seasoned renter.
1. Figure out your monthly income
The first step is to determine where you stand financially. While annual income is important, it’s your monthly income that matters the most. This is what dictates how much you can afford to pay in rent and for other necessities.
Looking at your pay stubs or paychecks, you’ll be able to determine your take-home pay. Your take-home pay is different than your gross income because your employer has already deducted things like income tax, payroll tax and social security.
If you’re only paid once a month, you can easily identify how much you make each month. If you get your paycheck every other week, you’ll need to add up your monthly paychecks.
This process is usually easiest for salaried employees, as they get paid a set amount for each pay period. Hourly employees may need to create a rough average of how much they make each month.
2. Determine your monthly expenses
Then, calculate your monthly costs. These are living expenses you’ll pay on a monthly basis like rent, utilities, renter’s insurance, health insurance, food and more.
It’s OK if you don’t have exact figures for all these expenses. If you’re still apartment hunting, you can sub in the average rent for the city or area. You can also estimate things like food. Err on the side of caution and make your expenses higher than you expect.
3. Subtract your expenses from your income to determine what’s left
After determining how much you make and then spend each month, deduct your monthly expenses from your income.
If your projected expenses are higher than your income, you’ll need to go back and see where you can cut costs. Likely, it means you’ll need to spend less on rent.
4. Calculate what you can afford to pay in rent
You should only spend 30 percent of your income each month on rent. Most landlords also require that your income be three times more than the rent. Using your income and expenses, you can calculate how much you should spend on rent using our rent calculator.
5. Choose a budgeting system that works for you
As you start this budgeting process, you’ll find that there are tons of different budgeting methods and systems out there. If this is your first time having to budget for an apartment, you may need to try several different systems before finding the one that works for you.
Nowadays, many people enjoy using budgeting apps to track their savings. These are great options because most are affordable and easy to use, and there are tons of different apps to try. Apart from apps, other popular budget methods include the envelope method and the pay-yourself-first method. But lots of people swear by the 50/30/20 budget method.
The 50/30/20 budget rule
If you’re looking for a monthly budget system that helps you consistently build savings while still covering all your needs with a little extra money left over for fun, the 50/30/20 method is a great apartment budget option.
It essentially works like this. You divide your monthly income into three sections. Fifty percent goes to needs or necessities. These can include paying monthly rent on your current apartment, renter’s insurance, paying the electric bill and other utilities and other essential needs. If you’re saving toward your first apartment budget and still live at home, the costs for your monthly needs probably aren’t too high.
Once you’ve paid for your needs, you still have 50 percent left over. Thirty percent should go toward wants. These are things you want but don’t necessarily need, like streaming services or dining out.
The remaining 20 percent gets automatically put away as savings. This budget ensures you pay for all the things you need and want while still consistently saving toward a goal. If you don’t have a ton of needs or wants, you can put more toward savings. The 50/30/20 rule serves as a framework and you can customize the savings and wants categories how you like. But always make sure that you cover your “needs,” like paying rent.
4 things to budget for when renting an apartment
Your apartment budget should cover the following:
Rent
When moving into an apartment, obviously you’ll need to pay the first month’s rent at move-in time. Some landlords also require that you pay for the last month’s rent upfront, as well.
Security deposit
Your budget needs to include the security deposit, which is usually the same amount as one month’s rent. In total, you need three months’ worth of rent saved before moving in.
Some landlords charge a pet deposit for pets, as well.
Utilities
It’s a good idea to budget for the first months’ worth of utility bills, as well. That includes electricity, water, natural gas, internet, sewer and garbage.
You can save money by finding an apartment complex that includes utilities. Apartment complexes that cover even some utilities like electricity or water are useful money-saving tools. Otherwise, you’ll be paying directly to the utility companies for everything and it adds up.
Miscellaneous fees and costs
On top of all that, you’ll also need to budget for the myriad other expenses that come with renting an apartment. That includes everything from application fees to cleaning supplies to actually furnishing the place. If you’re moving out and this is your first apartment budget, this handy checklist covers many of the things you’ll need.
You’ll also need to budget for moving costs like a moving truck or packing supplies. Sometimes, you can keep moving costs low if you don’t have a ton of stuff or aren’t moving far. But, if you have heavy furniture or are moving to a new city, you may have to pay for professional movers.
Renting an apartment also comes with the occasional additional fee or unexpected expense. It’s recommended to save more than you initially budgeted for to avoid nasty surprises.
What is a good budget for an apartment?
Along with the 50/30/20 rule, the 30 percent rule is a good rule of thumb for when you’ve moved into your apartment. As some monthly expenses like the cost of food can vary, the monthly rent will be one constant. You can use it as a set amount around which to anchor a budget.
Essentially, the 30 percent rule is that you should only spend 30 percent of your income each month on rent. This ensures you have 70 percent of your monthly take-home available for spending on other expenses like food.
How much money should you have saved when moving into an apartment?
There’s no straight answer about exactly how much money you need to save for your new apartment. The amount varies depending on factors like location and the cost of the rent. That’s why you’ll need to use the above steps to personalize the budget to your needs. If you’d like a rough estimate, check out this article about how big you should get your apartment savings.
If you’re saving for your first apartment, it’s always better to overbudget and save even more. On top of rent and other apartment living costs, you’ll need to actually furnish and outfit your apartment for living.
7 ways to save money for your apartment
Here are some other ways you can boost your budget.
1. Downsize
Smaller apartments like studio or one-bedroom apartments are generally more affordable and less expensive than bigger apartments. Plus, it’s always a good idea to live slightly below your means so you can constantly save money and not live paycheck-to-paycheck.
2. Have roommates
If you’re saving toward a two-bedroom apartment but it’s stretching your budget too much, add a roommate to the mix! Living with roommates cuts expenses down and opens the door to creating wonderful memories.
3. Don’t live near the city center
Beware the siren call of the city center. The cost of rent will nearly always be higher closer to the city center, especially in big cities. The promise of living just steps from big city amenities like dining and shopping is strong, but it’s better to live further away in a more affordable housing situation. On the plus side, you’ll have more money to enjoy those urban perks!
4. Set up a separate savings account
If you have the issue of constantly dipping into your savings account, set up a separate bank account. That way, the temptation to touch it is gone.
5. Reduce wasteful spending
While saving, cut back on unnecessary spending so you have extra cash to put toward your budget. Dine out less, cancel subscriptions you don’t need or use and the like. Have cable but don’t use it? Call the cable company and cancel. How about that gym membership you don’t actually use? It’s gone.
You can always take up those habits or wants-based spending again when you reach your goal.
6. Find bargains and deals to spend less
While saving toward an apartment, there are some things you still need to spend money on, like food. You still have to eat and food costs money. You still have to commute to work or get around for errands. But there are ways you can spend less on these activities and items.
For groceries, you can shop at bargain supermarkets, use coupons or buy cheaper, generic brands. Instead of driving everywhere and paying expensive gas prices, take public transportation.
You can also go thrifting or hit up garage sales for bargains and deals on big-ticket items. Need a new coffee table? Skip IKEA and hit up the local Goodwill. How about a couch? Check area neighborhoods for who’s having a garage sale.
7. Keep saving
Even after you’ve reached your goal and moved in, keep adding money to your savings. When the time comes for you to move again or upgrade apartments, you’ll already have a head start. You’re also prepared in the event you need a cushion in case of rent increases.
Whether it’s your first apartment or 10th, budgeting is easy with these tips and steps
It doesn’t matter if you’re a first-time renter or have been renting apartments for years. Creating and sticking to a budget is an important part of the rental process. Not only does it help you get a new place to live, but it teaches good financial practices you can use in other areas of your life. Above all, make a savings plan and stick to it.
Are you curious about the concept of a duplex apartment and eager to explore its unique features? Look no further! In this comprehensive Redfin guide, we will delve into everything you need to know about duplex apartments. Whether you’re hoping to move out of your cramped Houston apartment or you’re considering buying a property in Baltimore, this article will provide you with a detailed understanding of this distinctive residential arrangement. From its architectural design and layout to the benefits and considerations, join us for a comprehensive overview of duplex apartments so you can make an informed decision about this increasingly popular housing option.
What is a duplex apartment?
A duplex is a form of multi-family housing characterized by a building that contains two separate units. Duplex apartments can be vertically divided, with each level having its own entrance, or they can be horizontally divided, sharing a common entrance but with distinct living areas on each level.
In cases where outdoor space exists on the property, it is typically shared between the residents of both units or partitioned accordingly. A duplex building is owned by a single individual who may choose to reside in one of the units or not. The owner has the option to rent out either one or both of the units to tenants. Similar to duplexes, triplex and fourplex buildings are other types of multi-family housing, accommodating three and four units within the same structure, respectively.
Understanding the difference: duplex vs. apartment
A duplex refers to a building divided into two separate units, typically sharing a common wall, with each unit having its own entrance. This arrangement offers a sense of privacy and independence, as well as the opportunity for rental income. On the other hand, an apartment is a self-contained living space within a larger complex, typically consisting of multiple units in the same building. Apartments often offer amenities such as shared facilities, maintenance services, and a centralized management system.
Pros of living in a duplex
Spaciousness
Duplexes often offer more space than traditional apartments, with separate living areas, bedrooms, and sometimes even outdoor areas like patios or yards. This additional space provides residents with a greater sense of freedom and flexibility to personalize their living environment.
Homeownership potential
In some cases, duplexes are owned by individual landlords who rent out one unit while residing in the other. This arrangement can present opportunities for aspiring homeowners to live in one unit and generate rental income from the other, potentially helping with mortgage payments and building equity.
Noise reduction
Duplexes typically have fewer shared walls compared to apartments, which can result in reduced noise transfer between units. This can contribute to a quieter and more peaceful living environment, making it appealing for those seeking a balance between privacy and community.
Cons of living in a duplex
Limited availability
Duplexes may be less common in certain areas compared to apartment complexes, so finding a suitable duplex for rent or purchase can be more challenging. It’s important to thoroughly research the local housing market to determine the availability and pricing of duplex units.
Responsibility for maintenance
Unlike apartments where maintenance and repairs are typically handled by the landlord or management company, duplex residents are often responsible for the upkeep of their unit and the shared areas. This can involve additional time, effort, and expenses, depending on the terms of the rental agreement or ownership arrangement.
Potential lack of privacy
Despite the separation between units, living in close proximity to neighbors can sometimes compromise privacy. Noise, shared spaces, and occasional visual intrusions may diminish the feeling of complete seclusion typically associated with detached single-family homes.
Limited outdoor space
In many cases, duplexes have a smaller lot size compared to single-family homes. This can result in limited outdoor space, making it challenging for residents to have extensive yards or dedicated outdoor areas. Shared outdoor space might be required, which could require coordination and compromise with the other unit’s occupants.
What to consider when renting a duplex
Privacy vs. community
Duplexes offer a unique living situation where you share a building with another household. While this can foster a sense of community and potentially lead to friendships with neighbors, it’s essential to assess your personal preferences for privacy. Determine whether you are comfortable with shared walls, common outdoor spaces, and potential noise levels from the neighboring unit. It’s crucial to strike a balance that aligns with your lifestyle and social needs.
Rental agreements
Thoroughly review the lease agreement and ensure you understand the terms and conditions. Pay close attention to provisions related to maintenance responsibilities, utility payments, and potential restrictions on modifications or subleasing. Additionally, clarify the process for resolving any disputes that may arise with your landlord or the other tenant in the duplex. A clear understanding of the rental agreement will help set expectations and avoid any potential conflicts down the line.
Budget and affordability
Evaluate the rental price in relation to your overall budget and financial goals. Take into account not just the monthly rent, but also any additional costs such as utilities, maintenance fees, and potential shared expenses with the other tenant. Assess your current financial situation and ensure that renting a duplex aligns with your long-term financial plans. It’s important to strike a balance between finding a comfortable and suitable living space while ensuring it fits within your budgetary constraints.
Is a duplex the same as a condo?
While both can involve owning a portion of a building, a duplex is typically a single building divided into two units, whereas a condo is a type of ownership in which individuals own individual units within a larger complex.
Is a duplex apartment right for me?
The suitability of a duplex apartment depends on your lifestyle, preferences, and specific housing needs. Consider factors such as desired living space, privacy requirements, responsibility for maintenance, and availability in your desired location. Assessing these factors will help determine if a duplex apartment aligns with your living preferences and goals.
A family living in Sunset Heights, close to the center of Houston, Texas, is parting with their home for just $1.
But in order to get your hands on the 1,056 square foot, 2-bedroom, 1-bath property, you need to write an essay and submit a $150 entry fee.
So in total, you’re looking at $151 if your essay is selected and the $1 purchase contract is written up.
The house is located at 213 E. 23rd Street, Houston, TX 77008. Per Zillow, it was actually sold on September 30, 2013, and currently has a Zestimate of $339,299.
So the owner would only need about 2,267 entries to get that value. By the way, the home was sold for just $281,000 less than two years ago.
About the Home
The home was built in 1920 and sits on a 5,300 square foot lot across from “the adorable Halbert Park.” I can’t vouch for its adorability seeing that I’ve never been to Houston.
However, it does have a WalkScore of 78, meaning you should be able to get to trendy shops and restaurants without the need for four wheels.
And the owner renovated the bathroom in 2014, adding new tile, a sink, and some plumbing work. Old carpets were also removed to reveal the original hardwood underneath.
The kitchen received some upgrades in 2013 and washer/dryer connections were also added for convenience.
Why They’re Doing It?
If you’re wondering why the owner, Michael Wachs, is selling his home for just a buck, he explains on his website that “we have made home ownership in an expensive and competitive market more affordable.”
But he stresses that he’s not rich, and that the $150 entry fees should be enough to cover the mortgage he has on the home.
Wachs apparently got inspiration from a similar sale in Maine, and figured this would be a good way for a person to acquire a home without a pricey mortgage.
In order to make an offer, you must complete a 200-word essay explaining why you would like to purchase the home and submit a non-refundable $150 offer fee. I’m assuming a heartwarming narrative will work wonders here.
Essays should not contain identifying information so they can be read and judged anonymously.
Assuming your essay is chosen, a contract will be written up for $1 to purchase the home. The buyer will be responsible for all taxes, including real estate transfer taxes, property taxes, and all fees, including lawyer’s fees.
Also keep in mind that a free and clear home still comes with costs such as taxes, insurance, and ongoing maintenance.
The home is being sold as-is and no repairs will be made by the seller.
And here’s the kicker folks – the seller is a Realtor! So that might explain why he’s selling his home this way. Call it “free” marketing and lots of buzz and perhaps even a higher-than-expected sales price.
Offers are being accepted until June 13th if you’re interested.