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Q: Can I use my credit card internationally?

Yes, with an international credit card, you'll be able to use your card outside of the U.S. Exactly which countries you can use your card in will depend on the network. For instance, MasterCard's global network includes more than 210 countries, while Visa's network includes over 200. International cards are also available in the Discover and Amex networks, but with a more limited number of countries.

Jun

2024

International Credit Cards: Features, Benefits, and How They Work

By Jackie Lam | Credit, Family Finances, money | Comments Off

If you want to avoid dealing with native currency or carrying traveler’s checks or cash when traveling abroad, an international credit card can be an asset. Having this kind of card in your wallet, which you can use both at home and abroad, can make for smoother trips overseas.

Here’s a closer look at what an international credit card is, its main features, and how to get an international credit card that’s right for you.

What Is an International Credit Card?

An international credit card is a credit card that you can use outside of the United States to make purchases and at an ATM. The major networks that issue international credit cards include Mastercard, Visa, Discover, and American Express.

However, having an international credit card doesn’t mean you can use it anywhere in the world. The countries where you can use a certain card depends on the network. For instance, Mastercard’s international cards can be used in over 210 countries, whereas Visa’s global network spans over 200 countries to date.

Features of International Credit Cards

Besides the fact that you can use the card overseas, here are some of the other features an international credit card may have:

International Chip and Pin

International credit cards feature an international chip and pin. Chip cards, or EMV cards (which stands for Europay, MasterCard, and Visa), add an extra layer of security to transactions.

With the chip and pin feature of international credit cards, you dip your card into the reader, then insert your PIN. This differs from in the U.S., where EMV cards come with chip-and-signature technology, which means you insert your chip and then may input your signature. Chip-and-pin is the standard everywhere else and, as such, this is what international credit cards offer.

Welcome Offer

An international credit card might have a welcome offer, which features an attractive introductory bonus. Typically, with how credit cards work, you’ll need to spend a certain amount on the card within the first few months of opening your account in order to earn the bonus. The amount you’ll need to spend, the time frame in which you’ll need to do it, and the number of bonus rewards points you can earn will vary by card.

Travel Perks

Some international credit cards come with attractive travel perks, such as trip cancellation insurance, rental car insurance, and lost luggage insurance. They might also feature access to exclusive airport lounges around the world.

To qualify for an international credit card with some of these luxury perks, however, you’ll usually need to have a good or even excellent credit score (meaning 670 or above).

Rewards Points

While many credit cards come with the ability to scoop up rewards points, international credit cards might offer a higher credit card rewards rate for travel-related purchases. This might include hotel stays, car rentals, dining out, and booked flights. For example, you might get 5x points on these travel-related purchases, whereas other purchases earn 1x points.

Recommended: When Are Credit Card Payments Due

Credit Card Foreign Transaction Fees

An international credit card might come with a foreign transaction fee, which is a fee that applies when you make a payment with your card in another country. This fee is typically 3% of the total cost of the purchase, and it is charged in U.S. dollars. For example, if your total purchase came to $50, then the foreign transaction fee would be $1.50, for a total of $51.50.

If you’re not careful, foreign transaction fees can easily take a bite into your travel budget. Some international cards might not charge foreign transaction fees, which can put money back into your pocket and help you avoid credit card debt that’s hard to get rid of.

How to Get an International Credit Card

To get an international credit card, follow these steps:

1. Do your homework to see which cards are most attractive to you. Which have the best perks, lowest fees, and most enticing rewards?

2. You’ll also want to see which cards you can qualify for. By checking your credit score, you can better determine which cards you might get approved for.

3. Apply for a credit card. The process of how to apply for a credit card is similar whether or not it’s an international credit card. You’ll usually need to provide basic personal and financial information, such as your Social Security number and details on your income.

4. Once your application is submitted, the credit card issuer will do a hard pull of your card to determine your creditworthiness, which helps inform whether your limit will be above or below the average credit card limit. Be aware that a hard pull will likely result in a temporary ding to your credit.

5. Find out if you’re approved. If you are, you can expect to receive your new card in the mail in seven to 10 business days. Your card will have a unique account number as well as the CVV number on a credit card.

Recommended: What is the Average Credit Card Limit

How to Choose the Best International Credit Card

What’s the best international credit card for you will depend on a handful of factors. Specifically, you’ll want to consider:

• Where you’ll be traveling. Are you planning on using your card on business trips, and do you frequent certain countries for work? If so, there are certain countries or parts of the world where an international credit card may be more widely accepted. Different cards may be accepted in different locations.

• Rates and fees. Look to see what the APR on a credit card will be. If you are likely to keep a balance, it’s particularly important that you have a good APR for a credit card. The lower the APR, the less you’ll pay in interest when you carry a balance. Also take a look at any other fees that may apply with the card, such as annual fees, late fees, cash advance fees, and, of course, foreign transaction fees.

• Perks and rewards. Not all credit cards are equal when it comes to the perks and rewards they offer. It’s easy to be dazzled by attractive travel-related perks, but make sure they’re ones you’ll actually use. Also look at the earn rate for different categories, and see if the categories with the higher earn rates are in line with your spending habits. You want to use your credit card responsibly vs. overspending to earn rewards.

Pros and Cons of Using an International Credit Card

International credit cards have pros and cons, both of which are important to weigh.

Pros of Using an International Credit Card	Cons of Using an International Credit Card
Less hassle when traveling	Fees
Opportunity to earn rewards	Might not be accepted everywhere
Travel perks	Need to plan ahead to maximize perks

Pros of International Credit Cards

First, the upsides of international credit cards:

• Less hassle when traveling: Perhaps the top advantage of using an international credit card is that you won’t need to fuss with native currency or carrying around cash or traveler’s checks. Plus, if something were to go amiss, you have the usual credit card protections in place, which could allow you to dispute a credit card charge or request a credit card chargeback.

• Opportunity to earn rewards: Many international credit cards allow you to earn rewards for your everyday spending. Plus, some may offer higher rates of rewards for travel-related spending, which could be a big benefit for frequent travelers.

• Travel perks: As mentioned before, international credit cards can come with a host of travel-related parks. For instance, international credit cards may offer trip cancellation insurance, car rental insurance, and free upgrades on hotels and flight bookings, to name a few.

Cons of International Credit Cards

Next, consider the potential downsides of international credit cards:

• Fees: Some international cards have high annual fees, though these may translate to more attractive perks. You’ll also want to look out for foreign transaction fees, as these can quickly add to your costs when traveling.

• Might not be accepted everywhere: Not all retailers within a country may accept payments with an international credit card. Some retailers might still only accept the local currency or certain payment methods. Additionally, international credit cards’ networks may not include particular countries.

• Need to plan ahead to maximize perks: While international credit cards might come with some nice travel benefits and perks, it can take a bit of work and planning to make the most of them. For instance, if you want to rake in the bonus offer, you’ll need to plan for some big-ticket purchases to put on your card within the first few months of opening it.

Or, if a card features a travel credit that expires each year, the clock is ticking to use that benefit. This all could incentivize you to overspend, leaving you in a scenario where it’s hard to pay off more than the credit card minimum payment.

The Takeaway

Having an international credit card in tow while traveling overseas can eliminate the hassle of dealing with foreign currency or carrying cash. When looking for a good that suits your needs, it’s important to weigh the perks against the downsides, particularly the fees involved.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQs

Can I use my credit card internationally?

Yes, if you have an international credit card, you’ll be able to use your card outside of the U.S. Exactly which countries you can use your card in will depend on the network. For instance, MasterCard’s global network includes more than 210 countries, while Visa’s network includes over 200.

Should I withdraw cash with my international credit card?

While withdrawing cash from an international credit card is an option, note that doing so often comes at a cost. On top of the foreign transaction fee, which hovers at around 3%, there’s also a fee that applies to cash advances, and cash advances tend to have a higher APR. Interest on cash advances typically starts accruing immediately, as there’s no grace period on cash advances.

How can I find out which countries accept a given card?

Check the credit card network’s international use network to determine which countries you can use your card in. You may find this on the credit card network’s website or in the app or by contacting customer service.

Do I have to pay fees annually for an international credit card?

Some international credit cards do have an annual fee. Do your homework ahead of time to see what the annual fee is, and if the perks will offset the costs. Other costs you want to check include foreign transaction fees, cash withdrawal fees, and late fees.

Photo credit: iStock/Drazen_

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.

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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Jun

2024

Guide to IRA Accounts With Limited Margin

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

An IRA account with limited margin is a retirement account that allows investors to trade securities with unsettled cash. It’s a more lenient structure versus a cash account, where you must wait for trades to settle before using the money for further trading. But an IRA account with limited margin isn’t a true margin account in that you can’t use leverage.

Nonetheless, an IRA account with limited margin offers a few advantages, including the ability to defer or avoid short-term capital gains tax, and you’re protected against good faith violations. That said, there are still restrictions, so before setting one up, it may be beneficial to learn more about how these accounts work.

What Is an IRA Account With Limited Margin?

An IRA account that may have limited margin — often called simply a limited margin IRA — presents a more flexible option to invest for retirement than a traditional IRA. These types of IRAs may allow you to trade with unsettled funds, meaning that if you close a position you don’t have to wait the standard two days after you trade, you can use those funds right away.

There may also be tax benefits. In a traditional IRA margin account, capital gains taxes are deferred until funds are withdrawn. This is similar to a regular IRA, where you don’t pay taxes on contributions or gains until you withdraw your money.

You may also be able to use limited margin in a Roth IRA, and there may be even more tax benefits when using limited margin in a Roth IRA. You don’t pay any capital gains because Roth accounts are tax-free, since Roth contributions are made with after-tax money.

As noted, an IRA account with limited margin may allow investors to trade with unsettled cash. However, a limited margin IRA is just that — limited. It is not a true margin account, and does not allow you to short stocks or use leverage by borrowing money to trade with margin debits. In that sense, it is different from margin trading in a taxable brokerage account.

You may be able to use limited margin in several IRA types. In addition to having margin IRAs with traditional and Roth accounts, rollover IRAs, SEP IRAs, and even small business SIMPLE IRAs are eligible for the margin feature. While mutual funds are often owned inside an IRA, you cannot buy mutual funds on margin.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

How Does Limited Margin Work?

Limited margin works by allowing investors to trade securities without having to wait for funds to settle. You can think of it like an advance payment from positions recently sold.

The first step is to open an IRA account and request that the IRA margin feature be added. Once approved, you might have to request that your broker move positions from cash to margin within the IRA. This operational task will also set future trades to the margin type.

IRAs with limited margin will state your intraday buying power — you should use this balance when day trading stocks and options in the IRA.

An advantage to trading in limited margin IRAs is that you can avoid or defer capital gains tax. Assuming you earn profits from trading, that can be a major annual savings versus day trading in a taxable brokerage account. If you trade within a pre-tax account, such as a traditional or rollover IRA, then you simply pay income tax upon the withdrawal of funds. When using Roth IRA margin, your account can grow tax-free forever in some cases.

The drawback with an IRA with limited margin versus day trading in a taxable account is you are unable to borrow money from your broker to create margin debits. You are also unable to sell securities short with an IRA with limited margin account. So while it is a margin account, you do not have all the bells and whistles of a full margin account that is not an IRA.

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Who Is Eligible for an IRA With Limited Margin?

Some brokerage firms have strict eligibility requirements such as a minimum equity threshold (similar to the minimum balances required in full margin accounts). When signing up, you might also be required to indicate that your investment objective is the “most aggressive.” That gives the broker a clue that you will use the account for active trading purposes.

Another restriction is that you might not be able to choose an FDIC-insured cash position. That’s not a major issue for most investors since you can elect a safe money market fund instead.

IRA Margin Calls

An advantage to having margin in an IRA is that you can more easily avoid margin calls by not having to wait for cash from the proceeds of a sale to settle, but margin calls can still happen. If the IRA margin equity amount drops below a certain amount (often $25,000, but it can vary by broker), then a day trade minimum equity call is issued. Until you meet the call, you are limited to closing positions only.

To meet the IRA margin call, you just have to deposit more cash or marginable securities. Since it is an IRA, there are annual contribution limits that you cannot exceed, so adding funds might be tricky.

💡 Quick Tip: One of the advantages of using a margin account, if you qualify, is that a margin loan gives you the ability to buy more securities. Be sure to understand the terms of the margin account, though, as buying on margin includes the risk of bigger losses.

Avoiding Good Faith Violations

A good faith violation happens when you purchase a security in a cash account then sell before paying for the purchase with settled cash. You must wait for the funds to settle — the standard is trade date plus two days (T+2 settlement) for equity securities. Only cash and funds from sale proceeds are considered “settled funds.” Cash accounts and margin accounts have different rules to know about.

A good faith violation can happen in an IRA account without margin. For example, if you buy a stock in the morning, sell it in the afternoon, then use those proceeds to do another round-trip trade before the funds settle, that second sale can trigger a good faith violation. Having margin in an IRA prevents good faith violations in that instance since an IRA with limited margin allows you to trade with unsettled funds.

Pros and Cons of Limited Margin Trading in an IRA

Can IRA accounts have margin? Yes. Can you use margin in a Roth IRA? Yes. Should your IRA have the limited margin feature added? It depends on your preferences. Below are the pros and cons to consider with IRAs with limited margin.

Pros	Cons
You are permitted to trade with unsettled cash.	You cannot trade using actual margin (i.e. leverage).
You can avoid good faith violations.	You cannot engage in short selling or have naked options positions.
	You take on more risk with your retirement money.

The Takeaway

An IRA account with limited margin allows people investing in individual retirement accounts to trade securities a bit more freely versus a cash account. The main benefit to having an IRA with limited margin is that you can buy and sell stocks and options without waiting for lengthy settlement periods associated with a non-margin account.

But remember: Unlike a normal margin account, this type doesn’t allow you to use leverage. That means a margin-equipped IRA doesn’t permit margin trading that creates margin debit balances. You are also not allowed to have naked options positions or engage in selling shares short.

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FAQ

Is an IRA a cash or a margin account?

An IRA can either be a cash account or a limited margin account. While a cash account only lets you buy and sell securities with a traditional settlement period, a limited margin IRA might offer same-day settlement of trades. You are not allowed to borrow funds or short sell, however.

Is day trading possible in an IRA?

Yes. You can day trade in your IRA, and it can actually be a tax-savvy practice. Short-term capital gains can add up when you day trade in a taxable brokerage account. That tax liability can eat into your profits. With a limited margin IRA that offers same-day settlement, however, you can buy and sell stocks and options without the many tax consequences of a non-IRA. The downside is that, in the case of losses, you cannot take advantage of the $3,000 capital loss tax deduction because an IRA is a tax-sheltered account. Another feature that is limited when day trading an IRA is that you cannot borrow funds to control more capital. A final drawback is that you are limited to going long shares, not short.

Can a 401(k) be a margin account?

Most 401(k) plans do not allow participants to have the margin feature. An emerging type of small business 401(k) plan — the solo brokerage 401(k) — allows participants to have a margin feature. Not all providers allow it, though. Also, just because the account has the margin feature, it does not mean you can borrow money from the broker to buy securities.

Photo credit: iStock/Drazen_

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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.

*Borrow at 12%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
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Jun

2024

Is $150K a Good Salary for a Single Person?

By Jennifer Calonia | Life & Career, Money & Life, relay | Comments Off

Depending on your financial liabilities, a gross annual income of $150,000 is a good salary, especially for a single person.

Keeping tabs on the competitiveness of your income is an essential part of career growth and the financial and life goals you set for yourself. If you’re curious about how your six-figure salary compares to the average worker nationally and in each state, keep reading.

Is $150K a Good Salary?

For a single person, especially one who’s not supporting any dependents, $150,000 is a good annual salary. Consider the average salary in the U.S., which is $65,470, according to May 2023 data from the Bureau of Labor Statistics (BLS). A $150,000 annual salary is about 129% higher than the national average.

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Median Income in the US by State in 2024

The median income of workers differs across state lines, often even for the same profession. Typically, this is due to varying costs of living between states. Below are the median household incomes in every U.S. state, according to the latest data available from the U.S. Census Bureau.

State	Median Household Income
Alabama	$59,609
Alaska	$86,370
Arizona	$72,581
Arkansas	$56,335
California	$91,905
Colorado	$87,598
Connecticut	$90,213
Delaware	$79,325
Florida	$67,917
Georgia	$71,355
Hawaii	$94,814
Idaho	$70,214
Illinois	$78,433
Indiana	$67,173
Iowa	$70,571
Kansas	$69,747
Kentucky	$60,183
Louisiana	$57,852
Maine	$68,251
Maryland	$98,461
Massachusetts	$96,505
Michigan	$68,505
Minnesota	$84,313
Mississippi	$52,985
Missouri	$65,920
Montana	$66,341
Nebraska	$71,772
Nevada	$71,646
New Hampshire	$90,845
New Jersey	$97,126
New Mexico	$58,722
New York	$81,386
North Carolina	$66,186
North Dakota	$73,959
Ohio	$66,990
Oklahoma	$61,364
Oregon	$76,362
Pennsylvania	$73,170
Rhode Island	$81,370
South Carolina	$63,623
South Dakota	$69,457
Tennessee	$64,035
Texas	$73,035
Utah	$86,833
Vermont	$74,014
Virginia	$87,249
Washington	$90,325
West Virginia	$55,217
Wisconsin	$72,458
Wyoming	$72,495

Average Cost of Living in the US by State in 2024

Although $150K is a good salary for a single person, how far it goes depends on multiple factors, including your state’s cost of living (COL). Using a money tracker can offer insight into how to manage your finances no matter where you live.

Let’s take a look at the breakdown of COL by state, as aggregated by the Missouri Economic Research and Information Center.

State	Cost of Living Index
Alabama	88.3
Alaska	125.2
Arizona	108.4
Arkansas	89.0
California	138.5
Colorado	105.1
Connecticut	112.8
Delaware	101.1
Florida	100.7
Georgia	90.8
Hawaii	180.3
Idaho	98.6
Illinois	92.1
Indiana	91.0
Iowa	90.3
Kansas	87.1
Kentucky	92.0
Louisiana	91.0
Maine	109.9
Maryland	116.5
Massachusetts	146.5
Michigan	90.6
Minnesota	94.1
Mississippi	86.3
Missouri	88.5
Montana	102.9
Nebraska	90.9
Nevada	101.0
New Hampshire	114.1
New Jersey	113.9
New Mexico	94.0
New York	125.9
North Carolina	95.3
North Dakota	94.6
Ohio	94.7
Oklahoma	86.2
Oregon	114.7
Pennsylvania	95.6
Rhode Island	110.7
South Carolina	95.3
South Dakota	92.4
Tennessee	90.3
Texas	92.7
Utah	103.2
Vermont	115.3
Virginia	101.9
Washington	116.0
West Virginia	87.7
Wisconsin	95.1
Wyoming	92.4

How to Budget on a $150K Annual Salary

There are many budgeting strategies to explore, but one that offers a helpful guideline is the 50/20/30 budget. It buckets 50% of your take-home pay toward need-based expenses, like housing payments, auto loan payments, utilities, and groceries. Thirty percent of your net salary goes toward your wants, like shopping, entertainment, and dining out. Finally, 20% of your net salary is directed to your savings, like a high-yield savings account or retirement fund.

The 50/20/30 guide helps you allocate your take-home salary to your most important financial obligations and future self, while also leaving wiggle room for you to enjoy the rewards of your hard work.

One way to track your progress is with a budget planner app. This tool lets you set custom budget categories and goals for your spending so you see where your dollars go each month.

Maximizing a $150K Salary

A six-figure salary can provide a comfortable life, but how you manage it has just as big an impact. Here are a few ideas to maximize your $150K pay as a single person:

• Automate your savings. “Paying yourself first” is the first step in maximizing your $150K salary. This includes setting up auto-deposits into a high-yield savings account for a rainy day, and enrolling in your employer’s 401(k) retirement plan so your contributions have time to grow.

• Pay down existing debt. Letting unpaid revolving debt, like credit card balances, roll over each month keeps you buried in seemingly never-ending payments. If you have a lot of credit card debt, and already have a comfortable emergency fund, focus on paying off your debt. Doing so offers significant savings on interest over the long-term.

• Explore investments. If you have your savings, retirement, and debt repayment strategy handled, another area that can help maximize your $150K salary is investing. Note that with any investment, there’s always a risk of losing your money.

Is $150,000 a Year Considered Rich?

An annual salary of $150K won’t get you into the upper 1% — that requires an annual wage of at least $785,968, according to the Economic Policy Institute. But a $150,000 annual income will place you just above the 90th to 95th percentile among U.S. earners.

Since “rich” is a subjective description, one way to answer this question is by learning how to calculate your net worth. Your net worth is your total assets minus your total liabilities (e.g., debt, bills, child support, etc.).

You can use a net worth calculator by age to see where your finances stand.

Is $150K a Year Considered Middle Class?

Generally, earning $150K is way more than a good entry-level salary, and can be a comfortable wage for a single professional. If you don’t provide for dependents, your income exceeds the overall national median salary and the median salary in every state.

To further illustrate this point, the Pew Research’s income calculator states that a $150K salary puts you in the “upper income” tier even in high-cost areas like California, Hawaii, and the District of Columbia.

Example Jobs That Make About $150,000 a Year

Interested in the highest-paying jobs by state? How much a profession pays is largely subject to the industry you work in and whether there’s a high demand for your skills in your area.

Although annual salaries vary between companies across the country, here are a few jobs that make about $150K annually, according to data from the BLS:

Profession	Median Salary
Advertising, promotions, and marketing managers	$156,580
Financial managers	$156,100
Physicists and astronomers	$149,530
Podiatrists	$141,650

Recommended: Low-Stress Jobs for Introverts

The Takeaway

Is $150K a good salary for a single person? Generally speaking, yes, earning $150,000 a year is considered an excellent salary in most places in the U.S. It surpasses the median income across all states, even in areas with high cost of living, like New York. But whether a $150,000 annual salary feels comfortable to you depends on how you budget your money and expenses.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

Can I live comfortably making $150k a year?

Whether you can live comfortably earning $150,000 annually depends on your household size and preferred lifestyle. By comparison, the average pay in the United States is $65,470, according to the Bureau of Labor Statistics May 2023 National Occupational Employment and Wage Estimates.

What can I afford with a $150k salary?

What you can afford with a $150,000 salary depends on various factors, like the cost of living in your area, household size, current debt, and overall lifestyle. A home is arguably the largest purchase workers have. According to Zillow’s affordability calculator, with a $20K down payment and $250 in monthly debts, you can comfortably afford a home price of $508,202.

How much is $150k a year hourly?

An annual $150K income breaks down to an hourly wage of $72.12 per hour. This figure is your gross hourly salary and doesn’t include taxes and payroll deductions.

How much is $150k a year monthly?

With a $150K annual salary, your monthly gross salary is $12,500.

How much is $150k a year daily?

A gross annual income of $150,000 per year equates to a $576.92 daily salary. This calculation assumes you’re working 40 hours per week and eight hours per day.

Photo credit: iStock/VioletaStoimenova

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Jun

2024

What Is a Hostile Takeover?

By Michael Flannelly | Growing Wealth, invest, Investing | Comments Off

A hostile takeover is when one entity or investor tries to take control of a company without the permission of that company’s management or board of directors. That’s why the unwelcome acquisition bid is considered ‘hostile.’

There are various ways a hostile takeover can occur. The hostile company or investor may make a tender offer to buy the other company’s shares directly from shareholders. Or they may attempt a proxy fight, where the hostile company tries to replace the other company’s board of directors.

The implications of a hostile takeover can affect investors of all stripes. If you own shares of the companies involved, the outcome of a takeover can be important for short- and long-term stock price movements.

How Hostile Takeovers Work

A hostile takeover is a type of legal acquisition in which a bidder — either another company or an investor — seeks to acquire a majority stake in the target company without the approval of the target’s board of directors. Hostile takeovers are often characterized by aggressive tactics such as proxy fights, tender offers, and open letters to company shareholders.

This aggressive action contrasts with typical acquisitions, where two companies work together to agree on a deal, and the board of directors of the target company approves of the purchase. Investors who own stock in a company that’s involved in any kind of merger or takeover need to pay attention to the motives, proposed terms, and possible outcomes.

Reasons for a Hostile Takeover

There are many reasons why a company or investor may try to take over another company. Hostile takeovers happen when a target company’s management refuses initial takeover offers, but the bidding company is persistent in its efforts to acquire the company.

Sometimes it’s because the stock market undervalues the target company’s shares, and the bidder believes that they can increase the company’s value. Other times, it may be because the bidder wants the target company’s assets, brand recognition, or market share.

If the company making the hostile takeover successfully acquires a majority of the shares, then it can gain control of the target company. Once in power, the acquiring company can make changes to the target company’s management, strategy, and operations.

In some cases, the company making the hostile takeover may take steps to increase the value of the company, such as selling off non-core assets, cutting costs, or increasing investment in research and development.

Recommended: How to Buy Stocks: A Step-by-Step Guide

Hostile Takeover Strategies

There are a few ways a company may pursue a hostile takeover. Sometimes a bidder may try to buy a significant percentage of shares of the target company on the open market, hoping to gain enough voting power to persuade the board of directors to accept a takeover offer. If that doesn’t work, the bidder uses its voting power to change management.

The bidder may also take aggressive measures, such as making open letters to shareholders or launching a public relations campaign to pressure the target company’s management to accept the offer. The most common hostile takeover tactics include:

• Tender offers: A tender offer is when the bidding company reaches out directly to the target company’s shareholders, offering to purchase shares — usually at a premium to the current market value. The bidder pursues a tender offer to bypass a company’s leadership and get enough shares to have a controlling stake in the company. Each shareholder can then decide if they want to sell the stake in the company.

• Proxy fights: A proxy fight is a battle between competing groups of shareholders to gain control of a company. In a hostile takeover, a bidder, which usually owns a portion of the target company’s stock, tries to persuade other shareholders to vote out the target company’s management. This may allow the bidder to replace the board of directors and seize control of the company.

Examples of Hostile Takeovers and Takeover Attempts

A hostile takeover usually starts when the acquiring company makes an unsolicited bid to purchase the target company. If the board of directors of the target company doesn’t approve of the proposal, they may reject the offer. The acquiring company then will pursue a hostile takeover bid by going directly to the shareholders or trying to replace the board of directors.

However, hostile takeovers don’t usually reach this conclusion. The target companies may defend themselves, causing the bidding company to drop the takeover attempt. Or the target company’s board of directors will relent and eventually agree to terms on an acquisition.

In some cases, antitrust laws or shareholder resistance can thwart a hostile takeover in its tracks.

Choice Hotels’ Attempted Takeover of Wyndham Hotels & Resorts

When Choice Hotels International, Inc. (CHH) made a hostile bid for Wyndham (WH) early in 2023, concerns arose over the potential for a monopoly, given that each company controlled multiple hotel brands and close to half a million hotel rooms.

Choice made multiple attempts to acquire Wyndham, starting in April 2023, but by December their strategy had evolved into an outright takeover. The $7.8 billion attempt did not go through, however, and Choice backed out in March of 2024, citing a lack of shareholder support.

JetBlue’s Strategy to Acquire Spirit Airlines

In March of 2024, JetBlue (JBLU) scuttled its attempted $3.8 billion acquisition of Spirit Airlines (SAVE). This marked the end of JetBlue’s protracted pursuit of the smaller budget airline, which began as a merger proposal in 2022. After Spirit rebuffed JetBlue’s advance, the situation devolved into a hostile takeover — with a twist. JetBlue hoped to prevent Spirit from joining forces with Frontier. Unfortunately, the Justice Department ruled against the takeover, and a similar fate befell the Spirit + Frontier merger as well.

Elon Musk Takes Over Twitter

In one of the more well-known hostile bids in recent years, Tesla (TSLA) CEO Elon Musk moved to take over Twitter in 2023, in a months-long process that was closely followed — and widely debated — by business and media alike.

Despite speculation that the hostile takeover would not succeed, The final $44 billion deal resulted in a complete rebranding of Twitter as X.

Sanofi’s Acquisition of Genzyme

The French healthcare company Sanofi (SNY) attempted a hostile takeover of the American pharmaceutical firm Genzyme in 2010. Before the hostile bid, Sanofi’s management made several friendly offers to buy Genzyme, but the American company’s management declined.

As a result, Sanofi courted shareholders to gather support for a deal and made a tender offer. This put pressure on Genzyme management to finally accept a deal, which they did. Sanofi bought Genzyme for $20.1 billion in 2011.

Kraft Foods’ Takeover of Cadbury

Kraft Foods (KHC), an American food company, launched a hostile bid for Cadbury, a UK-based chocolate company, in 2009. The hostile takeover was motivated by Kraft’s desire to increase its market share in the global confectionery market and acquire Cadbury’s valuable portfolio of brands. Cadbury’s management opposed the takeover and put together a hostile takeover defense team. Also, Cadbury shareholders and the UK government opposed the deal. However, Kraft was ultimately successful in acquiring Cadbury, and the takeover was completed in 2010 for $19.6 billion.

How Can Companies Defend Against Hostile Takeovers?

Companies can deploy various strategies to defend against a potential or imminent hostile takeover. These defensive plans are intended to make the hostile takeover more difficult, expensive, or less attractive to the bidder.

Poison Pill

Companies may adopt a shareholder rights plan, more commonly known as a poison pill, to protect themselves from a hostile bidder. With a poison pill, the target company’s shareholders have the right to purchase additional shares at a discount if a hostile takeover attempt is made, diluting the ownership of the existing shareholders. This makes it more expensive for the acquirer to buy a controlling stake in the company and often deters hostile takeover attempts altogether.

Golden Parachute

A golden parachute is a hostile takeover defense where the target company offers its top executives large severance packages if another firm takes over the company and the executives are terminated due to the acquisition. This makes the purchase more expensive and unattractive for a potential buyer.

Pac-Man Defense

A Pac-Man defense is an offensive strategy employed by a target company in a hostile takeover attempt. A Pac-Man defense refers to a target company that fights back against a hostile bidder by launching its own takeover bid for the bidder.

How Hostile Takeovers Affect Investors

A hostile takeover can significantly affect investors who own shares of either the target or bidding company, causing uncertainty in short- and long-term stock market prospects.

In the short term, investors who own shares of the competing companies may see share prices rise or fall, depending on whether the markets view the proposal as a good or bad deal.

Recommended: Understanding Market Sentiment

The target company’s management may also make the company less attractive to a bidder, such as by adopting poison pill provisions or increasing debt levels. These tactics may increase costs and debt burdens, which may negatively impact the long-term outlook for the company.

However, the target company’s share price may be positively affected as the hostile company tries to buy the target company’s shares at a premium.

If the hostile takeover is successful, the investors in the target company may see a change in the management of the company, as well as a potential change in the company’s strategy. This may change the long-term outlook for the company, which may be bullish or bearish for investors.

On a macro level, a hostile takeover can also affect the industries in which the target company and bidder operate. If the hostile takeover is successful, the industry may see a consolidation of companies, affecting market competition and share prices of related firms.

The Takeaway

Investors may hear about hostile takeover bids in the press, causing them to wonder how the situation may affect them and their portfolios. In some situations, the stock of the companies involved may go up, and the stock may go down in other situations. In the end, it’s essential to monitor the news of the deal carefully and pay attention to price fluctuations.

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Photo credit: iStock/gorodenkoff

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Jun

2024

Cost of Vet School and Tips on How to Pay for Vet School

7 Ways to Pay for Vet School

By Melissa Brock | Going to College, Student Loans, student_loan | Comments Off

Enrolling in veterinary school to earn a Doctor of Veterinary Medicine (DVM) degree means four years of additional coursework and clinical training beyond your undergraduate degree. The top options for paying for vet school involve accessing money you don’t have to pay back, such as scholarships, grants, and fellowships.

Many vet schools offer these types of awards based on academic achievement, financial need, clinical proficiency, leadership, and more. There are many other ways to pay for vet school in addition to these opportunities, such as through federal and private loans.

Read on to learn more ways on how to pay for vet school.

How Much Does Vet School Typically Cost?

In general, the cost of attendance (including tuition, fees and living expenses) for vet school can vary widely, though is often upwards of $200,000 over four years. The VIN Foundations offers a comparison tool that provides information on vet school costs across the U.S. The cost of vet school can vary based on a number of factors, including whether you choose to attend an in-state vet school or a private school.

Continue reading for strategies to help students pay for veterinary school.

1. Choose an Affordable School

Choosing an affordable school means taking a look at a wide variety of colleges and universities and comparing the costs. Consider all costs involved, including tuition, fees, and living expenses. It’s a good idea to look beyond the sticker price on each school’s website — you may not pay the full sticker price.

Meeting with the financial aid office at each school will give you an idea about the types of financial aid you could potentially receive in order to offset the sticker price. Once you have an idea of the costs as they pertain to you, then you can more accurately compare the costs of vet schools.

When developing your list, consider looking at the list of American Veterinary Medical Association (AVMA)-accredited schools in the United States. These schools have achieved the highest standards, commitment to quality, and continuous improvement for veterinary medical education.

Recommended: 11 Ways to Make College More Affordable

2. Scholarships

Scholarships are a form of financial aid that you don’t have to pay back. You can find scholarships from vet schools themselves as well as through independent sources.

Colleges and universities often offer scholarships to first year students, as well as currently enrolled students.

Each college and university has a different approach and criteria for awarding scholarships. Contact the financial aid office of the schools on your list to understand the eligibility factors and process that each school uses to award each scholarship. For example, first-year students at the Ohio State University receive scholarships during the admissions process for the first year, while second-, third-, and fourth-year veterinary students must fill out a separate scholarship application.

Outside scholarships may come from any source, including local veterinarian offices, kennel clubs, businesses, and professional organizations. For example, the AVMA-American Veterinary Medical Foundation (AMVF) offers scholarships for first- through third-year students.

Recommended: Scholarship Search Tool

3. Fellowships

Fellowships and externships for veterinary students usually occur during the summer and often involve research-based and specific career development opportunities. For example, Ohio State University lists a variety of summer-based internships and externships available for students.

In another example, the American Association of Veterinary Medical Colleges (AAVMC) and the Foundation for Food and Agricultural Research (FFAR) combined to create a three-month summer fellowship which focuses on food security on a global scale as well as sustainable animal production.

Various stipends are available for veterinary fellowships — it’s a matter of finding the right program to meet your goals.

4. Grants

If you receive grants, you typically do not have to pay them back. Grants for college are need-based awards, which means you’ll qualify for them based on the level of your financial need. Withdrawing from school or failing to maintain eligibility for the grant means you may have to refund part or all the grant.

You may qualify for grants from your state government, your college or career school, or a private, corporate, or nonprofit organization. Veterinary schools often offer research opportunities for those who demonstrate financial need.

In order to qualify for federal grants, and possibly institutional grants, you’ll need to file the Free Application for Federal Student Aid (FAFSA^®). The FAFSA allows students to apply for all forms of federal financial aid, including grants, scholarships, and federal student loans.

5. Federal Loans for Health Profession Students

Just like your decision of becoming a vet, making decisions about how to pay for school could last for years after you graduate — in the form of paying off vet school debt.
Loans must be repaid with interest, but there are a wide variety of loans available for veterinary students, including federal student loans.

Students can borrow up to $20,500 each year in Direct Unsubsidized Loans for veterinary school, up to a cumulative aggregate limit of $138,500. “Unsubsidized” means that the loan begins accruing interest immediately. The aggregate amount includes loans you received in student loans for undergrad.

As mentioned, you must file the FAFSA to qualify for federal loans for veterinary school.

The U.S. Department of Education isn’t the only government entity that offers loans. The Health Professional Student Loan (HPSL) is a need-based loan from the U.S. Department of Health and Human Services, which offers help paying for pharmacy school as well as dentistry, podiatry, optometry, and veterinary loans.

For veterinary program students who apply, these loans come with a 5% interest rate (compared to current Direct Unsubsidized Loans at 5.50% and PLUS loans at 8.05%). The Department of Health and Human Services will consider your parents’ information to award HPSL funds. Interest does not accrue as long as you are enrolled at least half-time and there’s a 12-month grace period available as well.

There are other types of federal loans available, as well. For example, the U.S. Department of Agriculture offers a Veterinary Medicine Loan Repayment Program (VMLRP) that offers up to $25,000 each year to veterinarians who agree to serve for three years in areas where a designated shortage of veterinarians occurs.

6. Graduate PLUS Loans

A Graduate PLUS Loan, also called a Direct PLUS loan, is also available to graduate or professional students enrolled at least half-time who do not have an adverse credit history and meet the general eligibility requirements for federal student aid.

The Graduate PLUS Loan, which can cover the full attendance for veterinary school (minus other aid received, such as scholarships, fellowships, grants, etc.) currently has a fixed interest rate of 8.05% for loans disbursed between July 1, 2023 and before July 1, 2024. Interest begins accruing as soon as your loan is disbursed.

Grad PLUS Loans are eligible for certain federal perks, such as deferment programs and the opportunity to apply for loan discharge through programs like Public Service Loan Forgiveness.

Recommended: Complete Guide to FAFSA

7. Private Student Loans

Private student loans, which are not offered by the federal government, usually come with a higher interest rate than federal student loans. However, they may have their place in paying for veterinary school, particularly if you need to fill in other gaps between scholarships, federal student loans, grants, and other types of financial aid. It’s a good idea to compare the interest rates, fees, repayment terms, discharge options, and in-school repayment options for various private student loan lenders.

You can apply for a private student loan on a private student loan lender website. You’ll provide certain personal information, as well as information about your vet school program, graduation date, and the loan amount you need. Requested personal information may include the following:

• Social Security number

• Proof of income

• Identification, such as a driver’s license or other government-issued ID

• Financial aid you expect to receive

You must also agree to the lender’s terms and conditions in order to receive the loan. Every student loan lender will have a slightly different process, so follow the steps for the student loan lender you choose.

Private student loans aren’t required to offer the same benefits or perks as federal student loans (things like income-driven repayment plans or Public Service Loan Forgiveness). For this reason, private student loans are generally considered an option after all other resources have been exhausted.

Recommended: How Private Student Loans Work

How Much Can Vets Make?

The 2023 median veterinarian pay was $119,100 per year, or $57.26 per hour. From 2022 to 2032, the profession is projected to grow 20%, much faster than average, according to the Bureau of Labor Statistics.

It’s a good idea to consider this figure but remember that you may not make that amount right after graduating from vet school — the amount reflected is the median pay of many practicing veterinarians.

The Takeaway

Paying for vet school requires some research. You’ll likely want to research the best “free money” opportunities at various veterinary schools, like grants and scholarships. Next, you can look into federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Can you get scholarships for vet school?

Yes, you can get scholarships for vet school, though they vary widely in the amounts you can receive. Scholarships can come from a number of sources, including the institution you attend, professional organizations, kennel clubs, veterinary practices, and even local businesses. You may need to do some research to learn more about the scholarship options available to you and the requirements for each scholarship. Each scholarship carries deadline dates, so carefully mark them on your calendar and turn the applications in well before deadlines.

Can FAFSA be used for vet school?

Yes, you can file the FAFSA for vet school. In fact, you must file the FAFSA if you want to qualify for federal student aid, which includes federal student loans, grants, and some institutional scholarships. One of the best ways to understand more about your eligibility for federal student loans involves talking to multiple financial aid offices of the vet schools on your list.

How much can veterinarians expect to make?

In 2023, the median veterinarian pay was $119,100 per year, which equates to $57.26 per hour. However, it’s worth noting that the median pay may not reflect the amount you may earn as soon as you graduate.

Photo credit: iStock/herraez

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