Madison Allworth of FOX Business spoke with Bankrate.com senior analyst Ted Rosman about why consumers need to deal with their credit card debt sooner or later.
The Federal Reserve raised interest rates by 0.75% this week as politicians act more aggressively to fight inflation, which is at its 40-year high and is hitting US consumers.
But experts say the rise in interest rates, the biggest increase since 1994, could also affect personal finances in a variety of ways.
Here are some smart money moves you can make now that could put you in a better position with rising interest rates:
Lock the mortgage rate
Whether you are preparing to buy a home or already have a mortgage, make sure your interest rate is fixed and cannot be adjusted.
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“It really makes sense to be aware, because interest rates seem to be higher than we’ve been used to in the last decade or more,” said Robert Gilliland, managing director and senior wealth adviser at Concenture Wealth Management.
House for sale on Oak Street in Patchogue, New York on May 17, 2022 (Steve Pfost / Newsday RM via Getty Images / Getty Images)
“Interest rates will be higher, so [people] they will need to be aware that it may make sense to reconsider mortgage refinancing, “Gilliland told FOX Business, noting that ARMs can rise” a lot “and that in some cases it may be wise to refinance even from ARM if the fixed rates are higher than what the individual pays now.
“Manage your payments, it may make sense to close the rates,” he said. “The same would be true of your equity credit lines.”
Pay off credit card debt and make moves to reduce interest paid on balances
If you have credit card debt that is currently rising amid staggering inflation, be sure to create a plan to pay it off, as interest rates will continue to rise.
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“With a credit card that has a balance, you want to get really, really serious about paying them off, because those interest rates are going to keep going up,” Gilliland said.
A fan of plastic credit cards is in a woman’s hand. Concept for favorable offers of the bank for consumers (iStock / iStock)
In the meantime, try to either renegotiate the annual interest rate on your balance sheets or move this debt to a card with a lower or zero interest rate. He suggests checking out a site like NerdWallet to find the best deals available for transferred balances.
Shop for higher yield savings accounts
Gilliland says one positive thing about raising interest rates is that “Americans now have a lot of cash” and “their empty money will start earning a little more than it used to.”
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Bankrate chief financial analyst Greg McBride agrees, telling FOX Business “Cavuto: Coast to Coast” that the advantage of higher interest rates is that savers will benefit, and encourages people to shop to find the most good interest rates.
Bankrate’s chief financial analyst Greg McBride explains Cavuto: Coast to Coast.
“Return has been so low for so long,” McBride told host Neil Cavuto. “Things have turned around in the sense that for most of the last three years there has been a situation where the return on savings has fallen and then inflation has risen. We are now in a situation where over the next year or two, we expect interest rates to rise and hope that inflation will eventually fall. ”
Reassess the distribution of investments
Gilliland recommends that people meet with their financial adviser to assess the distribution of investment and make sure they have taken into account stress tests that are planning a higher inflation environment – especially people who are planning to retire or are about to retire. retired in the last ten years.
As for the stock market, Gilliland predicts that “we have a roller coaster ride ahead of us” while there is more clarity on inflation, interest rates and geopolitical events.
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His advice, given current market volatility, is to stay diversified and “don’t try to catch a falling knife.”
Talia Kaplan of FOX Business contributed to this report.
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