No one is certain when the Federal Reserve will raise the prime rate, but experts warn there will be a trickle down effect for consumers with credit cards. The Federal Reserve Chairman Janet Yellen says the Fed is on track to raise rates later this year, according to report by the wsj.com. When it comes to your personal finances, don’t let rising interest rates catch you off guard. With debt consolidation, you can get out of debt just in time to avoid the sting of higher interest rates. An article by cheatsheet.com points out people who carry large credit card balances each month could owe significantly more in interest. However, when you consolidate debt through a reputable credit counseling organization such as Christian Credit Counselors, you enjoy a lower interest rate. Your credit counselor negotiates for a lower rate even as interest rates climb.
Preparing for a higher APR
Experts say the Fed will likely raise its rate target which affects the prime rate. Typically, a higher price rate means your credit cards have higher annual percentages (APR). While the interest rates vary on different credit cards, the average interest rate on variable-rate credit cards is almost 16 percent, cheatsheet.com reports. Financial experts predict the APRs will grow at least 1 percent in the next year, which might not sound like a lot. However, if you carry a high credit-card balance, it’s imperative to consider a Debt Management Plan.
Saving the old-fashioned way
As interest rates rise, there is an upside for people who are saving more. You will likely get a better return on money you invest in CDs or certificates of deposit. When interest rates are higher, you can invest in a CD with a decent interest rate. In the past several years, many people ignored such savings vehicles because of the low return. With debt consolidation, you end up with one monthly bill that pays off your creditors. You will likely have more money in your budget to put aside for future long-term savings. While CDs might seem old-fashioned, they will come back into vogue when interest rates increase.
When it comes to raising rates, the Fed is cautious because inflation is low. By getting your personal finances in order now, you will be able to handle it when prices go up or if your income goes down.
At Christian Credit Counselors, we work hard so you can relax about your credit card debt. In most cases, our clients get out of debt 80 percent faster. By agreeing to a Debt Management Plan, you satisfy your obligations to creditors while paying less on interest charges. Getting on the path to financial freedom is all about meeting your financial obligations so you stay prepared for future financial opportunities.
Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.