There’s a lot of speculation about whether or not the Federal Reserve is going to raise the interest rates that it charges banks. No prediction here, but if and when it does happen, financial advisor and author Nancy Tengler warns, “The first thing banks do is raise interest rates; the last thing they do is raise interest on deposits. So there’s a gap that’s bad for consumers who don’t pay attention.” So, in the interest of paying attention, The List's Jimmy Rhoades has 3 tips for managing your cards any time… but they become especially important when rates are increasing.
1. PRIORITIZE PAYING DOWN YOUR HIGHEST INTEREST CARDS
As Nancy explains, “If you borrow $5,000 and you’re paying about 20% annual interest rate, if you make your minimum monthly payment, it’s going to take you 11 years to pay it back and you’re going to pay back about $5,000 additional in interest.” So do everything you can to find other savings so you can pay more than the minimum, and use bonuses or lump sums to make chunk payments whenever you can.
2. TAKE CONTROL OF YOUR CREDIT SCORE
Don’t think your credit score descends from on high. It’s based on information, some of which you can control. According to Nancy, “They are looking at the amount of your balance against what’s available to you in total credit. So you can call your credit company and say, ‘I’d like to increase my limit,’ and then not use it. And that will help your credit score.” The key is to not fill up that additional available credit!
3. UNDERSTAND THE FEES
Finally, you’ll hear strategies about moving balances from card to card to avoid interest, but don’t do anything until you understand the fees! For instance, Nancy says that zero or low interest period is limited, and “as soon as that offer period expires the rates skyrocket up. I’ve seen them as high as 25, 28%. And there often are also penalties! So you need to read the fine print."
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