5 Tips to Offset Rising Interest Rates

Rising Interest RatesThere is generally one small bright spot in the midst of a stagnant economy – low interest rates. But historically low rates are slowly beginning to creep upward resulting in an increase in the cost of borrowing. If you’re already finding it difficult to make a dent in what you owe, rising interest rates will only make it more difficult to reduce your debt, resulting in more time and money to pay off your balance. The thought of more of your hard earned money going to the bank is hard to swallow, but there are some ways to offset the rising cost of interest rates.

#1 – Curb Credit Card Use

The most obvious way to offset higher interest rates is to cut your credit card spending. Unless you’re one of the fortunate people who can pay off their credit card every month, you’re probably paying around 15% every month on the balance. Depending on the amount you owe, you could be facing years of interest charges, especially if you’re only paying the minimum each month. Start now by doubling (or tripling) your monthly payments to get out from under growing credit card debt. Start with your highest interest rate accounts first, since they’ll cost you the most over time.

#2 – Increase Your Savings

Once you’ve paid off or reduced your high interest rate debt, work to build some savings. The good news is that rates on certificates of deposit (CDs), savings and money market accounts are expected to climb after a long period of low rates of return. For most consumers it is generally advised to avoid long-term products to make it easier to take advantage of rising rates. Don’t assume that your local banker will give you the best rate, shop around. Check out online banks, which tend to offer higher rates of return. Take advantage of automatic deposits to ensure that savings become a habit and avoid the temptation of spending money that you intended to put away.

#3 – Consider Refinancing

Rates on auto, personal and home equity loans have been exceptionally low in recent months, but are expected to rise in the coming years. Refinancing can save you hundreds, or sometimes even thousands of dollars per month on your mortgage payment and even shorten the length of time you’ll have to pay. The key to making the decision to refinance is whether or not the current rate is low enough to offset the fees and hassle of securing another loan. If the cost associated with a refinance is low enough, a lower interest rate will save you money.

#4 – Long Term Investing

Even more important than traditional savings to offset interest charges is the effort you put into investing for the future with diversity being the most important aspect. Without it, your retirement fund could easily be decimated in a short while, if the economy or interest rates take a dive. For example, if you invest exclusively in the bond market, your investment will be at risk when interest rates rise. A diverse portfolio should include equities, fixed-income securities, cash and equivalents.

#5 – 0% Balance Transfer

Another way to lower the cost associated with credit cards is by consolidating multiple accounts into one zero or low APR credit card using a balance transfer. The one monthly payment will be less than the combined total of the multiple accounts giving you the opportunity to make a bigger dent in the balance you carry from month to month. The longer the introductory period, the more you’ll save and the quicker you’ll get out of debt. There are a variety of offers providing 0% for 12 months and more.

There’s no doubt that an improving economy is good for all Americans, but it often comes with rising interest rates. Now is the time to take advantage of refinancing your mortgage or transferring high rate credit card balances to lower rate ones and beating the upcoming increases.

* To compare the best credit card rates, visit www.wowcreditcards.com

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