If you’ve been hearing a lot about interest rates, here’s the scoop: Over the past two years, the Federal Reserve drastically raised interest rates in an effort to curb rising inflation — and just made the decision to hold that 23-year high at least a few months more. However, while these higher rates may help slow rising prices, they also make it much more expensive for the average individual to borrow money for mortgages, credit cards, and personal loans.
The average mortgage rate is over 7%, while credit card interest rates can peak over 20%. Since it does not look like these interest rates will be going down anytime soon, saving money and getting out of debt should be a top priority.
What happens when the cost of borrowing increases
Higher overall interest rates have led to higher credit card interest rates; that means when you carry a balance, you are paying higher interest. It also means that if you are in debt, it may be harder to pay off the balance because the higher interest rate increases what you owe.
Not to mention, there has been an overall economic impact making everything more expensive. However, there is a bright side: higher interest rates are a good thing when it comes to saving.
Savings accounts are now earning much more considerable returns. Currently, the best high-yield savings accounts offer rates of over 5% with no monthly fees.
With that in mind, here are three strategic money moves to make in a high-interest-rate environment:
Prioritize getting out of debt
Make a plan, and focus on paying down debt with the highest interest rate first. This could be credit cards, personal loans, or even your car note. The balance on your credit card is often a good place to start, as many cards can easily carry an interest rate of over 20%.
The quickest way to pay yourself and give yourself a financial boost is to pay off debt. If you are carrying a credit card balance from month to month,…
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