PITTSBURGH — The Federal Reserve hiked interest rates 10 times in 2022 and the first part of 2023. For consumers, it means you are paying more---on things like car loans—and credit cards. Couple that with inflation and everything costs more. Some of us are really feeling the pinch, but financial experts say it’s not all bad news. There are things you can do to relieve the strain on your budget and boost your savings.
At the Pittsburgh Financial Empowerment Center, Amber Book provides free counsel to people struggling with their finances. She says the number of clients she’s seeing has doubled this year.
“They’re just like, ‘I don’t have any money left at the end of the month and I’m not entirely sure why, says Book.”
Amber says the answer may be simple. Prices on everything, from groceries to gas, are up, and the recent interest rate hikes aren’t helping people with revolving debt.
“The minimum due on all your credit cards has gone up. Just to keep yourself paying your bills on time costs more now,” she says.
According to LendingTree, the average credit card interest rate has gone from 16.2% in January 2022 to 23.8% right now. If you carry a $7,000 balance, monthly interest charges are $138. You’re paying $44 more a month. Financial counselors say this is the best time to pay down credit card debt with a little belt-tightening.
Book says you can use the snowball method of reducing debt. Take the money you would have used on vacation, dinner out, or new clothes and send it to the credit card with the smallest balance.
“Pay that off and then roll that over to the larger one and keep going that way,” says Book.
Or try the avalanche technique. Dedicate a larger windfall, like a work bonus, to paying off a card balance with the highest interest rate.
On the flip side, Certified Financial Planner Alison Wertz says higher interest rates are good news for people nearing retirement who want to maximize savings.
First, Wertz says you can ask your bank for a better rate.
“If you go to your bank and actually talk about it, a lot of banks now are actually matching interest rates that you bring to them,” she says.
Or, you can research online to see if there are FDIC-insured internet banks offering competitive rates.
If you have money to put away for the long term Wertz says 12-month CDs, which don’t come with the risk of the stock market, could be a good option.
Wertz says 12-month CDs earned almost nothing one year ago. Now it’s almost 5%.
“With the cost of things going up, every penny counts,” says Wertz.
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