Expert tips to navigate higher interest rates
ROCKY HILL, CT (WFSB) - All-month long we are helping you navigate an inflated economy and save money. If you’re trying to pay off credit card debt, it can be difficult especially with the higher interest rates.
We wanted to know just how heavy this inflated economy is weighing on folks’ budget. Consumer Ellen Felgate spoke on the impact of higher interest rates.
“We are trying to get down to one credit card. Thank goodness I did it. But that was very high. It makes a big difference when you add it with the gas and food,” said Felgate.
Interest rates are making credit card debt harder to pay off. We spoke with two experts to find out what you should be doing right now to help save money.
“There are strategies. Debt consolidation can often be useful. Debt snowballs to pay down debt,” said Felgate.
Stephen Patterson, expert and financial planner for KeyCity Capital in Dallas said to first try the debt snowball method. Pay as much as you can on the smallest credit card debt. Once the credit card is paid off, take the money put toward that payment and roll it like a snowball onto the next-smallest debt owed. In the end, that snowball payment only gets bigger.
“I always advise, tackled the smallest balance first, because it gives you a win,” said Patterson. “Trying to keep spending to one card only can often help.”
As a second strategy, call your credit card company and ask what can be done. Osman Kilic, a professor of finance at Quinnipiac University said to ask for a lower interest rate.
“They don’t want to lose you. They will work with you. You’re their customer. Call them please,” said Kilic.
A third tip, consider balance transfers. Use one card to pay off the other with a lower percentage rate but only if you can pay it off in full in the allotted time.
“The challenge is at the end of that time, that rate will go up significantly. So you have to take maximum advantage of that,” said Patterson.
Experts said a fourth tip was to consider debt consolidation companies. However, you must do your homework. Be sure to research the company and ask tough questions. For example, if this will hurt your credit score. Most importantly, make sure they are legitimate.
“Some of them are very helpful. They work on behalf of you with the credit card companies,” said Kilic.
Patter said, “Make sure the interest rate on the debt consolidation loan is significantly below the interest rates you are paying on the credit cards.”
Both experts said you can use one or perhaps even all these tips that could help fight those higher interest rates to lift even a little bit of that heavy weight.
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