Today, March 16, 2022, the Federal Reserve announced a .25% increase in interest rates. There are a lot of good and some bad implications around this but without getting too far into the weeds, here is a quick list.
The Good:
Savings account interest rates are likely to also go up
The Stock Market has historically also been good during interest rate increases
The Bad:
Mortage rates will likely go up, impacting (lowering) the highest available loan for borrowers
Any interest rates that are tide to prime rates will likely go up
Credit card interest rates will likely go up
Credit card interest rates will go up?! They are already way too high and, generally, interest rates are variable for credit cards so they can fluctuate.
Over the past few weeks I’ve been posting a lot about financial topics and I focus on credit cards. This news about interest rates isn’t so good but with a proper strategy, we can all come out unscathed and even ahead.
While some of these points were planned to be discussed in the future, and more detail will be shared, the number one rule in making credit cards work for you is to pay off your balance in full every month.
Some of us might have some revolving debt so a wise choice right now if to prioritize paying down those balances before your lender announces an increase in the interest rates. But let’s go through a few steps I’m taking to lessen the impact.
My spending will go through my American Express charge cards (although, they are somewhat not charge cards anymore but best to treat them like that.) My Platinum Card is my first choice and I highly recommend it or any of the Amex charge cards: Platinum, Gold, or Green.
I have a small amount of credit card debt but also have two cards with 0% balance transfer options. I’ll be taking advantage of that. If you have that option, definitely worth checking out.
I’m prioritizing paying down cards with higher interest rates. For example, my Discover card is an unfortunate (but not awful) 17.99% while my old workhorse Citi Professional Cash card (no longer available) gave me a fixed 8.24% back in 2009. My Citi card has a higher balance but a much, much lower, interest rate.
Liquid assets that I have kept in checking accounts for quick access will be transferred into my higher yield SoFi account with a 1.00% APY—if SoFi is reading this, please, raise that even more!
All of this is to say, this is why charge cards and smart usage of credit cards is so valuable. While I have to say it again, if you are thinking of an American Express, it is the way to go. If you aren’t looking to swipe a Platinum Card, this link has other options in the upper left corner.
I have not review the American Express Green Card yet but it is actually the oldest of my Amex card, the original, the classic, and, frankly, the most underrated of the card. Worth taking a look. No interest when paid monthly, 3x points on so many categories of spending, and all that helps reduce the hurt of higher interest rates from the Fed.
Overall, an increase in these rates isn’t bad news but a mixed bag. But, as always, taking your finances to the next level through smart spending can only help in the end.