The Federal Reserve Board has announced that they intend to increase short term interest rates four times in 2022 Why is this important to know?
Short term rates affect how much your credit card companies charge in interest. If you are carrying balances on your credit cards, then this warning and a notice to take action now.
The last thing you want is for your money to be going to interest, especially when that is 12%, 18%, even 23.99%. You are not getting a good deal on anything when you pay that kind of interest rate.
Now is the time to pay off credit card balances.f
Here is The Plan:
- Pay off credit cards asap. Pay extra above the minimum payment required. Get that balance down to $0 before the interest rate goes higher — making it even more difficult to pay off.
- When the card is paid off, KEEP IT OPEN. Don’t close the card.
- Use your credit card at least once every four to six months so that the creditor doesn’t close it for “non-activity.” You want it open for your credit score.
- Only charge the amount that you can afford to pay in full when the bill comes. If you are carrying a balance, examine to see if you have over-spent for your budget. Or it might mean you had an essential large purchase, such as your water heater went out; and that is okay. Just pay it off as rapidly as you’re able.
Do what you can to get aggressive about getting out of debt. Limit new spending to essentials only. Pick up extra hours at work, if possible. If you are seriously in debt, see if you can pick up a side hustle for extra money, so that you can eliminate your debt as quickly as possible.
Once you have done all you can, let yourself feel peace and satisfaction. Not all goals are obtained easily or quickly. If you are on the path to better finances, good for you! Stay the course and you will get there.
If your debt is twice your annual income and it will take you more than 10 years to dig out, and you do not anticipate a significant increase in pay, then consider speaking with a bankruptcy attorney to see whether or not filing Chapter 7 would be your best strategy. Every state has its own laws regarding bankruptcy, so only a local attorney can give you specific answers for your own situation.
The sacrifice you make now to get out of debt will be worth the effort. We are not being blindsided: higher rates are on the way. This will help inflation, which will, in turn, help us at the grocery store — and that is a good thing.