Knowledge Center

With Interest Rates Rising, Now is the Time to Fine Tune Your Credit and Spending Habits

educating-myself | Read Time: 3 minutes

By Candice Caruso | Published: April 2022


If you’ve been paying attention to financial news lately, topics such as inflation, rising interest rates and the housing market have been the predominant headlines.

While much of the focus on rising interest rates has centered around how potential homebuyers are impacted and why they should act now to avoid paying more for the same home later, consumers should also be looking closely at any current debt and spending habits, too.

The reality is that many factors contribute to our current economic environment that we cannot control. But there are ways we can take the reins of our own finances to lessen the impact on our wallets.

Here’s what you should know and do now.

Understand How Rates Impact You
If you’re a credit card user and pay off your balance each month, the rise in interest rates probably won’t affect you all that much. However, if you carry a balance (or multiple balances) on credit cards, which typically have a variable interest rate, these balances could cost you in the short- and- long-term.

When the Federal Reserve raises the prime rate, credit card interest rates, or the Annual Percentage Rate (APR), also go up.

If you are carrying a credit card balance, higher APR will result in higher minimum monthly payments and longer periods of time to pay back what you owe. Credit card issuers are now required to show on your monthly statements how long it would take you to pay off your current balance if only paying the minimum each month. Take a close look at those numbers as a first step in developing a payoff plan.

Consider Consolidating
If you are carrying multiple credit card balances, consolidation may be a great option. Rather than trying to pay off multiple cards at once, consolidating would bring them all under one monthly payment, enabling you to pay more toward one balance instead of trying to incrementally pay more than the minimum spread over multiple balances.

A few options to consider are:

  • Transfer balances to another credit card: Look for a credit card that features a 0% interest grace period on balance transfers, transfer balances and pay as much as you can during the grace period. Even if you only have one credit card with a balance, transferring may still be beneficial to you because with zero interest, every penny goes toward your balance. Make sure you look at balance transfer fees so you are not surprised by your new balance initially increasing by 3% or more.
  • Tap into your home’s equity: If you are a homeowner, there’s a good chance the red-hot housing market has increased your property’s value, increasing your equity. A home equity installment loan would give you a lump sum up front to spend on your project, then have predictable, fixed payments and terms over an agreed upon period to pay it back.
    Another option is a home equity line of credit (HELOC) using your equity for a revolving credit line, like a credit card, that you can dip into now to pay off debt or when needed over a longer period.
  • Consider a Personal Loan or Line of Credit: Another way to mitigate the impact of rising rates on any outstanding revolving debt is to take out a personal loan or line of credit. These can be helpful if you don’t have collateral to borrow against home equity to pay off other loans.

Re-calibrate Your Budget
Even if you do not carry any credit card or other loan balances, now is a good time to take a hard look at your monthly budget to avoid falling into debt. With inflation continuing to drive higher prices for everyday needs like groceries, gas and more, adjusting your budget to account for increased spending on these items is a good move.

Taking a measured approach to inflation and rising interest rates can help you keep pace with paying off debt and can even help you find incremental ways to start or increase saving for long-term needs.

About the Author – Candice Caruso
Candice Caruso is Senior Vice President, Chief Retail Lending Officer at WSFS Bank. She brings more than 20 years of experience in the financial services industry, including 12 years as a business funding expert, and has been featured on Bloomberg Radio, CNBC’s Closing Bell, The Wall Street Journal and Franchising World.



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