With interest rates rising to levels not seen in years, now is the time to ensure you have a firm grasp on your debts and manage your credit and borrowing responsibly.
A recent WSFS Bank Money Trends study found that rising costs and inflation topped the list of why regional consumers are spending more (72%), with paying off more debt (23%) and rising interest rates on credit cards and loans (23%) also among the main reasons cited.
Inflation and rising rates have certainly impacted many consumers’ financial stability, but there are steps you can take to help firm up your financial footing.
Here are tips to responsibly manage your credit and borrowing.
Take Inventory of Your Debts
With interest rates continuing to rise, it is vital to ensure you have a handle on your various debts. This might include debt from credit cards, personal loans, or you may have student loans that had repayments restart recently.
Start by taking stock of how much debt you have, the interest rates for your various debts and work on a plan for how and when you will pay them off.
If you have credit card debt, looking into consolidating it with a credit card with a 0% introductory rate is one way to make a dent in the principle, you’ll just want to read the terms carefully to avoid being caught off guard when the interest kicks in. Consolidating your debt with a personal loan, which can provide some payment and budget certainty, is another option worth exploring, depending on how the rate compares to your current credit card interest rates.
Manage Your Borrowing Responsibly
Utilizing credit and borrowing responsibly is crucial, particularly during times of heightened interest rates. Before borrowing for purchases, calculate the true cost when factoring in any interest you may need to pay to help you decide whether you truly need to make that purchase at that time.
According to the WSFS study, 38% in the region are using their debit cards more than last year. In contrast, while 30% of respondents increased their credit card usage, an almost equal 26% reduced it. Among those using credit cards less, 37% are focused on repaying existing debt, while others are wary of high credit card interest rates (33%) or are better able to stay on budget by using credit cards less (31%).
With the holidays just around the corner, carefully monitor how you use credit and products like buy-now-pay-later to avoid overextending yourself. Using your debit card instead of your credit card is one method many consumers utilize to stay on budget.
Checking your credit report periodically is also a good idea. The three national credit bureaus (Equifax, Experian and TransUnion) recently announced Americans can now receive a free weekly credit report permanently, which can help you confirm your report is accurate and identify any fraudulent purchases or credit lines opened in your name.
Don’t Forget the Future
While taking stock of and managing your current debts, it is also important to look ahead to anticipate large expenditures you may have down the line, such as education costs or a new roof for your home, so you can begin planning and saving for those costs now.
Rising interest rates have made saving more difficult for many consumers, but also create the opportunity to earn more on savings through certificates of deposit (CDs), money markets and high-yield money markets than there has been in years.
These savings tools typically offer a higher interest rate than standard savings accounts, and can provide a great opportunity to save for your future.
If you need more assistance managing your debt, borrowing and saving options, consider speaking with your local banker, who can help put a plan in place to reach your goals.
Helping you boost your financial intelligence.
Read our financial resources from your friends at WSFS.