Five Ways to Save When Interest Rates are High
Published July 25, 2022
You may have heard about rising interest rates and wondered how it might impact your ability to save money.
While there are many things you can do on your own to save money in a changing market – like eating out less or shopping sales – at Maps we have some tips for you to find even more ways to save.
We’ll help you identify which areas of the market are most affected by rising interest rates, what you can do to manage debt, and find additional ways to save.
1. Lessen Credit Card Debt
Our first piece of advice is to pay credit card balances quickly to avoid higher interest rates. If that’s not possible, you can look for credit cards with low introductory offers on balance transfers. The lower interest rate generally remains in effect for several months – in some cases, up to a year.
At Maps, we never charge a balance transfer fee (many others do) and we have a cash back credit card with no annual fee. Paying off credit card balances with a lower fixed-rate personal loan may also be worth exploring.
2. Explore Savings Options
Your financial institution should have options or services available that will help you save more money. If you get stuck, start with these four ideas:
Shop around for a favorable savings account rate. At Maps we offer 3.00% APY* on the Member Rewards Savings Account. This free account is made available with every personal membership.
Save automatically with a preset transfer from your checking account to your savings every month. Or set up your direct deposits to automatically transfer a set percentage of each paycheck into your savings account.
Certificates of deposit (CDs) often yield higher interest rates than traditional savings accounts. While CDs are not yet back to pre-pandemic rates, they can be useful for short-term savings. CDs are secure and offer guaranteed returns.
Fixed annuities can pay a higher interest rate than what you can typically earn through a savings account, a money market account, or even CDs. Fixed annuities are best used when you have money above and beyond your emergency fund that you won’t need to use for a few years. They are tax-deferred and can be more flexible than a CD, because you have penalty-free withdrawal options. Fixed annuities may have fees or penalties, so visit a financial planner to find out if this is the right fit for you.
3. Use Unexpected Income Wisely
If you receive unexpected income – such as an employment bonus, tax refund, or inheritance – use it to reduce debt. Pay off high interest credit cards or make extra payments on auto or home loans. On a home mortgage loan, one extra payment per year will reduce your principal significantly over the life of the loan.
4. Pay Attention to Subscriptions and Memberships
Streaming services, subscription boxes, and auto-renewals on products or services can add up quickly. Regularly review any subscriptions or memberships and cancel any you don’t use. Carefully review your bank statement every month for subscriptions or memberships you’ve forgotten about and no longer use.
5. Lock in Low Rates
Lock in low rates as much and as quickly as possible. If you have a variable rate on a home equity line of credit, ask your lender for a fixed rate for any untapped portion of the line of credit. And if you are shopping for a new home, try to lock in your mortgage rate early, because there could be additional rate hikes by the Federal Reserve Board.
These are a few simple ways you can help control the impact of higher interest rates on your personal finances. For more information on these and other programs, contact us today. We’re always eager to help you save money, especially when the market gets tough.