In order to have an accurate idea of where we stand on our spending and saving, we should also stay up-to-date on the interest rates affecting our financial well being. While some accounts will grow with their interest rates, interest is also a pesky consequence of borrowing money. Start by checking to see just how much of a help or headache interest is in these three areas of your finances:
- Credit Cards and Interest Rates: Even though many credit cards offer zero interest for the first year, chances are, any credit card debt is now or will soon be accruing interest charges and reducing the amount that is going towards paying off your balance. Find out what interest rate is being levied against your debt, so you can plan to repay accordingly, and use the added cost on your credit card spending as a reminder to resist future overspending! If you feel your interest rate is high, consider contacting your lender to inquire if you qualify to have it lowered. Another possibility is a balance transfer to a card with a lower interest rate. If you have debt from multiple credit cards, once you know the interest rate on each card, you can consider repaying the balance with the highest interest rate first.
- Interest on Your Loans: Whenever you take out a loan, you will owe interest in addition to your borrowed principal. For large purchases, your repayment habits will affect your credit score, and your credit score will influence the interest rate you qualify for. But, in addition to our own financial standing, the market still has its influence. For example, the average interest rate on a thirty-year fixed rate home mortgage will play a role in your monthly mortgage payments.
- Saving and Interest: While increasing interest rates can be a burden on borrowers, they can be a benefit if you have money in places that grow based on a percentage rate of return. Make sure you find out what interest, if any, is being applied to your accounts and how often. For example, your interest could be compounded monthly or quarterly. The more often your money is compounding, the more opportunities your money has to grow!
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