News

Taking Advantage of Interest Rate Hikes

The last time the Federal Reserve raised interest rates, Barack Obama was a U.S. senator, but just today the Fed announced an increase in interest rates. It will mean a raise in the price of any new loan you take in the future as well as an increase in how much you pay every month on the adjustable-rate loans you already have.

Taking the right actions before the rate hike takes effect can save you thousands of dollars in interest payments after the rate hike. Here are some tips to protect yourself, save money and maybe even make a profit when interest rates go up:

If you have a high credit card balance, move it to a loan with a low, fixed rate.

Credit card rates have remained around 13 percent, on average, for several years, but a Fed hike will raise those rates. To make matters worse for people with sizable credit card debt, those rates compound quite quickly on a revolving account like your credit card.

Move your credit card balances from the cards you have now to a single high-limit card with a lower rate and save on interest. But be disciplined – using a credit card to pay off another card can be a dangerous strategy, because if you don’t pay off the principle by the end of the introductory period, whatever you have left will start charging interest again, and perhaps at a high rate (pay attention to the fine print). You also run the risk of falling back into bad habits and filling your new card up to its limit again.

If you think you’re ready to move your credit card debt onto a single, low-interest card, try our Platinum Awards or Preferred Rate Visa credit cards. You can apply online.

If you were planning on buying a house (or refinancing), it’s time to make your move.

Fixed-rate mortgages will be unaffected by interest rate hikes, so get your mortgage now. The difference of a few percentage points in the federal rate could mean mortgage payments increasing by as much as hundreds of dollars per month for some homeowners. Avoiding that fee is as simple as getting the paperwork for a new home loan finished before a mortgage rates increase.

If you wanted the extra few months to bulk out your down payment, or you weren’t sure about refinancing this summer, it’s time to sit down with a professional who can take you through the numbers and find out how much that indecision might cost. You can prequalify right now or calculate how much you can afford.

If you’re investing, it’s time to look at conservative options.

As long as the Fed kept interest rates low, it was a good idea to invest more heavily in stocks than investment products offered by financial institutions. Low rates meant easy loans to businesses and expansion was easy, so it was driving up stock prices. As rates go up, credit markets slow down, and expansion becomes less profitable for all those corporations in which you own shares.

At the same time, as the prime interest rate goes up, so does the return you’ll enjoy on your money market account, savings certificates (or CDs), or any of a variety of investment products you may have. With our Payback Savings, you’ll earn 12x the national savings rate, and be able to access to your money anytime. If you’re trying to get some money put together for college or retirement, don’t forget about our Education Savings and IRA accounts.

8 APY = Annual Percentage Yield correct as of 6/20/17. Dividends are compounded and credited quarterly. Rate is subject to change without notice. Any withdrawal prior to maturity will reduce earnings. A penalty is imposed if certificate funds other than earned dividends are withdrawn before the maturity date.

9 Bump Your Rate Certificate: Personal checking account required to open. New checking accounts must have direct deposit. Dividend rate may be changed to match any current comparable 36 month share certificate rate offered by the credit union twice during the term of the certificate.

Product Min. Deposit to Open Min. Balance Tiers, APY8 / Dividend Rate Min. Balance Tiers, APY / Dividend Rate Min. Balance Tiers, APY / Dividend Rate
Regular Term Certificate Minimum Deposit to Open $0 $20,000 $100,000
3 month $500 0.20% / 0.20% 0.25% / 0.25% 0.30% / 0.30%
6 Month $500 0.25% / 0.25% 0.30% / 0.30% 0.35% / 0.35%
9 months $500 0.25% / 0.25% 0.30% / 0.30% 0.35% / 0.35%
12 months $500 0.65% / 0.65% 0.70% / 0.70% 0.75% / 0.75%
24 months $500 1.00% / 1.00% 1.05% / 1.05% 1.10% / 1.10%
36 months9 $500 1.40% / 1.39% 1.45% / 1.44% 1.50% / 1.49%
48 months $500 1.70% / 1.69% 1.75% / 1.74% 1.80% / 1.79%
60 months $500 1.85% / 1.84% 1.90% / 1.89% 1.95% / 1.94%

In the end, you’ll want to decide if you want to leave your money in places where a rate increase could drive up your costs, or put it into more stable products. If you aren’t sure what to do and want guidance, feel free to call or come by, we’d love to help you understand your options.