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Banking in a Rising Rate Environment

While everyone is going about their busy lives, here at the credit union we are hyper aware of the rising rate environment we’re currently in. What does this mean? For years we’ve sat fairly comfortably with low federal interest rates on loans like mortgage and auto, as well as credit cards. Analysts have been predicting for some time that economic change would cause rate increases, and we’re now seeing that movement with even more increases anticipated around the corner.

As a consumer, here are some of the general tips you should know as we approach potentially higher rates across the spectrum. 

Purchase Timing        

I will of course begin with my weekly disclaimer that all of these suggestions are completely based on your financial situation and whether or not you can accommodate change.

Assuming you’re positioned for it, if you’re in a renting situation or driving an aged vehicle, now could be a great time to take the leap and get an auto loan or mortgage. Mortgage and auto rates have risen some over the past few years, but are still considerably low compared to historic trends. If you’ve been contemplating purchasing a home or a new car, the low and prospective rising rates may impact your timing. Interest rates can have a pretty substantial impact on your payoff schedule to the tune of thousands over the life of the loan!

Compare Plastic Rates and Rewards

You may not have even realized it, but variable rates just ticked up again last month. This includes credit cards, so your credit card rate may very well have gone up as a result. Although all financial institutions (FIs) have to adjust their offerings to consumers based on federal rate changes, some do so more than others. 

And this isn’t always in the form of rates. Some FIs also shift their rewards offerings to adjust. All of this said, just be sure you're aware of all updates associated with the offerings you currently take advantage of, and others that may make sense for you. A great place to take a look is NerdWallet.

Use it as Motivation

There is certainly a flip side to the purchasing angle. Rising rates can also be a fantastic motivator to pay off a loan or credit card you are carrying a balance on so you no longer have to pay the interest. I, of course, always suggest debt payoff as a top priority. This is just an extra boost that may be the catalyst to get you there! 

Although we certainly encourage you to consider rates on cards and loans, it’s only one factor in the greater financial picture. There are certainly rate shoppers out there who are looking solely at rates, but how you’re treated as a customer and convenience are also factors worth weighing. Many FIs also offer balance transfers, but this can come with a hefty fee, so be sure to weigh the risk/reward.

A rising rate environment can be a good prompter to make that jump into your first home, your next home, a more reliable car, a vehicle suitable for a growing family, etc. If nothing else, it’s a great time to check in and make sure that the offerings you use at your bank or credit union continue to compliment your family’s finances.

Kat’s Money Corner is posted in the Kansas City Star every week. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, follow us on Twitter @CommunityAmerCU.


Eric @CommunityAmerica

Thanks for all the feedback! We’re glad this blog post has had so much “interest!” Due to popular demand, we will get to work on an article that focuses on the savings side. Thanks again! ~ Tara/Eric

Jerry K

Same as other customer concerns “show me the Money”!! What about CD’s and savings rates? These should rise and by how much?

Robert Skiles

I was excited to hear about the saving side of the equation.

Jan Banks

I agree with Mark. Where is the savings strategy.

Mark Johnson

Interesting assumption to focus your entire piece on the effect on debt. What's happening to savings rates, CDs, money market rates, especially at Community America? Are those rates rising as fast as interest rates we have to pay?
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