TEMPLE, Texas — Money recently has gotten much more expensive. If you are borrowing, due to higher interest rates, you are paying more.
So how can you have the money that you make hold its value? Well, in this Money Talks, we learn it's best to keep that credit in tip-top shape and try to avoid paying as little interest as possible. Interest rates have skyrocketed. That won't hurt your credit score directly, but if you were on the margins already, you will feel the effects.
"Rising interest rates don't have a direct impact on your credit score, but rising rates will increase the payment amount on loans with adjustable interest rates," Certified financial planner Neil Vannoy told 6 News. "So, if you have loans with adjustable interest rates, increasing payment amounts might put a strain on your budget that could lead to late or missed payments. If that happens, that will have a huge impact on your credit score."
Those 15 to 19 percent interest rates that you had been paying on your credit cards are now in the 25 to 29 percent range.
"Anyone with outstanding debt should work to pay it down in order to keep their credit score in top shape, and I suggest focusing on high-interest debt and debt with adjustable rates first," Vannoy said. "Credit cards tend to charge huge interest rates – even back when rates for mortgages and car loans were much lower – so avoiding carrying a balance on a credit card."
But if you have good credit, there are some ways around those high rates as companies compete for your business.
"I've seen several credit cards offering 0 percent interest offers," Vannoy told 6 News. "That's a great way to offset expensive borrowing costs on other types of loans as long as you use them responsibly, comply with the terms of the offer and pay off the balance before the end of the offer term."
Spoken like any true good financial advisor, Vannoy says to get yourself paying little to no interest if you can!
"A common misconception is that you have to carry a balance on your credit card for it to help improve your credit," said Vannoy. "That's not true, and it could lead to high interest charges."
Rates have gone so high lately that Lending Tree is now calling 22 percent a good interest rate on a credit card. So, avoid paying it if you can!
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