Real estate agents and their prospective buyers are well aware that interest rates are on the rise…albeit slowly and surely. Likely, the Federal Reserve Board (Fed) will raise rates by 0.25% this June. Financial experts are predicting that by the end of this year, the rate hike could reach a full 1.0%.
Those buyers with credit cards should also be aware that the Fed’s decision to raise rates affects their credit card interest rates as well. Currently those credit card interest rates stand at approximately 16%. Any Fed increase could be costly…anywhere from $6 per month in interest to more than $80 annually for the “very best” account holders, i.e., account holders with no and/or minuscule debt on their credit card. For the those looking to buy homes, any Fed increase of interest rates (that will affect interest rates on credit card debt) will impact credit reports.
But most credit card holders are not “the very best.” Turns out that in Colorado, for example, the average holder has approximately $6,308. in credit card debt, according to ValuePenguin.com. And “…if your credit card has a variable interest rate on it, you’re going to see (a rate increase) impact your minimum monthly payments,” says financial planner Debbie Freeman.
Here are some tips that Freeman suggests for credit card holders struggling with debt, that you can share with your buyers…
- Ask their credit card company for a lower interest rate.
- If you have more than one credit card, pay off the credit card with the highest interest rate first.
- Target one debt at a time.
The Colorado Bankers Association has “To Do” tips for credit card holders:
1. Beware of Gold/Platinum credit cards.
2. Know the basic responsibilities of having a credit card such as repay what you charge and anticipate having to pay off interest on your debt over time.3
3.Absolutely do shop around. This is a competitive market so all fees, rates, credit limits, grace periods, annual fees, benefits, terms and conditions are variable. Compare them!
4. Use the same name and format each and every time you apply for credit.
5.Make sure you read the fine print…this is a contract. Avoid terms like “introductory rates” as those rates change and increase quickly.
6.Absolutely ask if/when you don’t understand something.
7.No one can “fix” your credit…stay away from anyone who says they can.
8. Set your budget and stick to it every month!
9. If possible, pay your bill on time every month.
10. If that’s not possible, at least pay the minimum amount…more if you can as you’ll be paying less over the long haul.
11. Contact the credit card issuer if you’re having trouble paying the bill. They may create a payment plan that’s doable for you.
12. Keep your card secure. Just in case it’s lost or stolen, have the bank’s phone number available to you all the time so you can call them if there’s a problem.
13. Know that your credit history is an investment in your future. It will determine whether or not you’re able to qualify for a mortgage and/or an equity loan and your credit history will determine your qualifying interest rate…only the “very best” holders qualify for the prime interest rate.
14. Order your credit report annually so you know where you stand and to ensure that everything is accurate.
15. Close credit card accounts you don’t use.
The Colorado Bankers Association also suggests that credit card holders DO NOT…
- Get a card if you don’t need one.
- Pay bills late.
- Spend more than you can afford.
- Max out your card.
One last thing…be wise to scams and thieves.