With another Fed rate hike imminent, it's time to take action. 5 things to do to protect your finances
Federal Reserve Chairman Jerome Powell is laser-focused on bringing down inflation, using the best tool he has at his disposal — raising interest rates.
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And while President Joe Biden is optimistic about August’s inflation numbers, the combination of high inflation and rising rates has millions of Americans feeling the pinch.
It gets worse. Consumers shouldn’t expect that pinching sensation to ease up anytime soon. In fact, with another rate hike a near certainty next week, that feeling may soon become even more acute.
Here are five money moves you may want to jump on before rates rise again.
1. Deal with your debt
While the Fed raises rates, lenders follow suit. Some types of fixed-rate loans will take a while to go up, but you should expect variable rates like credit cards or home equity lines of credit (HELOCs)](https://moneywise.com/mortgages/mortgages/what-is-a-heloc-and-is-it-right-for-you) to be impacted immediately.
That means the interest on your already expensive credit card will essentially go up overnight.
Although many households took the time to pay down their balances over the pandemic, outstanding balances are back on the rise. Outstanding credit card balances increased by $570 million between the first and second quarters of this year, according to Federal Reserve data.
If you’ve been relying on your credit cards to make ends meet or overspent lately, the expensive interest is going to add up quickly, which means paying down your debt should be a top priority — or it’ll cost you even more.
2. Work on your credit score
Improving your credit score is worth the effort whether you want to get a loan quickly in the next month or two before rates go up or you need to borrow later.
Boosting your credit score a few hundred points will make you a more attractive borrower to all types of lenders — from credit-card issuers to those offering mortgages.
You may need to take steps to improve your score to make sure you’re able to borrow at favorable rates once the Fed starts tightening credit. Checking for errors is a good place to start.
3. Trim your monthly expenses
With inflation still stubbornly high, it’s a given that everything costs more these days.