Your Money and Rising Interest Rates

Interest rates have been at historic lows for some time, which has been helpful for borrowers. In March of this year, the Federal Reserve raised rates by a quarter of a point and is expected to raise rates at least two more times in 2018.

Why the rate hike?

When the Fed raises or lowers rates the goal is to keep the economy healthy. So when it lowers rates, it’s to help the economy grow at a steady pace; when it raises them it’s to keep the economy from growing too fast which could lead to inflation.

Now that we are in a rising rate environment, here are ways to make the most of your money.

Credit Card Debt

As interest rates rise, borrowing money becomes more expensive. This means if you have a loan or credit card with a variable interest rate tied to the prime rate, your interest rate will increase. If you’re carrying credit card debt, you’ll see a bump in your interest rate, so you’ll need to adjust your budget and work on paying that debt down. Read Tips to Keep Debt in Check to see ways to get a handle on your debt load.

Mortgages

If you plan on buying a house, rising rates should not hinder you from moving forward with your goal, because rates are rising so gradually. If you do have an adjustable rate mortgage or ARM, you may want to switch to a fixed-term loan, so you can budget for a steady payment. However, SchoolsFirst FCU offers an ARM with a low starting interest rate of either five or seven years and adjusts up or down thereafter. Unlike traditional 5/1 ARMs that adjust every year after the initial term, our 5/5 ARM adjusts every five years after the initial fixed five-year term and comes with a lender-paid closing cost credit1. While rates are still low, it may be something to consider. Read Find the Best Home Loan for You to learn more about all your mortgage options.

Savings

If you have a traditional savings account, you’ve noticed that the interest rate has been low. And even with a rake hike, you may not see much of an increase in what you can earn on your money. That’s because there is no direct relationship between the interest rates on savings accounts and the federal funds rate. Still, it pays to shop around; some online banks offer higher interest rates. If you’re looking for a way to maximize your savings, a SchoolsFirst Share Certificate may be right for you because Share Certificates offer higher dividend rates than regular savings accounts. Learn more.

Investing

Whenever the federal funds rate increases, some consumers get panicky and may be inclined to sell off their investments. Keep in mind that rising interest rates signal the Fed’s confidence in the economy. Stick with your investing strategy and don’t jump in and out of the market. Taking a long-term approach is a key to investing success. And if you feel like you do need to rebalance your portfolio, your financial advisor can guide you in making the decisions that are right for you.  If you haven’t had an annual investment review now may be the time. Our financial advisors provide complimentary consultations.2 Visit schoolsfirstfcu.org/advisors to learn more.

Credit Union Products Affected by the Rate Hike

Below is a list of SchoolsFirst FCU variable loan products affected by the federal funds rate increase and may be subject to future increases.

Loan Product
Special Curriculum Loan
(for School Employees)
Higher Education Loan
Home Equity Line of Credit (HELOC)
Inspire Credit Card
Rewards Credit Card
School Employee Credit Card
(Rate adjusts with current
prime rate every August)

For more information about the Federal Funds rate increase, please see frequently asked questions.

 

1If the loan is paid in full prior to the 36th regularly scheduled payment, you will be obligated to reimburse SchoolsFirst FCU for a prorated amount of closing costs paid on your behalf. This amount will be added to the loan payoff balance.

2Securities sold, and advisory services are offered through CUNA Brokerage Services Inc.(CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution.

CUNA Brokerage Services Inc. is a registered broker/dealer in all 50 states of the United States of America.

Federally insured by NCUA   |          Equal Housing Lender

 

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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.

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