The U.S. economy has been slowly rebuilding itself for more than a decade, and the Federal Reserve has played an important role. Now, however, it is a virtual certainty that the interest rate will begin increasing before the end of the year, and perhaps even by the end of September. Instead of becoming panicked about what an increase could mean for your pocketbook, it is now the perfect time to take a few steps that will minimize the negative impact of a rate hike.
Quick and Easy Ways to Protect Yourself from an Interest Increase
You cannot completely avoid the financial changes that happen after the interest rate is increased, but you can do many things right now to save yourself some money.
- Move Your Debt - If you have been receiving credit card offers for zero percent interest balance transfers, now is definitely the time to start taking advantage of them. After the rate hike goes into effect, you can expect to see fewer of these opportunities. It is also easy to speculate that the fee associated with transferring a balance might increase from the standard of 3 percent to as much as 5 percent. This will enable creditors to make money while still honoring the adjusted interest rates. Unfortunately for consumers, these changes will make it more difficult to pay off large amounts of debt. By transferring your biggest balances now, you can avoid some of these extra expenses.
When Will Rates Increase?
Six years ago, the U.S. had a whopping 600,000 jobless individuals seeking unemployment payments on a weekly basis. This was one of the biggest indicators of how badly the economy was struggling, which also made it clear that it would be very damaging for interest rates to move up even a quarter of a percent.
As of two months ago, the nation's unemployment numbers have flipped dramatically. In fact, there were only 255,000 people who filed for unemployment compensation for the week of July 18. This represents that lowest number of jobless individuals since 1973, and it is also a strong signal to the Federal Reserve that the country may be ready for the first interest rate increase since 2006.
Many experts are predicting that there will not be an increase this year because of how volatile the global market has been during the past few months. It also stands to reason that if the Feds do not pull the trigger this month, they most likely will not want to raise rates during December. Either way, we can expect at least a nominal increase sometime between now and mid-2016, so make sure that you are prepared.