Interest Rates May be Rising – How Does that Help You?

Whether you think about it or not, when interest rates rise it affects your life in good ways, and unfortunately, in bad ways as well – want to learn why?

First, let’s start with why interest rates are rising. Interest rates on U.S. Treasury securities are starting to move higher. As the US Government prints more and more money to fuel the bailout, aka the recovery efforts, the dollar can weaken and so can the world’s perception of the United States credit-worthiness. The US Government issues billions and billions of dollars of Treasury bonds each month, and if they are traded at discounted rates, that in turn increases the effective interest rate on those bonds. That is a major driver of interest rates in the US, including mortgage rates, auto loan rates, credit card rates, CD rates, savings rates, etc.

Now, how can this be a bad thing for you? If you are planning on buying a new car, or a home, or if you have a home, you may want to refinance now, because when rates increase, so will the cost of a loan to you. Depending on the loan, it could mean thousands of dollars more per year in interest payments. A weak US dollar could also mean buying imported goods (goods from outside of the US) like gasoline, electronics, and food will cost more.

On the plus side, if you are still scared to invest your money in the stock market, CD rates and interest rates on savings account should turnaround and start to increase. If interest rates go up to 4% on CD accounts, you could make hundreds of additional dollars per $1000 invested in a 3-5 year CD. That can definitely make a difference to your savings.

If you know rates are going up, you can take advantage of the lower interest rates today, and find all the ways to take advantage of the higher interest rates in the near future.