One of the advantages of the recent Fed rate cuts has been the significantly lower rates on consumer loans. Home equity loans, credit cards and even car loans have been seeing lower interest rates. So, while this might have been a real bummer for your high-yield savings account and other cash investments, if you are someone with debt, this has been nice.
Have you been taking advantage of the lower interest rates to do some damage to your debt, now that more of your payments will go to principal? I hope so, because interest rates could be on the rise. And it doesn’t matter who you are, reports Wisebread:
It doesn’t matter to banks that you’re a good customer with a good credit standing. What matters to banks is their bottom line, and the only way they can think of to prevent more massive financial losses this year is to rip off their remaining customers. The result is that banks are looking for reasons to consider you an “at-risk” customer.
Also, NPR is reporting that banks are looking for new fees to tag onto your account — fees for normal banking things that you do. So keep a close eye on your bank statements for that.
The driver behind this is a need for more revenue. With revenue from subprime loans basically gone, and revenue from Alt-A loans drying up, banks are looking for ways to keep their coffers full. And that means that the money needs to come from somewhere.
We’re that somewhere.
So be prepared. Pay down what debt you can before interest rates go up, and before the new fees kick in.