Buzz
The Federal Reserve is projected to increase short-term interest rates three times in 2018, which could benefit savers.
These rate hikes could result in higher savings and CD rates, with some savings accounts offering up to 2.3% and 5-year CDs reaching 3% by the end of the year, as reported by Bankrate. While it's not a get-rich-quick scheme, it's an improvement compared to 2017, when high yield accounts only reached 1.4%.
Bear in mind, these high rates will be the top-tier offers—the average rates will be lower. To find the best deals, it's important to shop around, using platforms like Bankrate or NerdWallet that compare accounts in real-time. Pay attention to account minimums and other criteria.
Another crucial point: as rates rise, borrowing will become more expensive in 2018. This is particularly important if you have credit card debt or a home equity line of credit.
If you have a variable-rate credit card, you might be able to avoid paying extra interest by applying for a balance transfer card that allows you to pay off the principal without interest for a specified period. Here are some factors to keep in mind, according to Credit Karma:
Typically, you'll need a good credit score to be eligible for a transfer.
Transferring your balance usually involves a flat fee, typically a percentage of the balance.
While balance transfers can help you avoid paying interest for a limited time, they won’t clear your debt.
There may be limits on the amount of debt you can transfer.
Be cautious of the APR increase once the introductory period ends.
You’re likely to encounter these rate hikes before seeing any increase in your savings account or CD rates. If you haven’t yet set a resolution for the new year, make paying down your debt a top priority before rates rise.
