TOP DRAWER ARTICLE

The Ups and Downs of Interest Rates
by
HL Carpenter

The rates go up, the rates go down ... do you have an interest in interest rates? If you’re a mortgage holder, an investor, a balance-carrying credit card holder or a business owner, the answer is yes. Whether you’re a borrower or a lender, interest rates affect your income and spending ability.

So what should you do now that rates may be rising again? Here are three ideas:

Take advantage of current low rates. Rates for car loans and mortgages generally go up when interest rates rise, meaning now could be a last window for refinancing. You may also want to consider converting a variable rate mortgage to a fixed to lock in current low rates.

Shift slowly into longer-term investments. As rates on certificates of deposit and Treasury notes rise, you might choose to expand your investment time frame. Instead of selling short-term securities, replace them with longer maturities as they become due.

Pay down credit card debt. Even when interest rates rise, this strategy can make sense. Ask yourself this question: is the interest you earn on money you save more than the interest you are paying on your credit card debt? If not, paying down the balance on your cards is a good idea.

Originally published May 2004.

Last update: January 8, 2011