As the end of the year approaches, it may be time to reassess your finances. This year has been marked by record inflation and multiple interest rate hikes. As the Fed attempts to rein in inflation by raising interest rates, there is a strong possibility that the economy will teeter into recession in the coming months.
If you’re concerned about the economy, you’re not alone. This summer, consumer sentiment toward the economy hit historic lows. While personal finance tips are unlikely to save you from inflation or a market downturn, Select shares some personal finance tasks and tips to do this year to help you save at less some money and plan for the future.
Subscribe to the Select newsletter!
Our top picks delivered to your inbox. Shopping recommendations that help you improve your life, delivered weekly. Register here.
Check the APR on your credit card debt
When it comes to getting your finances in order, you need to consider how rising interest rates will affect the amount of interest you pay on your debt. When the Fed raises the interest rate, or the federal funds rate, it changes the interest rate on interbank loans. This, in turn, affects the amount of interest you pay on your credit card debt. Credit card APRs are tied to the federal funds rate.
In November, the Fed implemented its sixth rate hike this year. Now, the Fed’s target interest rate range is around 4%, up from near-zero interest rates during the pandemic. This means that credit card APRs have also increased. According to the Federal Reserve, the average APR is 18.43% for interest-paying credit cardholders, up nearly 4% from five years ago.
In other words, it’s likely to be even more expensive to run up a balance on your credit card in the months ahead. Of course, paying it off is easier said than done, but you might consider getting a 0% balance transfer card to avoid paying a lot of interest.
With a 0% balance transfer card, consumers transfer their credit card balance to a new card for a small fee, typically 3% to 5% of the balance. Cardholders then pay 0% interest on that balance before the end of the 0% introductory period.
If you think this might be a good fit for you, you’ll probably need a good credit score (a FICO score of 670 or higher). You’ll also want to make sure the balance transfer fee doesn’t exceed the amount you’d save in interest with the new card.
The Citi® Diamond Preferred® Card and the Wells Fargo Reflect® Card are both good options.
The Citi® Diamond Preferred® Card has an introductory period of 21 months at 0% APR on balance transfers from the date of the first transfer, after which the variable APR will be 16.74% – 27.49 %. Balance transfers must be completed within 4 months of account opening.
Citi® Diamond Preferred® Card
-
Awards
-
welcome bonus
For a limited time, get $150 credit after spending $500 on purchases within the first 3 months of account opening.
-
Annual subscription
-
Introduction AVR
0% for 21 months on balance transfers; 0% for 12 months on purchases
-
Regular APR
-
Balance Transfer Fee
5% of each balance transfer; At least $5. Balance transfers must be completed within 4 months of account opening.
-
Foreign transaction fees
-
Credit needed
Advantages
- No annual fee
- Balances can be transferred within 4 months of account opening
- One of the longest introductory periods for balance transfers
The inconvenients
- 3% foreign transaction fee
The Wells Fargo Reflect® Card has an introductory APR of 0% for 18 months from account opening on eligible balance transfers with a three-month extension for cardholders who make minimum payments on time during the launch period. There is a variable APR from 16.74% to 28.74% thereafter. Balance transfers made within 120 days are eligible for the introductory rate and fee.
Wells Fargo Reflect® Card
On the Wells Fargo secure site
-
Awards
-
welcome bonus
-
Annual subscription
-
Introduction AVR
0% intro APR for 18 months from account opening on eligible purchases and balance transfers. Intro APR 3 month extension with on-time minimum payments during the intro period. 16.74% to 28.74% variable APR thereafter; balance transfers made within 120 days are eligible for the introductory rate and 3% fee, then a BT fee of up to 5%, min $5.
-
Regular APR
16.74% – 28.74% Variable APR on purchases and balance transfers
-
Balance Transfer Fee
3% introductory fee for 120 days from account opening, then up to 5% ($5 minimum)
-
Foreign transaction fees
-
Credit needed
Advantages
- No annual fee
- Long introductory APR period of up to 21 months on eligible purchases and balance transfers
- 3% initial balance transfer fee ($5 minimum) for the first 120 days
- Access to Visa Signature Concierge
- Get up to $600 coverage for your cell phone (subject to a $25 deductible)
- Access to My Wells Fargo Deals to earn money in the form of account credit when shopping, dining
The inconvenients
- No reward
- No welcome bonus
- 3% fees levied on foreign transactions
Enjoy a high-yield savings account
Fed decisions make borrowing more expensive for consumers, but rising rates also encourage people to save. When the Fed raises rates, annual percentage yields (APY), or the interest you earn on your deposits, increase.
High Yield Savings Accounts differ from traditional savings accounts in that they offer significantly higher interest rates. The national average APY on savings accounts is 0.24%, according to the Federal Deposit Insurance Corporation (FDIC). Meanwhile, the high-yield savings accounts with the highest APYs have rates 18 times higher than the average APY on traditional accounts. The WSJ found that people who held their deposits in traditional savings accounts at the top five banks lost more than $42 billion in interest by not switching to the top five performing savings accounts.
High-yield savings accounts are a good option for people looking to store emergency funds, as consumers can make up to six withdrawals per month without paying fees. Select LendingClub High-Yield Savings and UFB High Rate Savings ranked among the best high-yield savings accounts.
LendingClub High Yield Savings
LendingClub Bank, NA, Member FDIC
-
Annual Percentage Yield (APY)
-
The minimum balance
No minimum balance required after $100.00 to open the account
-
Monthly fee
-
Maximum transactions
-
Excessive transaction fees
-
Overdraft fees
-
Offer a current account?
-
Offer an ATM card?
Advantages
- Strong APY
- No minimum balance required
- No monthly fees
- Free ATM card and no ATM fees
The inconvenients
- Minimum opening deposit of $100 required, although there is no minimum balance after that
- No physical branch
UFB High Rate Savings
UFB High Rate Savings is a member of the FDIC.
-
Annual Percentage Yield (APY)
-
The minimum balance
-
Monthly fee
-
Maximum transactions
-
Excessive transaction fees
-
Overdraft fees
-
Offer a current account?
-
Offer an ATM card?
Advantages
- Strong APY
- No minimum balance
- No monthly fees
The inconvenients
- No option to add a current account
- No physical branch
Think about maximizing your 401(k)
If you have access to a 401(k) through your employer, you will have until the end of the year to contribute up to the $20,500 limit for 2022. People over age 50 can make catch-up contributions for a total limit of $27,000.
401(k) contributions are considered tax deductible. This means that 401(k) contributions reduce your taxable income and therefore the amount you pay in taxes. If you are able to invest more in your 401(k), you may consider increasing your contribution amount to further reduce your taxable income.
Use your FSA money
Note that some employers offer grace periods of a few months after the end of the year, but you should check with your employer. If you have an FSA, you can use your funds for everything from personal medical expenses to prescription drugs to sunscreen.
Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.
Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.
#money #moves #set #financial #success