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Wyandotte, Mich. — September 28, 2022 — Higher interest rates are sending consumers into a tizzy, with costs impacting new and adjustable-rate mortgages, auto loans and credit card balances, but there are a few tips to mitigate overall borrowing costs, according to Michigan Legacy Credit Union President and CEO Carma Peters.
“Credit unions and banks obviously feel the pinch, too, when interest rates go up. The cost of funds for the institution also increases—and we have to pass those costs along to consumers when they take out loans for purchases like mortgages and automobiles, or make payments on credit cards, which have always had high interest rates,” Peters said. “However, that doesn’t mean that borrowers don’t have any options in trying to lower the costs they pay on borrowed money.”
For Credit Cards, Don’t Just Check Interest Rates – Check Fees
Credit card interest rates vary by card, but so do card fees. Peters urges consumers to shop interest rates but to also pay attention to fees. “A lower interest rate doesn’t always offset any additional fees. That’s why consumers need to consider both rates and fees when credit card shopping,” Peters said.
Don’t Forget to “Reward” Yourself
Many consumers use credit cards that offer rewards for spending – but there’s no reward if you don’t use them. “If you have a card that offers rewards and you’re not taking advantage of them, you may ultimately be paying more for your card than necessary,” Peters said. “Pay attention to the details of the annual fee, which is typically more with a rewards-based card. If you find that you don’t use the rewards, consider transferring the credit card balance to a no-annual fee card, which is available through many financial institutions, including Michigan Legacy.”
Take Advantage of Variable Rate Loans
Starting rates for variable rate loans tend to be less than fixed rates, which is the incentive for lenders to get borrowers on a variable rate note. If applicable, switch an outstanding loan balance on your home to a variable interest rate loan. Then, when rates go down, you can switch back to a lower fixed rate.
It’s not just for retailers anymore. Some financial institutions, including Michigan Legacy, will match a lower interest rate from a competing institution. You’ll never get a price match if you don’t ask, though!
No, it’s not a dating app – some financial institutions offer relationship pricing. “The more money you have invested in a particular lender – for example, auto and home loans plus a credit card – the more likely you are to benefit from a discounted interest rate,” Peters said. “Similarly, your lender may offer a discounted interest rate on lending products if you have direct deposit for your paycheck or automated payment transfers to make a timely payment on a loan or credit card.”
Peters notes that some financial institutions like Michigan Legacy will provide a payment incentive for referrals. When a member of the credit union refers a new member who transfers bank accounts or loan balances, the referring member gets a $25 bonus per referral, depending on the incoming account value or loan balance.
Taken together, Peters says the tips can add up.
“Depending on the amount of collective outstanding loan balances, these tips may not completely mitigate the recent rise in interest rates, but they can save money that you’d otherwise be spending in interest and fee-related charges,” Peters said. “Further, they really show why having a relationship with your financial institution can literally pay off in the long run.”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.