Rates Remain the Same: Get That Consumer Debt Paid Down
August 5, 2008 by Miranda Marquit
Filed under Finance
About 45 minutes ago, the US Federal Reserve announced that its federal funds rate — which is the rate that banks charge each other for loans — will remain at the same low 2% it has been at for the past three months.
For people with cash investments (savings accounts, CDs, money market and the like), this is a bit of a bummer. On the other hand, people with consumer debt have something to cheer about: With interest rates remaining low, more of your credit card and home equity line of credit payments will go toward reducing your principal.
If you are working on getting out of debt, now is a great time to participate in aggressive debt reduction. Instead of eating up your payments with interest charges, chances are that you can make a bigger impact on your debt right now.
Go ahead. Make that extra credit card payment. It will help you in the long run.
image credit: sxc.hu
Hi
I agree with the overall sentiment here. Using any additional money that you have to pay down your debt will give very real and predictable benefits in the future. If you pay off debt then you will definitely “earn” the interest that you don’t have to pay in the future.
Some people might be tempted to use any money they have to invest, reasoning that they should be able to get a better rate of return on their investments than they pay on their debts. This is risky though, especially in the current environment.
thanks
Neil
Thanks for sharing. I agree that now is the time to use cash to pay down debt and prepare for the future.