For two years now interest rates as a whole have generally been falling or remain very low. Of course you may have some instances where rates are increasing, for the most part when it comes to savings accounts, CDs, and even mortgage rates, they are down sharply compared to a few years ago.
Good for Debt, Bad for Savings
Lower interest rates are good for borrowing money since it means you will be paying less in interest. The bad news is that the Fed rate cuts don't directly translate into lower rates for consumers. These cuts can take many months before the effects are felt on your bottom line, but you can begin shopping for lower rates now. Once you can begin to benefit from the lower rates, you'll have more money in your pocket as less is being spent on interest payments.
While lower interest rates saves you money when borrowing, the opposite is true when you are saving money at the bank. As interest rates fall, the rate of return on your checking, savings and CD accounts will likely follow suit. If you enjoyed the comfortable savings rates during most of 2007, you're probably not very excited as many rates have now dropped below the rate of inflation. If you can, make sure you're getting the best rate possible and explore other banks to ensure you're getting as much interest on your savings as possible.
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Dear Jeremy,
I must admit when I started reading your articles more than 12 months back I was as blind as a bat as far as ‘real’ financial planning goes.
And so far, I have been getting better at managing my credit card debt, household and personal finances, cutting back on heating expenses, and so on.
Thank you so much , Jeremy, for making me realize there’s more to saving money (here and there) than spending.
Indeed, every little bit helps!
Warmest regards,
Andrew Molobetsi