CLEVELAND, May 1, 2018 /PRNewswire/ — Short-term interest rates, already at the highest level in a decade, are expected to be on the rise throughout 2018. While rising rates boosts the cost of borrowing on everything from cars to homes to credit cards, people with higher credit card balances might be concerned they will feel more of a personal finance pinch.
But not to worry: KeyBank has some suggestions on ways to keep credit card debt – and any related anxiety – to a minimum without resorting to shredding any and all plastic in your wallet.
“At KeyBank, we want to offer options, not one-size-fits-all solutions,” said Patrick Smith, head of KeyBank’s financial wellness initiative. “We take the time understand clients’ individual credit card debt situation, offer a range of debt consolidation tactics and then collaborate with clients on a final plan.”
Divide debt, and conquer accordingly
Separate your existing credit card accounts into three categories by balance and interest rate – high balance/high interest, low balance/high interest and low balance/lower interest. Then talk to your banker about borrowing options such as interest-free balance transfer cards, unsecured personal loans, and if you own your home, home equity loans and lines of credit.
An interest-free balance introductory card might be the solution for those low balance/high interest credit cards. Be sure to consider balance transfer fees – most transfer cards assess a fee per amount transferred, and be sure you can commit to paying off the new card within the promotional rate period.
Options for managing high balance/high interest rate cards might be revolving unsecured loans, unsecured loans, or if you own your home, home equity loans or lines of credits.
“Ask your banker to rank your options by loan term, payments and interest savings so you have a complete picture how each option affects your short-term and long-term plans,” Smith said.
Commit to wise credit card use
Like any good habit, smart credit card use doesn’t end with a plan to consolidate and reduce card debt, Smith said:
- Keep all credit card utilization – meaning the percentage of credit used – at 30 to 40 percent.
- Know your spending habits, set a credit card spending limit – and use spending and security alert options to help you stick to the limit.
- Pay cards off in full each month, or pay extra each month.
- Consider having two credit cards – one with a revolving balance for major purchases and one with a rewards option. Use that card for regular purchases, and reap the rewards, such as cash back or gift cards.
Close the loop – with savings strategy
Granted, there’s immediate gratification – and budget relief – to be had by paying off high interest credit cards. But you and your banker could continue the financial wellness conversation by moving from saving on interest to bolstering saving.
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“Remember, you and your banker took interest savings into account to settle on a credit card debt consolidation plan,” Smith said. “You know how much you save in terms of interest. Take full advantage of that ‘extra’ money by using automatic savings account options to deposit money into an emergency savings account or money market account.
“Take the savings conversation a step further. You know how much more money you will have once you’ve paid off the no-interest introductory card or the low-interest term loan. Use that estimate, and develop a savings strategy for the future,” Smith said.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice.
About KeyBank
KeyCorp’s roots trace back 190 years to Albany, New York. Headquartered in Cleveland, Ohio, Key is one of the nation’s largest bank-based financial services companies, with assets of approximately $137.0 billion at March 31, 2018.
Key provides deposit, lending, cash management, insurance, and investment services to individuals and businesses in 15 states under the name KeyBank National Association through a network of approximately 1,200 branches and more than 1,500 ATMs. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit https://www.key.com/. KeyBank is Member FDIC.
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SOURCE KeyBank
