Predicting if and when the Federal Reserve will raise interest rates is a fool’s game, though plenty of people try doing it.
Last week’s inaction by the Fed to hold interest rates where they are may prolong global uncertainty, though it’s a global uncertainty that has been around since the last time the Fed raised interest rates in 2006. Its main interest rate has remained practically zero since then.
The Washington Post reported that some Fed officials expect interest rates to be raised sometime this year — which leaves only four months. Its top officials are scheduled to meet twice more in 2015: October and December.
3 ways to beat the Fed
If interest rates do rise this year, there are some financial habits worth starting now in preparation for the rise. Here are three:
Repay student loans
This may be difficult for college students, many of whom have student loans, but limiting debt and paying loans before graduation will help avoid inflated balances and reduce monthly payments after graduation, according to Scott Smith, president of Seattle-based CreditRepair.
Early repayment will free up income for post-grad purposes. It will also reduce a borrower’s credit utilization ratio, an important factor in keeping a credit score as high as possible.
Higher credit scores will help qualify you for lower interest rate loans, which will ultimately offset any future interest rate hikes by the Fed, Smith says.
Don’t carry credit card balances
Credit cards can help build a credit score if used properly. If you’re carrying a monthly balance, it could hurt your credit score, as could making late payments.
An interest rate hike will ultimately cause credit card rates to increase, affecting people with large credit card debt.
When applying for a credit card, consider annual fees, your ability to repay and all service charges, Smith recommends.
Practicing discipline with a credit card is important, as is paying all of your bills on time. By doing this, an interest rate hike will have very little effect on credit card users.
Savings accounts finally win
The best part about the Fed raising interest rates is that savings account will finally see a rate hike in interest rates.
Saving is difficult, so starting the habit of saving now before interest rates rise will make it a lot easier when you’re earning more money on your savings.