Fed’s $600 Billion Plan to Lower Rates Could Help and Hurt Atlanta Consumers
In short, the idea behind the stimulus is to pump money into banks, reducing rates and thereby increasing borrowing. But while low interest rates are good news for consumers who want to borrow to buy a house, start a business or otherwise make an investment, they're not so good for those of us who plan to save rather than spend - like the many Americans struggling to make the mortgage payment on the house we already own or to restore the retirement funds we've already lost.
Sure, low interest rates and rock-bottom house prices make today a good time to buy a home. But some experts say rates are already low. Banks already have plenty of money. It's the demand, not the supply, that's lacking. What if you already have a home, and are having trouble paying the mortgage? What if you can't afford a home yet, and were hoping to start saving for one? In that case, you should be less concerned with interest rates on loans and more concerned with the interest rate on your credit card.
When you're making an effort to save part of your paycheck, you want to stretch that savings to its maximum potential. When rates are higher, it might be well worth it to stash your funds in high-yield savings accounts, CDs and money markets. But when rates are at all-time lows, you'd be better off not locking up your money - and instead using it to pay down debt.
Look at it this way. Does it make sense to put your cash in an account that earns 1% interest, while you continue paying interest on a credit card with 20% APR? You can save more by lowering debt - and thus reducing the years you would have spent paying interest - than you can by earning cream-of-the-crop returns on just about any investment.
Actually, reducing debt is a form of investment - an investment in your financial future. The more debt you pay off, the more of your future income will stay in your pockets - not the pockets of your creditors. If too much debt is keeping you from taking back your financial freedom, filing for bankruptcy might be a solution. Our Atlanta bankruptcy attorneys can identify a bankruptcy plan that works for you when you try a free personal debt analysis.