(WXYZ) — The Federal Reserve cut interest rates Wednesday, the first time it’s made a move like that in more than a decade.
While another move by the Fed may draw yawns from some, money experts like Joe Saul-Sehy — creator of the Breaking Benjamins podcast — tell 7 Action News that it’s a time to act if you owe money on a home, car or have credit cards. Saul-Sehy suggests viewing your debt in that order too, from biggest to smallest.
“Most people get it wrong,” he said. “They start off with the little things, and what we want to do is start off with things that make the biggest impact.”
FIRST STEP: YOUR HOME
There’s two things to look at as a result of this move by the Federal Reserve when it comes to your home: the possibility of refinancing and a review of a home equity line if you have one.
This move doesn’t guarantee that a refinancing your mortgage will be a good money move, but it opens the possibility. The fed move doesn’t directly affect home loans, but it does affect what the treasury does — which in turn affects your home. So it’s worth looking into whether a refinance is possible.
If you have a home equity line of credit that payment will likely drop. However, the experts say that you should keep making payments at the same rate as you have in the past.
“Your payment may drop, and people say, ‘Cool, I have some extra money,’ and they go out and spend it on whatever,” explained Saul-Sehy. “Instead, I would try to keep your payment level, since you’re paying less interest to the man and pay off the loan early.”
SECOND STEP: YOUR CAR
If you hold a car note, that’s directly affected by fed moves. Saul-Sehy considers this a big opportunity if you have a high-interest on your payment.
“I would go first to a credit union, I like their rates over bank rates, go to a credit union and see if you can lower your payments that could potentially save you a lot of money.”
THIRD STEP: CREDIT CARDS
The interest rate on credit cards will go down after this latest move. It’s worth noting that the fed has been raising rates dating back to 2008, so this won’t be a significant drop to what we saw years ago. It still means credit card rates will drop.
Saul-Sehy noted that while cards drop, it also means a competitive period of time for companies that want your business.
If you’re in the market for a new card, Saul-Sehy noted three website that offer comparisons tools for loans and credit cards that will allow you to do research without applying for loans or cards: