Double Digits? Be Prepared for Rate Increases

If you think that you are safe because you have a "fixed-interest-rate" credit card, you will be in for a terrible surprise. A fixed interest rate with a credit card company doesn't mean the interest rate is fixed at that rate forever. The fine print allows the lender to increase the rate, although it is not automatic as with a variable-rate credit card. If interest rates begin to rise, you can be sure that your fixed rate will also increase. Your only defense against the increasing interest rates is to not have any credit card debt.

2. Lock in interest rates: If you have a variable-rate mortgage, you should consider refinancing and lock in a low, fixed rate. Locking in a fixed rate will mean paying a higher rate than you could get with a variable-rate loan, but in the long run, it will save you a lot of money. If interest rates hit double-digits, you'll still be paying that same lower, single-digit fixed rate, while others with variable interest rate loans will be paying double-digit interest.

3. Consider delaying loan prepayments: If you have a fixed-rate mortgage or student loans that charge around 7% interest, you may have been paying them off early. If you can earn only 5% in the bank, paying off a 7% loan may make more financial sense. But if interest rates do increase to double digits in the next few years, you may want to have that money available for investment purposes, and the money that you paid toward these loans won't be accessible.