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As WNY Rebounds, why pay more interest than you need to?

Experts say now is a good time to explore lower interest options including 0% credit card offers.
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Posted at 2:26 PM, Apr 29, 2020
and last updated 2020-04-29 17:42:10-04

BUFFALO, N.Y. (WKBW-TV) — One of the fallout's from the coronavius crisis is that interest rates have dropped in an attempt to prevent a long-term recession. While that is not good news for banks, it can be good news for consumers.

"I don't see why you shouldn't be saving money especially on interest charges, because I always say it is like throwing money in the garbage," said Noelle Carter, President/CEO of Consumer Credit Counseling Service of Buffalo.

SHOULD YOU CONSIDER 0% RATE CREDIT CARD OFFERS?

Credit card offers that promise a 0% transfer rate can help if you have existing credit cards that charge interest in the upper-teens and 20% range. Those 0% cards can be useful for emergencies, explained Noelle Carter. But there are some important "fine print details" that you should take into consideration before applying:

  • How long does the 0% period last?
  • Is there a grace period? Make sure you have a financial plan for when the 0% ends.
  • What is the annual fee? Some annual fees can be as high as $100.
  • What is the interest rate after the 0% offer runs out? If it is more than the interest rate you are currently paying, then it might not be a good idea to switch.
  • How much is the transfer fee? Even with the balance transfer fee, it can be worthwhile to reduce your interest charges by switching credit cards.
  • Your credit score will determine what rates you are offered. Remember it can be negatively affected if you apply for credit cards too often.
  • DON'T MAKE THE MISTAKE of opening a 0% credit card and still using the credit card you transferred the balance from. You will just be putting yourself into a deeper financial hole!
  • Use the 0% credit card for emergencies and avoid using it for entertainment and 'binge' online spending.
  • The same rules apply to 'convenience checks' that credit card companies try to entice you with to make balance transfers, pay for unexpected expenses, or cash for yourself.

AUTO LOANS

Since auto loans are shorter in length, the interest savings in refinancing might not be as substantial - especially if you got a special deal, rebate, or interest rate initially. It can't hurt to look though.

MORTGAGE RATES

The low interest rates will have the biggest impact on home buyers and home owners. A quick look at mortgage interest rates offered by M&T Bank showed rates under 3% for some 15-year fixed rate loans and just over 3% for some 30-year fixed rate loans.

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Is it worth refinancing?

Absolutely, said Canisius College Assistant Finance Professor Steven Gattuso. "For people looking to refinance, it is at least a half-percent difference in rate that will justify refinancing." Some of that will be offset by closing costs, explained Gattuso. "So, even if you lower your rate, it will take some time to recover those closing costs."

It is a good time to consider shortening the length of your mortgage, which can save you on long-term interest costs while not increasing your monthly payment much.

"One of the best reasons is to lower your duration. If you have a 30-year loan, bringing that down to a 15-year loan doesn't usually cost too much more. Generally the interest rate is better and you can save in the hundreds-of-thousands in interest," explained Professor Gattuso.

STRUGGLING WITH DEBT, INTEREST RATES OR OTHER FINANCIAL PROBLEMS?

The Consumer Credit Counseling Service of Buffalo is offering free "Financial Checkups" to anyone who needs some financial help during the COVID-19 public health emergency.

You can call (716) 712-2060 for more information or click on this link.