Blog posted On January 20, 2021
When life gets busy, certain activities might have to take a backseat – whether that’s date night, a family facetime, or even checking in on your finances. If you have a steady income and regularly scheduled payments, it can be easy to let your finances take care of themselves so that you can take care of the people around you. However, when it comes to your interest rates, you might want to take a closer look a little more often, because knowing your them could help you save thousands of dollars.
Mortgage interest rates
Knowing the interest rate on your mortgage is a crucial detail to saving money. Though this advice may sound obvious to some, more than a quarter of all mortgage holders don’t even know their current interest rate. “Roughly 8 in 10 homeowners with a mortgage have not refinanced and more than 1-in-4 doesn’t even know what rate they’re paying,” says Greg McBride, Bankrate chief financial analyst. Without knowing your interest rate, it can be harder to determine if refinancing is a worthwhile option.
Right now, mortgage rates are near historic lows, making refinancing an appealing option for many homeowners. But it is not always the right option for all. Learning the current interest rate of your mortgage could help you make the decision, and it’s is easy to do. One option is to check your monthly account statement. Another is to simply call your mortgage lender.
Credit card interest rates
Mortgage rates are not the only financial details that people are skimming over. Another survey found that 50% of the people holding a credit card balance don’t know their credit interest rate. If you don’t know the interest rate on your credit card, you may be missing ways to boost your credit (and lower your interest), thus perpetuating higher credit card payments. If you are late on credit card payments or do not make the payments in full, this could affect your credit score, which is often a strong factor in determining your interest rates on other loans, like your mortgage.
Credit card interest is often expressed as your annual percentage rate or APR. To calculate your credit card interest charged to overdue balances, divide your APR by the number of days in the year (365) – this will be your daily periodic rate. Then, multiply your daily periodic rate by your average daily balance, and multiply this number by the number of days in your billing cycle (30).
Unlike mortgage interest payments, interest payments on credit cards are typically only charged if you have an outstanding balance that isn’t paid on time. Therefore, paying interest on your credit card can generally be avoided if you pay your monthly bills in full and on time.
It’s important to know your interest rates because several aspects of your finances are intertwined and affect each other. “Personal financial decisions have large impacts on every other aspect of your life,” says Sean Stein Smith, an assistant professor in the business and economics department at Lehman College. When you are aware of the interest you are paying on your mortgage or credit card, it puts you in a better position to save money.
Before making large financial investments, consult your financial advisor for more information. To learn your current mortgage rate, contact us or review your monthly statement.
Sources: Bankrate, CNBC, Credit Karma