FINANCIAL FOCUS

How to Combat the

Rising Cost of Credit

By Robert May Assistant Vice President Frost Commercial Banking

After a two-year period of exceptionally low interest rates, the Federal Reserve has spent most of 2022 increasing rates to counteract skyrocketing inflation. And while these are still well within the normal historic range, significant rate increases tend to create an economic ripple effect – impacting everything from consumer spending to business development to the stock and bond markets. Aside from investment considerations, rising interest rates are especially noteworthy for another reason: borrowing money becomes more expensive.

Even consumers with a solid financial footing may use debt as a tool to finance important purchases, making the rising cost of credit relevant to everyone. While a few extra percentage points probably won’t put you in dire straits, it’s worth considering how higher interest could affect your personal financial decisions over the next year. Here are three money moves to consider.

Look into alternative financing. Think twice about selling off investments to make major purchases in cash. This could trigger capital gains taxes or derail other financial goals. First, talk to your banker to explore options like a personal line of credit or home equity line of credit (HELOC), which can still be obtained at relatively low rates. a fluctuating rate, it might make sense to refinance those balances to lock in a fixed rate before the Fed raises rates yet again.

TWO

Refinance variable rate loans. If you have an adjustable-rate mortgage (ARM) or private student loans with

THREE

Take advantage of the flip side. Keep in mind you’re not the only one paying higher interest rates. Banks now have to pay you more to access your money, which presents some opportunities. For example, increasing the cash in your emergency fund or purchasing certificates of deposit (CDs) could help hedge against volatility in the investment markets.

Before making any major financial decisions, be sure to speak with your Frost banker who can provide strategic counsel based on your individual needs.

Would you like to talk to a financial professional? Contact Robert May at 713.388.7821 or Robert.May @frostbank.com.

Investment and insurance products are not FDIC insured, are not bank guaranteed, and may lose value.

Brokerage services offered through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services offered through Frost Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank.

Investment management services, financial planning and trust services are offered through Frost Wealth Advisors of Frost Bank.

Additionally, insurance products are offered through Frost Insurance.

Deposit and loan products are offered through Frost Bank, Member FDIC.

Frost does not provide legal or tax advice. Please seek legal or tax advice from legal and/or tax professionals.

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