Inflation in the United States, why do you advise paying off your debts as soon as possible?

It must pay its debts as soon as possible in the face of a sharp rise in inflation in the US.

ivan rodriguez gelfenstein

R. Gelfenstein - The central bank decided to raise interest rates again to combat inflation. Although markets forecast a rise of 50 basis points, the Federal Reserve (Fed) raised the benchmark rate by 75 basis points last Wednesday (one basis point equals 0.01%), the first three quarters of 28 years.

One of the ways the population is affected by the Federal Reserve's interest rate increase is through the fees charged on credit cards, as most charge a variable interest rate based on the rate indexed on the credit card. The Fed's benchmark policy tool: the federal funds rate.

That's why it's important that when it comes to credit card bills or other types of debt, such as personal loans or medical bills, you have a plan to pay them off before the federal Fed government announces further interest rate increases, provided that, if inflation doesn't go down, the central bank could have five more hikes by the end of the year and more hikes in 2023.

The first thing you need to do is understand your credit situation and, if possible, reduce your expenses. Having an overview of your debt is important, we recommend making a list of what you owe, who you owe, minimum payments and interest rates. The list should range from the highest interest rate to the lowest interest rate.

Once you have your debt list, establish a repayment plan prioritizing debt with the highest interest rate. You may also consider switching high-interest debt to a zero-balance credit card, but be sure to pay off the balance and don't add anything. Another option is to transfer the high-interest debt to a low-interest personal loan.

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