Understand how interest works.
What’s interesting about interest? Sometimes you want high interest rates and other times you want low rates. When you take out a loan, you want a low interest rate. When you put money into a deposit account such as a checking, savings or investment, you want a high interest rate. Do your homework to find the best solution for you, and learn how interest works to help you make smart financial decisions.
Interest on Loans
If you take out a loan or use a credit card, you are paying interest on your purchases. This means an institution is charging you a fee to borrow money which makes your purchases cost more than you might think. Let's say you find a tremendous deal on a high-end home entertainment system for $500. If you purchase that system with your credit card and cannot pay off the balance immediately, you will be charged a fee on top of the $500 based on your card's interest rate. A 12% interest rate on your card, for example, means you're paying an extra $60 each year you carry the balance. That might not seem like a significant amount, but consider how many purchases you put on your credit card every month and your interest payments can add up quickly.
In the same respect, the interest rate on a mortgage or auto loan is extremely important in determining how much money you will end up spending on your house or vehicle at the end of the loan's term. Many people put extra money toward their high-dollar loans because they know they will pay off the loan sooner and ultimately pay less money toward interest.
Interest on Savings
A higher interest rate is better for savings and investments. When you open one of United Community Bank's accounts that earn interest, such as an interest-bearing checking account, CD, IRA, Money Market or savings account, you will be paid interest based on the current rates.
The earlier you start saving the better your results will be over the long term. Choosing the savings option that offers the highest interest rate will help you grow your money faster and provide greater peace of mind.
