Reader mailbag: Should I pay off debt with the highest interest rate first? Christian Science Monitor
Bank interest rates definitely fluctuate over time, at least with online banks. Some banks – usually large brick and mortar ones – do maintain the same rates over many years, and it’s usually a low one. Smaller banks and online banks tend to vary their interest rates more.
How do they vary it? It varies based on what the Federal Reserve does with the prime lending rate (going up when the Fed raises rates and so on). It varies based on the marketing goals of the bank. It varies based on what the competitors are doing.
If you sign up for an account at an online bank, don’t be surprised to see the rate you earn vary over time. Right now, I would say that rates are definitely at the low end of the spectrum, but the Federal Reserve rates are also very low, too.
I have a private student loan at 6.54% (154/mo) and a car payment at 3.9% (493/mo). The car will be paid off in 30 months and both loans currently have a balance of 13k each. Also, I do not receive any tax benefits from either debt.
