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Stung by rising interest rates? Here are 3 ways to save big right now

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Switching to lower-rate credit products and higher-rate savings accounts is a great way to offset rising living costs.

Inflation is soaring in Australia as the prices of many essentials keep rising. To combat higher costs of living, the Reserve Bank of Australia (RBA) has hiked interest rates fast. This has made things even more expensive.

But higher rates mean bigger savings are on the table when you switch to a better deal. Comparing rates on all your financial products, from your home loan and your bank account to your credit card, will net you big savings.

1. Put your savings to work

Rising interest rates are bad news for borrowers. But it's good for savings accounts. Interest rates are finally starting to rise for savers, meaning you can earn more interest on the cash you've parked in the bank.

Take advantage of this by switching to an account that offers a genuinely high interest rate. Don't stick with the bank account you've had since childhood out of habit.

It's now possible to get a savings rate above 3%.

2. Switch to a cheaper home loan

Unless you got a fixed rate loan at exactly the right time, your mortgage's interest rate has risen quickly in recent months. This adds hundreds of dollars a month to most people's repayments.

The flip side to this is that getting a better rate now will save you more than ever. Even with every lender raising rates, many of them also offer better deals to new borrowers.

Your lender could have you on a rate of, say, 3.50% while offering an identical loan to new customers at 3.40%.

It's not much, but even a slightly lower rate can save you lots of money over the life of a loan.

And if you have a very high rate, switching to one of the lowest rates on the market could save you a couple of thousand dollars a year.

You have 2 options:

  1. Ask your lender for a better deal. The worst it can do is say no.
  2. Compare rates from multiple lenders and refinance to a lower rate.

3. Take another look at your credit card

Credit card interest rates don't change that much and don't seem to fluctuate in line with savings and home loan rates. But there's still a big difference in rates between different cards.

With a $2,000 card debt, switching from the market average rate to a much more competitive card could save you $124 a month.

Check out all our top money saving tips and download the Finder app to manage your money better.

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