How will rising interest rates affect credit card debt?

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If you have a balance on your credit card, you’ll soon be paying more to pay it off. Here are ways to let go of higher debt.

SAN ANTONIO, Texas — Credit card interest rates are generally variable. So expect your interest rate to rise by July or August, now that the Federal Reserve has raised the interest rate again. That means you’ll likely pay between $65 and $75 more on your total balance.

“These aren’t necessarily astronomical amounts,” said Matt Schulz, senior credit counselor at Lending Tree. “But if you have credit card debt, every increase really matters and is definitely not welcome.”

Credit card debt can be one of the most expensive debts.

“Credit card interest rates are already ridiculously high,” Schulz said. “They are up about 20% on average. The Fed. raising rates isn’t going to make things any easier for the average person with credit card debt. If you have credit card debt, it’s very important to make sure you can pay off that debt as quickly as possible. It’s certainly easier said than done, but with rampant inflation, high interest rates and other things going on in the economy. It’s more important than ever to reduce credit card interest on that credit card debt. »

Credit card interest rates could reach 21% or 22% by next year. Now is the time to act so that higher interest rates don’t put you further into debt.

Transfer your balance to a card with an initial interest rate of zero percent.

“There are many balance transfer credit cards with 0% interest. The average of these gives you between 12 and 15 months without interest. It’s a really big deal,” Schulz said.

Always look to move your balance even if you don’t qualify for a 0% interest rate card. Instead, find a card with lower interest than you currently have.

“There are many balance transfer cards out there,” Schulz said. “Even if you can just transfer that balance to a card with a bit lower interest rate, it can still add up and reduce the amount of interest you pay and reduce the time it takes to pay off that balance. .”

“It’s more important that even consumers shop around,” said Karl Eggers, financial adviser at CAPTRUST in Boerne. “It will take a little more work than before. Put aside bonus points, SkyMiles, all those perks we’re used to looking for when buying a credit card. Set them aside. Go for the cheapest rate right now if you have credit card balances because it really snowballs and it adds up.

Make additional payments, if you can.

“That’s probably the first thing you should do with extra money is pay for it,” Eggerss said.

“If you have a little extra cash to put on your credit card, now is a good time to do it,” Schulz said. “Because with inflation, with interest rates rising, that credit card debt is only going to get more expensive if you don’t do anything about it.”

Consider a personal loan to pay off your credit cards.

Make sure the loan has a fixed interest rate that is lower than your credit card interest rate.

“Not only does this allow you to lower your interest, but it may just help streamline your payments overall, as you could potentially consolidate multiple credit cards,” Schulz said.

Or try this trick:

“Call your credit card issuer and ask them for a lower interest rate,” Schulz said. “Far too few people do it. It’s something people can be a little nervous or a little intimidated about, but if you pick up the phone and make that call and ask for a little help, chances are you’ll get through it.

“That rate they charge is not set in stone,” Eggerss said. “You can also threaten to switch credit cards or pay off that balance to move somewhere else. They want you to keep paying them interest, so definitely negotiate that interest rate.

Those who make this call are successful about 70% of the time according to Schulz.

Credit card debt will only cost you more if you do nothing.


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