In late July, the Federal Reserve raised interest rates for the fourth time this year. While the move is to combat high inflation, it ties directly into credit card interest rates and APRs.
What does that mean for you?
If you have credit cards, you should expect to start paying more. This is especially going to hurt if you’ve already been using your card to pay for higher gas prices and larger-than-normal grocery bills. According to CNBC.com, credit card balances have increased year over year, collectively reaching $841 billion in the first three months of 2022.
Average credit card interest rates are currently almost at 17%, with many financial experts agreeing they expect them to rise by the end of the year up to 18%–19%, possibly reaching record highs. The pandemic, as well as the Russian-Ukraine war, have contributed directly to the rate hike, which will impact not just credit cards but also mortgage rates and personal loans.
Focus on Debt Management
If you’re struggling to pay more than the minimum, or are afraid you won’t be able to pay even that, here are some steps you can take to help lessen the financial impact:
Stop using your credit cards. It might seem like an impossible feat with the price of gas today, but in the long run you’ll be saving yourself from owing even more money. Sit down and go over all your expenses and get a budget into place. This might mean cutting back on costs like eating out, streaming services, or recreation, but it will also help keep you from going even deeper into debt.
Ask your lender to lower your rates. If you can’t pay down your existing debt, you can always ask your current lender if they will lower your interest rates, especially if you’ve been with that specific lender for a while. While many people don’t realize it, lenders will often work with you to help you get into a more manageable repayment plan.
Transfer your balance to a 0% interest card. Often, credit card lenders offer 0% incentives for a set period to get new customers. If you don’t spend any more on the card and pay your loan back responsibly, you could potentially be saving yourself thousands of dollars.
Take Advantage of Credit Counseling Services
Talk to a credit counselor. By making an appointment with a credit counselor, you’ll get help with budgeting, as well as more tips on how to pay back debt and get into a financially healthier situation. Because a credit counselor will typically work with your lenders to lower your interest rates and consolidate your credit card debt into a reasonable monthly plan, a debt management plan could be an incredibly attractive option in the current economy.
Since it doesn’t look like interest rates are set to fall anytime soon, consider your options and go from there. Remember that you’re not alone and that there are ways to manage this financial situation.