In April 2019, credit card rates hit a record high of 17.87%. But with the Federal Reserve raising interest rates in late July by 0.75 of a percentage point—the largest hike since the 1990s— credit card interest rates are expected to hit new highs, with experts estimating 18%–19% interest rates by the end of the year.
The rate hikes are necessary to bring down soaring inflation, which everyone has felt when buying groceries or getting gas. But understanding why they’ve increased rates doesn’t hurt your wallet less—especially for anyone who is already struggling with credit card debt.
What it all boils down to is this: Anyone who has credit card debt will potentially be paying significantly more as their credit card interest rates go up as well. If you’re already struggling to pay the minimum on your card, or an increase in your interest rate is about to set you over the edge, it might be time to talk to a credit counselor.
A counselor will help you create a budget that works for you, so that you can manage your credit card debt more efficiently. Especially in today’s current economic climate, enrolling in a debt management program can help you avoid the worst of the interest rate hike and help you get out of debt sooner. Your counselor will work with your lenders to lower your interest rate and consolidate your loan into one monthly payment, designed to be paid off in three to five years.
While meeting with a credit counselor could be just what you need to set you on the right path, if you’re determined to try a few things yourself, here are some steps you can take to help combat rising rates:
Put a repayment plan into action.
This might be a hard pill to swallow, especially with prices so high right now, but to avoid falling even more deeply in debt, you’ll want to stop using your cards all together. To help yourself, it’s best to create a budget as well as a repayment plan. Two popular ways to attack debt are the snowball method and the debt avalanche. While there are different schools of thought for which one is the best, essentially the snowball method says to pay your lowest debt off first (while applying minimum payments to your other cards), for a quick win. From there, you’d move onto the next smallest debt. The debt avalanche is much the same except instead of the smallest debt, you focus on paying the debt with the highest interest rate off first.
Talk to your credit card companies.
Many people don’t realize that if you talk to your credit card lenders about lowering your interest rate, they’ll often work with you to come up with a repayment plan that works. While having a strong history of responsible repayment will help your case, it also never hurts to ask regardless of your situation.
Look for a 0% interest rate incentive.
Credit lenders sometimes offer 0% interest rate offers to potential card users. Take advantage of the offer and transfer your current balance over to one of these cards and reap the savings you’ll incur by not paying extra each month. Just be sure to make your payments regularly.
While using these techniques can help you weather this financial upheaval, don’t be afraid to ask for help. Contact Consumer Credit of Minnesota and ask about our credit counseling and debt management services - start today!