If you carry credit card debt, beware: It is becoming more expensive.
Chances are good that you have such debt. In fact, Americans are now collectively paying more than $100 billion a year in credit card interest and fees.
From April 2017 through March 2018, federally insured U.S. banks raked in $103.7 billion in credit card interest and fees, according to a recent Magnify Money analysis of government data.
That figure is up 11 percent compared with the same period one year earlier, and up 35 percent compared with five years earlier.
Why it’s getting more expensive to borrow
Magnify Money attributes this trend to the rise in the federal funds rate. The Federal Reserve has been steadily increasing this influential rate since December 2015, with the latest hike in June.
The analysis also shows that credit card interest rates are particularly sensitive to Fed rate hikes. For example, they rise more than twice as fast as mortgage interest rates.
With more Fed rate hikes expected, the analysis projects that the amount Americans pay in credit card interest and fees will again rise by more than 10 percent in 2019.
So, if you carry a credit card balances, you must act now to stem your losses.
Ideally, you already stave off credit card interest by paying your bill in full every month. If that’s not possible, you have four realistic options for minimizing interest payments.
Even if you don’t carry a credit card balance but you pay card fees, one of these options can help you save money.
1. Transfer your balance to a no-interest card
Getting a lower annual percentage rate (APR) will save you money every month by lowering the amount of interest you incur.
One way to get a lower rate is to find a new credit card with a zero percent APR and transfer your balance to it. You can find and compare no-interest cards using a free online resource like Money Talks News’ credit card search tool. Click on the “0% APR” category, which you will find in the menu on the left.
The hitch with no-interest cards is that the zero percent rate is generally temporary, meaning it will rise after a certain number of months. Still, many folks with debt should consider these cards.
For example, if you switch to a card with a zero percent rate that lasts for 12 months, you will not pay any interest on your debt for a year. If you can manage to pay off all your credit card debt in that time, you will avoid paying interest on that debt ever again.
2. Ask for a lower APR
Another option is to ask your current credit card company for a lower APR. I’ve done this myself in the past, and it can be as easy as picking up the phone and asking.
The worst thing that can happen is that you get a “no” — but the chances of you getting a “yes” are better, according to a survey conducted earlier this year. It found that 64 percent of credit card users who had requested a lower rate received it — with the average decrease being 5.5 percentage points.
3. Shop around for a new credit card
If the options above don’t work for you, it might be time to shop around for a new card with a lower rate.
Even if you aren’t in credit card debt but still pay credit card fees, it’s worth taking a few minutes to shop around. Credit card offerings change all the time, so there could be a great fee-free card out there for you.
A few minutes is all it takes if you use an all-in-one resource like Money Talks News’ credit card search tool. Just click on a card feature that interests you, and the tool will show you various cards with that feature. Or you can search by credit rating or card network.
4. Get out of credit card debt ASAP
Even if you transfer a balance to a no-interest card or otherwise get a lower APR, you must also tackle your debt itself, paying it down as fast as possible. This, too, will save you money on interest payments: The faster you get out of debt, the less interest you will end up paying over the life of your debt.
For more help with this step, check out “8 Foolproof Steps to Get You Out of Debt Fast.”
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