It might be time to give your credit cards a rest and focus on paying down balances ASAP.
Last week, the Federal Reserve System unveiled its latest interest rate hike. That move is likely to cost anyone who is carrying credit card debt.
CNBC reports that the latest increase in the Fed’s benchmark federal funds rate:
- Collectively will cost consumers roughly $1.6 billion in extra finance charges this year alone, according to data from WalletHub.
- Means you will pay an extra $2.50 a year for every $1,000 in debt, according to data from NerdWallet.
This news comes as Americans’ credit card debt just hit a 10-year high.
While the country’s central bank raised the federal funds rate by only 0.25 percent on March 15, the hike was the third in a span of 15 months. That’s bad news if you have credit card debt, because the effect of these hikes on such debt is cumulative.
As NerdWallet credit card expert Sean McQuay tells CNBC:
“These rates are expected to continue to rise, and each change adds up and increases your debt burden.”
There are two main ways to ease your debt burden when it comes to plastic, and ideally you’ll do both:
1. Get a lower interest rate
With a phone call or a little research, you can lower the interest rate you’re paying on credit card debt. That means the debt will cost you less in finance charges while you’re paying it off.
This can be done in three steps:
- Find out what rates your credit cards are charging you.
- Ask your current credit card companies for a lower rate. This is not guaranteed to work, but it takes only a few minutes, and the worst thing that can happen is to be turned down. However, if you have been with the same company for years, you might be pleasantly surprised. This has worked for me in the past.
- Look for a new credit card with a lower rate. You can compare credit cards based on their rates in the Money Talks News Solutions Center.
2. Pay off your debt faster
Paying down your credit card debt faster will also mean the debt will cost you less in finance charges in the long run.
There are many ways to do this, and you can read all about them here:
- “How to Pay Off $10,000 in Debt Without Breaking a Sweat“
- “8 Foolproof Steps to Get You Out of Debt Fast“
If you think you need professional help, the Solutions Center can point you in the right direction. Money Talks News has partnered with Debt.com to match you with reputable experts who can develop a customized plan to help you get out of debt.
What’s your best tip for tackling credit card debt? Share it below or on Facebook.