Recently, the Federal Reserve hiked its benchmark rate by a quarter percentage point, as a result, you could see a rise of the interest rates on your credit cards by 0.25%. That was the first hike of the key rate in 2017 and the Fed expects to make two further rate rises this year.
This rise in rates is bad news for those with credit card debt. Here's why: the rise in the key rate means that the prime rate will also rise, and since most credit cards rates are variable and based on the prime rate, the credit card interest rates will go up as well. When the Fed raised the rate in March this year, it took about a month or two for the banks to change the variable APRs on their credit cards. You can expect the same quick reaction with the next rises. Note that banks have no obligation to let their consumers know the credit cards interest rates are changing when the Fed announces an interest rate increase. So, you should check on your own to find out if the interest rates on your credit cards are going to change.
What to expect if you have credit card debt?
Today most credit cards have variable interest rates which are calculated based on the prime rate. When the banks rise their prime rates, it impacts immediately the consumers' credit cards interest rates. Therefore, if you already have the credit card debt it will only get bigger much faster and it will be harder to pay it off. And since two more rises are going to happen, you should expect the trend of rising interest rates, and your debt along with them, to continue.
What can you do?
A wise decision would be to pay off your credit card debt and never carry a balance thereafter. You can consider trying to refinance or consolidate your debt. You can also find a low-interest rate credit card and transfer the existing card balances to it. There are a lot of credit card offers with 0% intro APR on balance transfers nowadays. The cards are typically offered to people with established credit, but consumers with average to good credit can also find a suitable balance transfer offer.
We picked four balance transfer credit card offers and outlined them below. You can choose one of these offers to consolidate your credit card debt, or you can go further and make your own comparison of the available balance transfer offers.
This balance transfer credit card is available to those with average to excellent credit. Plus, it comes with cash back rewards and no annual fee. So, if you are into earning cash back, you may like this offer. The 0% intro APR on balance transfer is not super long but still impressive. You'll start with 18 months of 0% intro APR on balance transfers (with a 3% balance transfer fee) and 6 months of 0% intro APR on purchases. Cash back rewards are 1% cash back on all purchases and 5% cash back in rotating categories (up to the quarterly maximum, then 1%). Rotating categories change each quarter and you should enroll each time the category changes to be able to earn 5% cash back.
This card will help you to stick to your goal of paying off the transferred balance. No rewards program will tempt you to use this card for purchases and therefore increase the card balance – there're no rewards offered. The card simply gives you 21 months of 0%* intro on purchases and balance transfers, which is almost two years of no interest. The balance transfer fee is 3% of the amount transferred but that is not much compared to the interest you would pay on your old card. There are no other fees: no annual fee, no penalty fee and no penalty rate. So, in case you are late with a payment, you won't lose your 0% intro APR and won't pay the penalty fee.
This is another card from Citi that offers a 21-month % intro APR on purchases and balance transfers. It may look similar to the Citi Simplicity card with its no annual fee, no rewards program and balance transfer fee of 3% of each balance transfer; $5 minimum, but there is one significant difference – it won't forgive you for being late with your monthly payments. This card requires all your responsibility, but to make it easier for you to be on time, you are allowed to choose your own payment due date.
Disclaimer: This editorial content is not provided or commissioned by the credit card issuer. Opinions expressed here are the author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. Reasonable efforts are made to present accurate info, however all info is presented without warranty. Consult a card's issuing bank for terms & conditions.