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%. This 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 that credit card interest rates are changing when the Fed announces an interest rate increase. So, you should check to find out if the interest rates on your credit cards are going to change.
What to expect if you have credit card debt?
Most credit cards have variable interest rates which are calculated based on the prime rate. When the banks raise 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 raises are coming as well, 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. 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 some balance transfer credit card offers and outlined them below. You can choose one of these offers to consolidate your credit card debt, or make your own comparison of the available balance transfer offers to pick the best fit.
Citi, a Credit-Land.com advertising partner, offers the Citi Simplicity® Card - No Late Fees Ever that 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 on balance transfers, which is almost two years of no interest. The ongoing APR is 14.74% - 24.74% (Variable). The balance transfer fee is 5% of each balance transfer; $5 minimum. That is not much compared to the interest you would pay on your current 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.