International conflicts and a global pandemic have contributed to the soaring inflation that’s reportedly higher than we’ve seen since the early 1980s. Anyone who has shopped for groceries or watched the numbers rack up while pumping gas has felt the impact. To combat this, the Federal Reserve has hiked interest rates four times in the past year—the last of which was an uptick of 0.75 points in late July.
While it’s a necessary step to help bring down inflation, you might be wondering how these hikes will affect you. For starters, when the Fed hikes rates, it has a direct impact on your credit card interest rates—meaning they’re going to go up, too. And this won’t be the last hike.
According to experts, while average interest rates currently hover just under 17%, they’re expecting them to go up to 18%–19% by the end of the year. According to Bankrate.com, the record high for credit card interest rates was in 2019 when they hit 17.87%.
What this all means for you is this: It would be wise to stop using your credit cards, otherwise, you’re going to pay more in the long run. By curbing spending habits now, you can protect yourself from going even deeper in debt.
No one wants to pay more back to lenders than originally planned. But for anyone on the cusp of not being able to make payments, or if you’re only able to pay the minimum, acting now can help you make it through a time of financial uncertainty.
Here’s four actions you can take:
- Make a budget: This includes cutting costs where you can, whether it’s eating out or cutting a service, and coming up with a plan for repayment.
- Ask your lender for help: You have nothing to lose by talking to your credit card lender and asking if they will bring down your interest rate. Often, they’ll work with you so it's easier to manage your repayment.
- Transfer your balance: Don’t overlook the opportunity to transfer your balance to a card offering 0% interest rates. You’ll avoid the current hikes and save a lot of money in the long run.
- Call a credit counselor: For some, this may be the best option. When you talk to a counselor, not only can they help you create a budget, but they can help enroll you in a debt management program. Especially right now, with the prospect of repayment soaring higher, this is a good option to keep in mind. The counselor will work with your lenders to bring down your interest rates and consolidate your loans into one affordable monthly payment—helping you to pay your loans back efficiently without going deeper into debt.
Looking for help with your credit debt? CCCS of Chattanooga offers credit counseling and debt management services - contact us today!