In 2017 alone, the Federal Reserve increased the interest rate not once, twice, but a total of three times. As a result of this fact, the interest rates associated with credit cards is expected to increase.

“Credit is a system whereby a person who can’t pay, gets another person who can’t pay, to guarantee that he can pay….†– Charles Dickens

An appropriate response to increasing credit card rates is to obtain as much knowledge as possible on the situation, develop an understanding of the issue, and to take the necessary actions to minimize the costs. Since December of 2015, the Federal Reserve has raised its rate a total of five different times in increments of 0.25%. The most recent occurred in December of 2017. This means that credit card holders will be required to pay higher minimums each month and will see new interest charges on their accounts.

Variable Rates and The Impact on Consumers

According to research, nearly all of the standard credit cards utilized for general purposes within the United States have variable interest rates that are directly tied into the index of prime rates. The index of prime rates is directly tied into changes that occur within the Federal Reserve. You should review your credit card agreement to determine if you have a variable rate. The agreement will also inform you of which index the card is directly tired into. If you have a fixed rate credit card or if you are already paying the highest level of interest on your card, you will not have to concern yourself with changing interest rates.

Affected Interest Rates

When a change occurs within the Federal Reserve, banks must adjust the rate associated with their prime lending. APRs that are on a variable rate credit card will be directly related to the index of prime rates. You may, typically, discover this rate online or in The Wall Street Journal publication. When the Federal Reserve increases the interest rate for 0.25%, you will be charged an additional $2.50 each year on every $1,000 that you carry in balances on the corresponding credit card. The interest rate increase will commonly be placed on the bill of the following cycle from when the rate was put into place.

Tips to Offset Increasing Interest Rates

Let’s face it; no one wants to owe. No one wants to carry high interest rates on their credit cards, either. In order to effectively offset increasing interest rates, you may follow the tips outlined below:

  1. Make every attempt to pay down or pay off your balances on all of your variable rate credit cards.
  2. Lower the interest rate of each of your cards. Typically, this takes one phone call and only a bit of negotiating.
  3. Transfer balances from a high interest rate card or cards to a low interest rate card.
  4. Seek assistance for debt management to eliminate your high interest rate balances.
  5. Obtain a bank loan to pay off credit card debt.

For more information on obtaining a loan to cover your high rate interest balances on your variable credit cards, contact us today at one of our locations: