A few days ago, the Federal Reserve raised the key interest rate for the ninth time since last March. And every time the Federal Reserve raises interest rates, the lending rates that banks charge their customers rise. This means that consumer debt, particularly variable rate credit card debt, will become more expensive.
In a recent research note, Bank REIT’s chief financial analyst, Greg McBride, said: “The average credit card rate is now at a record high above 20%. This is well above the average of 16.3% at the start of 2022.”
He added, “If you pay your bill in full every month, it doesn’t concern you.. But if you have a balance, especially if you only pay the minimum amount due, you will pay more dollars every month to get interest only and it will take longer to pay off what you owe.” You owe it.” “I would expect you to see your interest rate go up in a few releases,” he continued.
But your best bet is to try and find a good balance transfer card with an initial 0% rate and make a plan to pay off what you owe in the coming months before the high rate kicks in.
“Supercharge your debt repayment efforts with 0% balance transfer offers, some of which last up to 21 months,” McBride added. “This insulates you from rising prices again and gives you a runway to pay off the debt once and for all.”
But first find out what fees, if any, you’ll have to pay (such as balance transfer fees or annual fees), and what penalties will be imposed for late or missed payments during the zero-rate period. The best strategy is always to pay off as much of your existing balance as possible — on time each month — before the zero rate period expires. Otherwise, any remaining balance will be subject to a new interest rate that may be higher than it was before, if rates continue to rise.
If you haven’t switched to a zero balance card, another option may be to take out a personal loan with a relatively low fixed interest rate.
According to CNN, the average personal loan rate was 10.82% as of March 22. But the best rate you can get depends on your income, credit score, and debt-to-income ratio.
Bank REIT advises that to get the best deal, ask some lenders for quotes before filling out the loan application.