Your credit card debt is about to cost more. Here’s what to do now.
SAN ANTONIO – Just as people are turning more to credit cards to cover higher costs for gas, groceries and more, they are about to be hit with a double whammy as the rate of Interest on this card is about to climb.
Elsa Robles usually has no balance on her credit cards. She does now.
“Lately, I know we’ve been relying on them, unfortunately,” she said. “Prices are up on everything.”
Now that the Federal Reserve has raised borrowing rates, the APR on credit cards will soon follow. Cardholders may see the higher rate on their next statement.
If you pay off your credit cards every month, a higher rate may not make a difference. But, for people who have a balance, it will cost more each time they swipe.
Financial advisors say now is the time to pay off that credit card debt.
“A lot of people don’t realize it’s new and existing balances affected by these rate hikes,” said Ted Rossman, principal analyst for Bankrate’s. CreditCards.com.
If you can’t pay your card total each month, Rossman suggests other strategies.
“Get a zero percent balance transfer card. That’s my best advice if you’re struggling with credit card debt,” he said. “These allow you to avoid interest for up to 21 months. It’s a huge advantage.
There are caveats. You need good credit to get one, there are usually 3%-5% transfer fees and you have to pay off the card on time or get huge interest.
Another option he suggests is getting a low-rate personal loan to pay off the cards. Or, if your credit isn’t great, consider a nonprofit credit counseling agency to help.
You can always try calling your credit card company and asking them for a lower rate. This often works, but it won’t be a big discount.
More rate hikes are expected this fall, making credit cards more expensive than ever. Rossman expects the average credit card interest rate to reach 19% by the end of the year.
“Credit cards – those rates are so high. It’s really hard to build wealth when you’re paying the credit card company 15-20% every month,” he said.
Ultimately, it’s best to plan now to avoid going into debt later.
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