Fed rate hikes could drive up your credit card bill
A small interest rate increase could cost you hundreds of dollars
InvestigateTV - The average American has $5,000 in credit card debt according to TransUnion, and with rising interest rates that amount could grow.
In 2022, the Federal Reserve raised interest rates four times and with each increase, the variable rate on your credit card goes up within the next few months.
If you pay your credit card debt in full each month and avoid interest, you don’t have to worry about the increases. But for the millions of Americans who carry credit card debt, the new rate can lead to hundreds of dollars over the years.
Ted Rossman, a senior industry analyst with Bankrate, said the national average rate for credit cards before the rate hikes was 17.5%. .
“So if you were only making minimum payments towards $5,000 in debt at 17.5%, you would have been in debt for more than 15 years and spent about $6,000 in interest,” Rossman explained. He continued to say a .75% increase would add about $300 in interest to the original $5,000 debt.
Rossman urged consumers to pay down this debt as soon as possible and offered a few suggestions:
- Transfer balance to a 0% card
- Pick up a side job
- Sell items you no longer need
- Cut your regular expenses, especially monthly charges and fees
- Consider debt consolidation
In addition, Rossman suggested contacting a reputable nonprofit credit counselor like the National Foundation for Credit Counseling for advice on how to handle your debt.
The Federal Trade Commission offers free advice on how to choose a credit counselor.
Copyright 2022 Gray Media Group, Inc. All rights reserved.