Are you one of the millions of Americans affected by the recent Interest Rates hike? Check out this article for everything you need to know.wp_under_page_title - under_page_title -->
If you have a credit card, there’s a good chance you’ve been hit with a rate hike lately. In fact, the average interest rate on variable-rate credit cards has reached a quarter-century high of 18.03% this week, according to data from Bankrate.com. That’s an increase of 1.5 percentage points since June 25, and the highest rate that Bankrate has estimated since January 1996.
Why are rates rising? Lenders are responding to rate hikes by the Federal Reserve, which has raised its benchmark federal funds rate three times since December 2015. As the cost of borrowing goes up for banks, they typically pass those higher costs on to consumers in the form of higher rates on loans and credit cards.
The credit card industry has long been one of the banking industry’s most profitable niches, and higher rates mean even bigger profits. “Credit card issuers have been reporting blowout earnings,” says Ted Rossman, senior industry analyst at Bankrate. “Their margins are very good right now.”
What can you do about it?
Here are few things you can do if you’re facing higher interest rates on your credit card:
Option 1: Shop around for a new card
If your interest rate is higher than you’d like, it might be time to shop around for a new credit card. There are plenty of low-interest options out there, so you shouldn’t have trouble finding a card with a lower APR. Just make sure to do your research and compare offers before you apply, so you can be sure you’re getting the best deal possible.
Option 2: negotiate with your lender
If you’ve been a good customer and made all of your payments on time, you may be able to negotiate a lower interest rate with your lender. It never hurts to ask, and if your lender is unwilling to budge, you can always threaten to take your business elsewhere. Remember, the worst they can say is no!
Option 3: transfer your balance
If you have good credit, you may be able to transfer your balance to a new credit card with 0% APR for 12 to 18 months. This will give you some breathing room to pay down your debt without having to worry about accruing more interest. Just be sure to make your payments on time and in full, so you don’t end up paying more interest in the long run.
Read more: The best and longest balance transfer credit cards.
Rising interest rates are bad news if you carry a balance on your credit card – but there are still options available if you need help managing your debt. If you have good credit, you may be able to transfer your balance to a 0% APR credit card or take out a personal loan at a fixed interest rate.
Just be sure to compare offers carefully before agreeing to anything, so you can find the best solution for your financial needs.
Do you have any tips for dealing with rising interest rates? Share them in the comments below!