Raleigh, North Carolina – The Federal Reserve on Wednesday raised interest rates by three-quarters of a percent. While the move is intended to slow inflation by reducing consumer spending and borrowing, the rate hike will force anyone who borrows variable-rate money to pay more interest.
This is the fourth rate hike this year, so you may have already noticed a higher interest rate on your credit card.
“The rates you pay on your balances have skyrocketed, almost 20% for many people. That’s a big jump from last year when it was down to 14-15%,” Penny said. Wang, associate editor of Consumer Reports.
5 On Your Side Calculated The Numbers
The average credit card balance for a person in North Carolina is $5,121, according to Experian analysis.
If someone paid this at a rate of $200 per month at a 14% interest rate, it would take them 29 months and cost them $951 in interest at the current rate.
However, with a rate of 20%, it would take someone two more months and they would end up paying over $1,464 in interest.
What steps can you take to save money if you have credit card debt
With the new rate hike announced, your interest rates will likely rise again, so it’s important to pay them off as much as possible.
If you don’t have enough money to pay off your balance, consider a balance transfer to a credit card with a promotional period of 0% APR. The 0% promotional interest rate is an introductory rate offered on a new credit card. It can last from 6 months to a year.
Once you’ve transferred your credit to this card, if you pay off your credit card quickly, you can avoid paying high interest rates.
However, keep in mind that most balance transfer credit cards carry a one-time fee of 3%. The fee is a percentage of the total amount of credit you have on your credit card and is always less than the amount you would pay in interest.
But Wang has a warning for those who decide to take this route. This 0% APR does not last forever.
“Make sure you can pay it back within the transfer window or you’ll fall victim to those higher rates again,” Wang said.
If your credit card has a variable rate, you can find your current rate by checking your monthly statement or you can call customer service and ask.
Paying your bill on time and having a good credit rating will help keep your variable rate low.