How to Prepare for the Rising Cost of Credit Card Debt

May 5, 2022 | Modified: November 10, 2022

As consumers are struggling to make ends meet, they are turning to credit cards to pay for everyday expenses. They may not realize the cost of credit card debt is on the rise. In March, CNBC reported that U.S. credit card debt hit a record $930 billion. Recently, the Federal Reserve ordered the largest rate hike in more than two decades in an attempt to tame inflation. What does this mean for credit card holders? It means you very are likely to see a hike in your variable credit card rates.

Since most variable credit card rates are tied to the prime rate, which is based on the federal funds rate, most credit cards will likely have an increase in interest rate. The size of that increase not only depends on Fed rate increases but also on your credit score and other variables. Credit cardholders will probably begin to see the impact of Fed rate hikes within a couple of billing cycles.

Financial tools to deal with the rising cost of credit card debt  

With more Fed rate hikes on the horizon, credit card rates may continue to increase, costing consumers significantly more in interest over the time it takes to pay off a balance. Focusing on lowering your credit card balances is one of the best ways to prepare to deal with the rising cost of credit card debt. If paying off your credit card debt isn’t in the cards financially for you and your family, you may want to consider a debt consolidation loan or a Benchmark FCU 0% APR* balance transfer credit card.

0% APR* balance transfer credit card 

Yes, you read that right. Benchmark FCU is offering a 0% APR* balance transfer VISA credit card* for purchases and balance transfers for up to 12 months.* If eligible, that would give borrowers a full year to pay down credit card debt while not adding to the interest. Zero-percent balance transfer offers are considered by many to be one the best tools for paying down debt and saving hundreds or even thousands of dollars in interest. CNBC reported the average credit card balance in Pennsylvania is $5,840. In some states, such as New Jersey, it’s over $7,000. A balance transfer credit card may help you ease the burden of credit card debt if you stay focused and pay off your debt in a timely manner.

Pay your balance in full each month

Pay off your credit card balance in full each month to avoid paying interest. If you do that, the increasing rate may not affect you as much. On the other hand, if you carry credit card balances over from month to month, and have high balances, it may be time to consider paying down the balances. It’s important to remember that this rate increase by the Federal Reserve won’t be the last. There are more rate increases expected this year. Waiting to pay down debt could prove costly.

Credit card debt consolidation with home equity

Consolidating high-interest credit card debt with a low-rate home equity loan may be another option for fighting rising interest rates. A home equity loan enables you to borrow against the equity in your home to access funds at a lower interest rate for many needs, such as credit card debt consolidation. It’s another effective way to battle the rising cost of credit card debt

Prepare to battle the rising cost of credit card debt 

In conclusion, when the Fed raises interest rates, they make borrowing a little more expensive for all of us. As rates rise, you should expect to see an increase in your credit card rates. The time to pay down your credit card balances is now before interest rates rise again. If you’re only making the minimum payments on your cards, it may take you many years to pay them off. Add any extra income you have to your credit card payments to help pay down debt. If you need more help, consider a Benchmark FCU 0% APR* balance transfer VISA credit card.

For more tips, read our blog “3 Reasons to Access Your Home Equity Before Rates Increase.” 

Disclaimers

***LTV = Loan to Value