"If you are getting a 1-2% reward, that’s completely offset by cost of carrying a balance at an interest rate like 15-25% or even higher," says Mierzwinski. USE REWARDS CAREFULLYĬash back, points and other programs only make sense if you are paying off the card in full every month. Or nonprofit credit counseling firms like Money Management International can also help place you into a single loan at a lower rate. For someone with good credit, rates can be more like 6%. A personal loan from your bank is one solution – those currently average around 10%, says Rossman. ![]() There are other loan options that can be preferable to getting soaked to the tune of 20-25%. So go as far above the minimum as you can, and ideally do not carry a month-to-month balance at all. But you are playing right into lenders’ hands – leading to interest income that makes the banks about $100 billion a year, according to the Consumer Financial Protection Bureau.Īs an example, a $10,000 debt on a card with a 20% rate, making a small monthly payment of $200, will cost you an additional $11,000 in interest alone over time (and take 106 months to pay off). When getting a monthly statement, many cardholders simply send back the minimum amount due. Just try to be prudent with balance transfers, says Mierzwinski, since frequently closing old accounts and opening new ones is not ideal for your credit score. Prominent offers right now include Wells Fargo Reflect, Citi Simplicity, and Citi Diamond Preferred. Obviously you still have to pay the sum back, but at least you can enjoy an extended introductory period of 0% interest. There is one elegant way to slash those double-digit interest rates right away: Arrange a balance transfer onto a new card. PIRG once tried this out with a sample group of consumers, 56% got a reduction – with successful candidates getting rates cut, on average, by more than a third. ASK FOR RATE REDUCTIONĬall up your lender, and see if they are amenable to a lower rate – something they are more likely to do if you are a longtime cardholder in good standing, and not someone who makes late payments or is bumping against credit limits. This rising tide of credit card interest rates may be difficult to push back, but you are not powerless. Other times a rate boost might be because of a late or missed payment, which violates the original contract and allows lenders to reset at a higher percentage. Often a hike is because of variable-rate cards that are tied to the prime rate, so when that rate goes up (currently 5.5%), it is passed through to borrowers. They raise rates whenever they have an opportunity." ![]() "The banks are getting away with it, and have been for a long time. "Credit-card interest rates seem to always go up and never go down," says Ed Mierzwinski, senior director of the federal consumer program for advocacy organization U.S. That 13% year-over-year increase is the largest jump in over 20 years.īigger debts, paired with bigger interest rates, are putting some household balance sheets in the danger zone. National credit card debt rose $46 billion for the quarter, and $100 billion compared to the same time last year, according to the new Household Debt and Credit Report from the New York Fed. This is obviously bad news for consumers, who were busily stacking up debt in the year’s second quarter. "Credit cards were expensive before, they are more expensive now, and they will be even more expensive by the end of the year," says Ted Rossman, senior industry analyst for.
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