There sure is a lot of interest in interest rates these
As the Covid-19 pandemic spread throughout the world and
economic activity grounded to a halt, many Central Banks slashed interest rates
and governments began to issue trillions of dollars in stimulus to ward off
recession and economic pain. In the United States, the Federal Funds rate was
cut to 0% and roughly $5 trillion in stimulus payments were issued. Now that
the worst of the pandemic is behind us, we are facing another threat: Inflation
at a 40-year high.
In an effort to bring down inflation, the Federal Reserve
began to raise rates in March of 2022. First, a .25% increase, followed by a
half point in May and two increases of .75% in June and July. As inflation
remains stubbornly high and rates continue to rise, many Americans are
beginning to feel the impact on their credit card bills. According to a recent
survey by Bankrate.com, the average credit card interest rate hit 18% in early
September 2022, the highest rate seen in 26 years. With rates expected to
continue rising over the next year, is now the time to ditch your old credit
If you tend to carry a balance each month, you might
consider moving to a balance transfer card at 0%. Many credit card companies
are still offering balance transfers at 0% interest for 18 months for new
customers, possibly saving you thousands of dollars each year while you work on
paying down the balance.
Another move to consider might seem counterintuitive, but it
could make sense to use your credit card for purchases each month if you have a
cash back card. Moving purchases from your debit card to a credit card offering
2-3% cash back could help to reduce the extra costs imposed by inflation. For
example, with inflation current at 8%, a card offering 3% cash back could help
to reduce the cost of inflation by more than a third. However, it is extremely
important that you don't squander your potential savings by carrying a balance
If you do not have a cash back credit card and don't want to
open another account, you could always call your credit card company and ask
for a rate reduction. It's important to be prepared with information such as
your APR, current balance, and statement due date, as well as competitors'
information and offers. If you have kept up with payments and have a long
history with your credit card issuer, they might lower your rate just to retain
the business. In the end, the worst they can say is "no" and it doesn't cost
you anything to ask.
With rates expected to continue increasing at a historic
pace, NOW is the time to act and reduce your monthly credit card payments. If
you are feeling the impact of inflation and carrying a credit card balance each
month then there really is no time to waste.