Excessive credit card debt is tough to deal with in normal economic times. These days, it might be harder than ever to pay down your balance.
As you know, the Federal Reserve has raised the prime interest rate several times in 2022 and ’23 to try to tackle inflation. The rising prime rate has affected things like mortgage rates and how much interest you can earn on a savings account, both of which have gone up a lot this year. What you might not realize is the prime rate could be affecting the interest rate on your credit cards, too.
Why is my monthly bill rising?
Unlike an auto loan or (most) mortgages, the interest rate on a credit card balance is not locked in at a certain percentage. Such interest rates generally are high to begin with, even if you started out with a relatively low introductory rate. Now, the high prime rate has hiked the average interest rate on credit cards to 22 percent, up from 16 percent in February 2022.
Therefore, if your balance is high enough, you could be facing hundreds or thousands of dollars more per month just in interest payments. Your plans to pay off your credit cards within the next few years could be hitting a major speed bump.
Find out how to get out of the credit card debt cycle
Fortunately, if your credit card debts have become overwhelming, you don’t have to figure out a solution by yourself. You could have several options for reducing or eliminating your debt and restoring yourself to financial stability. A conversation with a bankruptcy attorney can lay out your options.