| A 'double whammy': Consumers are feeling the pain of rising interest rates and ballooning credit card debt, economist says | | |  | WED, JUL 20, 2022 | | | | Credit cards can be a great financial tool – unless, that is, you can't make the monthly payments. Then they can become your worst financial nightmare.
Sadly, more and more American consumers are putting a great deal more stuff on their credit cards. This is because they need to keep up with the rising costs of everyday goods and services.
Of course, carrying long-term credit card debt is generally a bad idea. It's always better to pay your credit card bill in full rather than carrying a balance.
After all, credit card debt is typically the most expensive debt you can take on. Interest rates on credit cards are typically well into the double-digits and often above 20% — even for people with good credit.
For many people, it's just not possible to make those monthly credit card payments. Consequently, they find themselves always behind and in debt.
Well, if you need an incentive to make a plan to pay down that debt, here goes: As the Federal Reserve continues to raise interest rates to fight inflation, carrying a credit card balance month after month costs more than it has in many years. Why? Because the interest rate will tick-up in concert with the Fed.
Interest rate hikes from the Fed will result in higher annual percentage rates and longer debt payoff periods for cardholders. For those dealing with higher credit card balances to start, the challenge to pay them off will only intensify.
Put simply: When the Fed raises interest rates, your credit card debt becomes even more expensive.
Finding ways to pay down credit card debt can be complicated. Successfully paying off your credit card debt requires a hands-on approach, from determining your best payment strategy to contacting creditors to negotiate rates.
It is, of course, in your best interest to take the necessary steps to pay down your credit card balance and save yourself some money. Now is a good time to get started.
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