Credit Card Rates Expected to Rise Greatly – Here Are 6 Steps to Get Out of Credit Debt ASAP

By Suze Orman | suzeorman.com

If you have unpaid credit card balances, your situation could soon progress from very expensive to ridiculously expensive.

The majority of credit cards charge interest rates that move up and down based on the level of benchmark indexes, and those benchmarks tend to move in lockstep with what happens to the Federal Funds rate controlled by the Federal Reserve. When the Fed raises its interest rate that means that credit card interest rates are headed higher. And in December the Fed raised its interest rate for the first time since 2006.

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In a recent report, the Consumer Financial Protection Bureau noted that if the Fed’s projections for its target interest rate play out, the rise in interest costs for consumers who have credit card debt could be $30 billion over three years.

The bottom line: Paying high rates on credit card debt has always been a bad deal. But it’s likely to become even more costly as interest rates begin to rise. I hope that’s some extra motivation to get your credit card balances paid off.

And right now it’s an especially smart investment. Paying off the balance on a credit card that charges you 12% interest is the same as earning 12% on an investment. If you’ve been paying attention to how choppy the stock market has been lately, earning 12% is not likely.

Some tips for getting out of credit card debt:

1) No shame, no blame. I want you to have a positive frame of mind about your goal to pay off your debt. Beating yourself up just depresses you. I want you to be full of optimism and determination. You can do this.

2) Consider a balance transfer. If you have a strong FICO credit score of at least 740 or so you may be able to snag a balance transfer to a card that doesn’t charge any interest for a year to 18 months, and also doesn’t charge a fee for the transfer. Search online for “no fee balance transfers.”

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3) Ask for a lower rate. If a no-fee transfer doesn’t work for you, but you have a high FICO score, call up the credit card issuer and ask for your rate to be lowered. You might mention that you have other cards with better terms, so if this rate can’t be lowered you will shift all new purchases elsewhere.

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