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Your Credit Card Debt Is About To Get More Expensive — Here’s How To Protect It From Fed Hikes


Spenders beware: It’s about to get more expensive to use your credit card.

The Federal Reserve has raised interest rates twice this year. Two more hikes are expected by the end of the year, including one at the Fed’s Sept. 25-26 meeting.

One of the first things impacted by a rate hike will be your credit cards. You could see an increase in your interest rate as soon as your next statement.

If you’re carrying credit card balances, the rate increase can cost you hundreds of dollars in interest charges each month. While paying down these balances as soon as possible is advisable, it isn’t possible for everyone.

For those who can’t wipe out their balances before the interest rate increase comes, a balance transfer could be a smart strategy to save big.

How a balance transfer can save you money

The average interest rate on variable-rate credit cards is more than 17.3 percent, according to Bankrate data. A rate increase of half a percent could add even more to your monthly interest charges.

Most balance transfer cards have an introductory interest rate, which is usually low (between 0 and 5 percent, depending on your creditworthiness).

Chad Rixse, co-founder of Millennial Wealth in Seattle, says these introductory periods can be as long as 12 to 18 months.

“(A long introductory period) gives you extra time to get the balance paid off without interest accruing on it — it means you can do more with less and in a shorter amount of time,” Rixse says.

He recommends finding a card with the longest introductory period as possible — but be sure to have the cashflow on hand.

Once the introductory period is over, the card will have a higher annual percentage rate (APR). A common misconception about the introductory period ending is that interest will be backdated to the original balance, but Rixse says that’s not the case.

BankRate, excerpt posted on SouthFloridaReporter.com, Sept. 18, 2018

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