Rising interest rates to battle inflation affect credit card debt.
HOUSTON — Why could your credit card bill soon get a lot bigger?
The fed is raising rates in an attempt to slow down inflation, which is the worst it’s been in 40 years. The process has the boring name of “quantitative tightening.” The goal is to slow consumer demand and one of the tools to do that is raising interest rates.
So what does this mean for your credit cards?
The variable card rates are tied to something called the prime rate. That prime rate is based on the fed’s target interest rate. So when the fed’s starts raising its target interest rate your credit card bill goes up.
This comes as credit card debt approaches near record highs as Americans struggle to keep up with inflation by charging more.
Experts recommend managing your credit card debt more strategically. According to Bankrate, that means making a plan to pay off your cards with the highest interest rates first. You will need to do the math but it is possible to get a better deal by taking out a personal loan to pay off high balance credit cards.
It all depends on those pesky interest rates.