Rosalind Evans
The Federal Reserve’s decision to leave rates unchanged last week, with only one cut anticipated before year-end, means credit card users won’t see relief from high-interest charges anytime soon. As Matt Schulz, chief credit analyst at LendingTree, advises, “Consumers need to understand that the cavalry isn’t coming anytime soon, so the best thing you can do is take things into your own hands when it comes to lowering credit card interest rates.”
Understanding Current Interest Rates
With most credit cards linked to the Fed’s benchmark, the recent rate hike cycle has pushed average credit card rates from 16.34% in March 2022 to nearly 21% today, according to Bankrate. Michele Raneri, vice president of U.S. research and consulting at TransUnion, emphasized the importance of using credit wisely: “It’s best to only use these cards to the extent there is confidence they can be paid off relatively soon, as interest can pile on quickly, particularly at the higher rates of today.”
Proactive Steps to Lower Your APR
Waiting for a rate cut from the Fed might not be the best strategy. Schulz suggests several proactive measures: call your card issuer to negotiate a lower rate, switch to a zero-interest balance transfer credit card, or use a personal loan to consolidate and pay off high-interest debt. “Those anticipating a dip in new credit card APRs in the near future should probably adjust their expectations,” he said.
The Power of Balance Transfer Cards
Zero-percent balance transfer cards remain a viable option, even in today’s high-rate environment. Ted Rossman, senior industry analyst at Bankrate, finds this surprising: “The fact that zero-percent balance transfer cards remain widely available is, on its face, surprising,” especially given inflation and recent rate hikes. These cards can offer 15, 18, or even 21 months without interest on transferred balances.
Rising Credit Card Debt
Despite rising debt levels, credit card issuers continue to offer favorable terms on balance transfer cards. According to the Federal Reserve Bank of New York, total credit card balances have been above $1 trillion since August 2023, now hovering around $1.12 trillion. Rossman explains, “It’s actually a very profitable time for credit card issuers because rates are up and more people are carrying more debt for longer periods of time.”
Additional Alternatives for Debt Management
For those who can’t secure a zero-percent balance transfer card, personal loans offer a good alternative. Schulz notes, “If you don’t have enough credit to get a zero-percent balance transfer card, a personal loan can be a good alternative.” Currently, the average interest rate on a personal loan is just above 12%, according to Bankrate. TransUnion’s Raneri also recommends exploring lower-interest products to consolidate high-interest debt and reduce monthly payments.
In a high-interest environment, taking proactive steps to manage credit card debt is crucial. As Schulz puts it, “Balance transfer cards are still your best weapon in the battle against credit card debt.” Whether through balance transfers or personal loans, consumers have several strategies at their disposal to lower interest rates and simplify debt management.
