The Federal Reserve’s decision to maintain interest rates has left many consumers carrying credit card debt facing the prospect of persistent high interest charges. According to Matt Schulz, chief credit analyst at LendingTree, the Fed’s stance suggests that lower interest rates are unlikely in the near future, leaving it up to consumers to find solutions to reduce their interest expenses.
Fortunately, options are available, particularly for those with solid credit. The average credit card rate has risen to almost 21%, near an all-time high, in the wake of the recent rate hike cycle. Michele Raneri, vice president of U.S. research and consulting at TransUnion, advises consumers to use credit cards judiciously, paying them off as soon as possible to avoid accumulating excessive interest charges.
While annual percentage rates (APRs) will eventually decline when the Fed cuts rates, Schulz anticipates only a modest adjustment. He recommends proactive measures such as contacting card issuers to request lower rates, switching to zero-interest balance transfer cards, or consolidating high-interest credit card debt with personal loans.
Ted Rossman, senior industry analyst at Bankrate, notes that cards offering 15 to 21 months with no interest on transferred balances remain widely available. Despite inflation and interest rate hikes, credit card issuers continue to offer generous terms on balance transfer cards.
Rossman attributes this to the profitability of high interest rates and extended debt repayment periods for issuers. However, he cautions that a worsening job market or increased delinquencies could make issuers more cautious in the future.
Schulz emphasizes the effectiveness of balance transfer cards in combating credit card debt, as they allow consumers to consolidate their outstanding balances onto a new card with a lower interest rate. Raneri suggests exploring lower interest products such as personal loans to reduce monthly payments.
Consolidating debt through a personal loan offers the additional benefit of simplifying outstanding balances while lowering monthly payments. Currently, the interest rate on a personal loan is closer to 12%, providing a viable alternative for those unable to qualify for zero-percent balance transfer cards.
