Are you tired of high interest rates on your credit card? You might get some relief soon! The big bank group that decides interest rates, known as the Federal Reserve, is thinking about making rates lower in September.
Right now, the rate is between 5.25% and 5.50%, which is the highest we've seen in more than 20 years. This has caused credit card rates to go up a lot, from about 16% last year to over 21.5% now.
Also, people are owing more on their cards than ever before, over $1 trillion. Plus, about 9 out of 100 people are taking longer to pay their bills.
But don't get too excited yet. Even if the Fed lowers the rate, it might not make a big difference on your credit card. The Fed might only reduce rates a little, like by 0.25% or maybe 0.50%.
So, your credit card's annual interest rate might not drop much because it's already pretty high, around 25% to 30%.
Think back to February 2020, when the Fed lowered rates last time. Credit card rates didn't change much. This means that when rates do drop, your credit card interest might not go down by a lot.
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What You Can Do if Rates Go Down
Want to save some money on your card? Here's what you can do:
- Check your card's interest rate. If it doesn't go down when the Fed lowers rates, ask your card company for a lower rate. You might get one, especially if your credit score got better or you're making more money.
- Pay more than the minimum due each month. This will help you get out of debt faster.
- Try not to spend more on your card. If it's hard, use cash or a debit card instead.
- If you have a good credit score, move your balance to a new card that has 0% interest for a while.
- If you're really struggling to pay off your card, look for a credit counseling service. They can give you advice and help you get your debt under control.
The Bottom Line
A lower rate from the Fed could help a bit, but it won't solve every problem with your credit card debt. It's still up to you to find ways to pay off what you owe. Use this chance to make a plan and work toward not having debt anymore.
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