In September 2022, the Federal Reserve increased interest rates for the third time this year. The move was widely expected after vital economic data, including job growth and inflation.

The Fed’s increased interest rates hike will affect Americans in different ways. For some, it will mean higher credit card bills.

The Impact of Interest Rate Hike on Credit Card APRs

When the Fed raises interest rates, banks and other lenders often follow suit by increasing credit card annual percentage rates (APRs).

Generally, variable-rate credit card APRs are directly tied to the prime rate banks charge their best clients. The prime rate is directly based on the federal funds rate. Thus when the Fed raises rates, the prime rate usually goes up.

For instance, assume you have a credit card with an APR of 17.99%. If the Fed raises rates by one-quarter of a percentage point, as it did in September, your interest rate will increase to 18.24%.

How Can Credit Card Holders Handle the Hike?

When interest rates go up, so do your minimum payments. And with more of each payment going toward interest, it can be challenging to make any progress on reducing debt.

Fortunately, there are a few things credit card holders can do to ease the pain of higher interest rates.

Option 1: For many people, the best strategy is to pay down debt as quickly as possible. The balance transfer credit card offers a 0% APR introductory rate for a certain period.

The window allows you to pay down your debt without paying interest charges. Ensure you pay the entire balance before the intro period expires, or you will be stuck with a much higher APR.

Option 2: If you cannot pay off your debt in full before the intro period expires, the next step is finding a personal loan plan. Personal loans have lower interest rates than credit cards, and you will save on interest charges.

Option 3: Enroll in a hardship program offered by some lenders. These programs typically involve making reduced payments for a brief period, after which payments increase gradually.

Option 4: Take expert advice about credit card loan consolidation. Credit card debt consolidators can provide you with the latest information about the best ways to consolidate your debt. They can assist in finding the right balance transfer credit card or personal loan for your needs. In addition, credit card debt consolidators can negotiate with your creditors to get lower interest rates and monthly payments.

Talk to Debt Consolidation Experts at Reliant Management Solutions!

Does Fed’s Increased Interest Rates Affect Credit Card Holders? The decision of the Federal Reserve to hike interest rates can significantly impact credit card holders. However, we can help you with a custom debt payment plan, no matter how challenging your situation is.

Our credit consolidation experts team will work with you to create a debt payoff plan that fits your requirements and helps you get out of debt as quickly as possible. Call us today and schedule a free consultation to learn more.