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Rising interest rates mean it’s time to knock out your credit card debt – Portland, Oregon

Portland, Oregon 2022-06-25 10:02:02 –

((((NerdWallet) – Credit card debt can be difficult to manage even at its peak, but increasingly higher interest rates are being added to the challenge.

The Federal Reserve Board has announced a 0.75% increase in the federal funds rate. This is the biggest increase in almost 30 years. Increasing this rate tends to make borrowing more expensive. In other words, it can be more expensive to carry your credit card balance.

However, you can save interest by planning to repay your credit card within the next few months. Whether you’re working on debt one at a time or integrating it into a fixed-rate product like a personal loan, there are strategies to help.

Why Credit Card Debt Should Be Prioritized

Most credit card interest rates are floating rates. In other words, interest rates can fluctuate based on several factors such as market conditions.On the other hand, fixed interest rate products such as personal loans Interest rate changes may not be seen much As the federal funds rate rises, floating rate products such as credit cards may rise.

Jeff Arevalo, a financial wellness expert at the non-profit credit counseling agency GreenPath, said that high credit card rates mean people carry balances when households are already tight due to rising consumer costs. It means paying more for.

It can also mean that as more people focus on achieving their goals, the development of other important goals, such as saving for the home, is postponed. But Alevaro says there is still plenty of time to stay ahead of the rising interest rate environment.

“when [the Federal Reserve increases] With regard to interest rates, it can take a month or two to fully affect a credit card, so ideally consumers can be proactive, “he says. “If you know these changes will be made and have these higher credit card balances, the key is not paralyzed by fear.”

Credit Card Debt Initiatives: First Steps

Brittany Davis, a certified financial counselor working with people suffering from credit card debt, says the first steps to getting out of debt can be the most difficult for clients.

First, you need to confront the extent of your debt. Davis recommends writing down each credit card balance, minimum monthly payment, and interest rate to get a complete picture of what you are borrowing.

Then she says, you can use online tools like Debt repayment calculator, Insert numbers and compare different strategies. Two common payoff strategies are avalanche and snowball methods. The avalanche method starts with the highest interest rate debt and gradually declines. This usually saves interest time and money. The snowball method starts with the least debt and moves up to increase motivation.

Another tip from Davis: Stop using your credit card for the time being. This includes checking the sites and apps that are already linked. You may remember not reaching for your credit card when making big purchases, but it’s a smaller, recurring cost like a monthly subscription that creeps up on you.

“Money moves fast now,” says Davis. “It’s easy to forget where our cards are linked. If you’re serious about not using your credit card during payments, be sure to switch those accounts to debit cards.”

Other Strategies for Addressing Credit Card Debt

If you feel your debt is too overwhelming to tackle with an avalanche or avalanche method, there are other strategies that can help lighten the load.

Negotiate with the creditor. Calling creditors and asking what they can do for you is never a pain, especially if you already have a relationship with them, Davis says. Banks or credit unions may extend lower rates, waive fees, or impose higher credit limits. This will reduce credit usage and give you access to low interest rate loans in the future.

Be aware of the impact of what you are looking for. For example, you may need a hard credit pull to extend a higher credit limit. This can temporarily reduce your credit score by a few points.

Consolidate your debt. If you have high interest rate debt on multiple credit cards, especially if you are eligible for a lower interest rate than your current debt, integration is a wise move.

0% Balance transfer card If you have good or good credit (FICO score above 690), it is one of the best ways to consolidate your debt. These cards charge 0% interest during the promotion period (possibly 21 months), so if you transfer your debt to the card and repay it within this period, your interest will be zero. Some cards typically charge a balance transfer fee of 3% to 5% of the total transfer fee.

If you do not qualify for a balance transfer card, Loans for debt consolidation Another good option. These loans are available to borrowers throughout the credit spectrum, but they charge the same monthly interest to charge fixed interest over the entire term of the loan.

Please contact your credit counseling agency. Finally, you don’t have to go it alone. Alevaro recommends finding a reputable, non-profit credit counseling agency that can assist you in budgeting, negotiating with creditors, or entering debt management plans.

Debt management plans typically consolidate credit card debt at low interest rates and provide a three to five year repayment plan. You may be charged a startup fee and a monthly fee when using this service.

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