roughly a decade, millions of consumers could afford to
focus on the rewards and ignore the rates on their
haven’t really had to think too much about interest
rates because they didn’t change that much," said
Robert A. Dye, chief economist at Comerica Bank.
over. Get ready for higher rates on your credit cards
after more rounds of Fed rate hikes this year and next.
Many consumers may not realize it but the interest rates
on credit cards aren’t fixed. Most credit cards have
what are called "variable rates."
a result, the interest rate consumers pay on credit card
debt typically ticks up each time the Federal Reserve
week, the Fed raised rates by a quarter-point once
again. The target range for the federal funds rate will
be 1.75 percent to 2 percent. A rate hike by the Fed
translates into a higher prime rate.
Fed said economic activity has been "rising at a
data suggest that growth of household spending has
picked up, while business fixed investment has continued
to grow strongly," the Fed said in a statement
a result, consumers can expect higher rates on credit
cards, home equity lines of credit and other
will need to be more savvy about their spending and how
they finance it as a result of rising interest
rates," Dye said.
you don’t pay off your credit card every month, you’re
looking at slightly higher monthly minimums and higher
annual percentage rate on the credit card balance.
many cases, higher interest rates can hit in the first
billing period after a change in the prime rate. Bank
policies vary; some can change quarterly.
the Fed raises rates, the APR on your credit card is
going to rise pretty quickly," said Matt Schulz,
senior industry analyst for CreditCards.com.
price tag for the latest Fed rate hike will be an extra
$1.6 billion this year alone for consumers who are
carrying debt on their credit cards, according to an
analysis by WalletHub.
that’s the added cost of just one rate hike. Many
economists expect two more rate hikes in 2018. And many
are forecasting another three rate hikes in 2019.
began the year with more than $1 trillion charged on
their credit cards for the first time ever. But
consumers did repay $40.3 billion in credit card debt
during the first quarter — the second biggest
quarterly payout ever, according to Jill Gonzalez,
analyst for WalletHub.com.
times, consumers use their tax refund cash or a year-end
bonus to pay down debt in the beginning of the year, she
said. But this year, consumers appeared to act more
aggressively to tackle their debt.
are realizing they’re not keeping up with their bills.
They’re falling behind," Gonzalez said.
41.2 percent of all households carry some credit card
debt, according to a recent study by ValuePenguin, a
consumer data website. Researchers found the median debt
per American household to be $2,300, while the average
debt stands at $5,700 based on the most recent data from
the Survey of Consumer Finances by the U.S. Federal
Reserve. This information comes from data collected up
through to the year 2013.
average credit card debt for those younger than 35 was
$5,808 but credit card debt goes up significantly for
other age groups, according to the study.
age 35 to 44 had an average credit card debt of $8,235.
Consumers age 45 to 54 had an average credit card debt
metro Detroit, the average credit card debt was $5,367
in 2018 — up from $4,942 five years ago. That’s an
8.5 percent increase in the past five years and a 4
percent jump since 2016, according to ValuePenguin.
Rankin, economist for the PNC Financial Services Group,
said consumers overall are confident in their job
prospects and the potential for higher wages, given the
low unemployment rate.
a result, they’ve been comfortable taking on more
credit card debt in recent years. In general, consumers
shouldn’t be feeling overburdened by the level of
credit card debt they’re carrying, he said.
so, some are concerned that balances could become more
difficult to manage for some consumers as rates increase
in the next year or so.
consumers will pay their debt more quickly," Dye
said. "Others will start to feel more stress as
their debt balances become more difficult to
I am concerned about is how consumers will handle the
added financial stress when job growth cools," Dye
a look at useful strategies to deal with the higher cost
of credit card debt:
to a lower rate card remains an option
average rate on credit cards is 16.75 percent but the
average could go up to 17.5 percent in the next year,
according to CreditCards.com.
rates on variable rate credit cards have gone up, credit
card issuers are still offering 0 percent rates for a
limited time, such as a 18 months or 21 months, that can
allow a consumer to pay off their debt more quickly.
balance transfer card, if used wisely, can save you an
awful lot of money," said Schulz, of
of course, would mean using that zero percent window to
pay down the debt you already built up — and not take
on more debt.
you’d be able to pay off that entire balance within
that introductory period. But that’s not reality for a
lot of folks," Schulz said.
for a card with a low balance transfer fee. Some credit
cards are pushing those fees to 5 percent — which
means you’d pay $500 on a $10,000 balance transfer.
attention to the length of the zero percent introductory
offer — and get a clear idea of what rate you’d pay
afterwards. Typically, you’d not be able to transfer a
balance from one card to another card being offered at
the same bank.
around for a better rate is essential
credit card issuers appear to be less likely to target a
mass audience by offering rewards to anyone who comes
along. They don’t want to just sign up credit card
rewards gamers or consumers who sign up for new cards to
get bonus rewards.
card issuers want to offer incentives to current
customers or others who are more likely to use the card
for a long time, Schulz said.
banks want you to keep the card you get and to hang
around," Schulz said.
you get an offer for a lower rate from another bank, it
does not hurt to reach out to your bank to ask if they’d
match that rate.
almost certainly listen to you and your chances for
success are higher than you might think," Schulz
different offers from the same bank can pay off
bonus rewards or special deals that you spot in a bank
branch can vary from what the same bank is offering
online or via the mail that arrives at your house.
made this mistake myself and lost out on a rewards offer
by signing up at the bank branch before looking into
what was offered as a sign-up bonus online.
best not to be impulsive and swing at the first pitch.
Take time to review any offers and compare what’s
being offered in other channels.