One of the words parts of having a credit card is the interest rate, and, as if they weren’t bad enough already, they’re about to go up. The nations central bank is about to raise key-lending rates, which will domino effect down to your credit cards APR rate, and it will increase. They plan to do this in increments; one raise now, another one in a few months, and probably another one after that. At first, the raise will barely be noticeable, but add these tiny bumps up over a period of time, and the difference will become increasingly apparent.
The reason these little changes are most likely going to influence you is because of your variable-rate credit card. Don’t have one of those? Cool! Then this may not be something you need worry about. For those of us who do posses one of those tiny pieces of plastic, it’s important for us to understand that the APR on our cards is tied to the ‘prime rate’ all our banks follow, which is in turn connected to the federal interest rate. But why are the feds messing about with these sensitive numbers to begin with?
The last time the federal funds rate was increased was back in 2006, while the economy of America was still booming, in hopes to keep pushing it forward. After the crash it became painfully apparent the rate was to high, so the fed’s made the educated decision to lower the rate in 2008. Now, with everything picking back up again, and the economy beginning to (shakily) stand on it’s own two feet, the time has come for the increases to begin once more. Yes, this will mean more money out of your pocket in the long run, but have no fear. There are plenty of credit card moves for you to prepare yourself for when that time comes.
Balance Transfer Credit Cards
A balance transfer of your current debt to another, lower interest rate card, can help shrink the amount you owe due to your cards considerably. You do this by paying for one credit cards bill using a different, less expensive card with low rates, essentially re-borrowing the money. This is one credit card move that won’t be available for long.
Banks have been able to offer such low rate cards for the past few years for one reason: the federal funds rate has basically been 0 for a long time. Since the banks have essentially been borrowing money for free, they have had no problems offering the same deal to us on a short time basis. Unfortunately, when the federal funds rate increases, banks will no longer have access to a deal as sweet as that, and so neither will we. The domino affect will ensue, and balance transfer credit cards will become a thing of the past.
Deal With Your Debt
Another great credo card move, or credit move in general, is handling your debt. As if you need more incentive to deal with your debt! Try to free up cash, and increase your monthly payments, so you’ll be charged a smaller interest rate in the long run, regardless off the Fed’s raising rates.
- Consider budgeting your spending every month. With a little extra planning and care, you should be able to free up some extra cash here and there.
- Reduce unnecessary expenses. Why go see that movie in theatres when it’ll be out on Netflix in two months?
Keep an eye on where you’re moneys going, and you’ll find it easier to manage. Click here to check out more great tips and tricks to deal with your debt before they fed raises rates.
Ask And You Shall Receive
Many people the world over take everything their bank says at face value, no if and’s of buts about it. Would you believe me if I told you are completely underestimating your power here? A completely overlooked credit card move we all posses is the power of our voice. Out of 1,497 people who asked their banks for lower interest rates, 65 percent of people’s wishes came true. Even a seemingly insignificant reduction in your rate can make a huge difference in the long run! Don’t be afraid to take advantage of every credit card move available to you, especially your own voice.
Don’t let any of this information stress you out! I’m not announcing doomsday here. Yes, while a raise in rates is highly likely, allow me to reiterate that they will not be rising all at once. This is going to be a gradual, slow transition that will take time. So take advantage of that time, and get to work. Take advantage of the credit cart moves above, and all should be fine when the time comes.