What the Fed’s Rate Hike Means for Credit Card Holders
Interest rates on credit cards are typically not fixed, so they’re especially vulnerable to changes in the federal funds rate.That means when the Fed’s raise interest rates and you are carrying credit card debt, you can probably expect your interest rate — and also your minimum payment — to rise. That will make it harder to reduce your debt.
But there are moves you can make to take the sting out of climbing credit card interest.
Reducing your credit card debt aggressively is a good idea no matter what rates do. Re-evaluate your budget to see if you can free up any cash to pay down your credit card balances, and think about whether you can increase your income, even temporarily.
As interest rates rise, make sure you’re making at least the minimum payments on time, on every card. This will help strengthen your credit score over time, which will make it easier to qualify for lower-interest loans.
Remember, any effects a rate hike may have on interest-rates in the long-term can be mitigated by a good credit score. Good credit generally entitles you to the best terms and conditions on new loans and can be handy in potentially negotiating new interest rates on certain old ones, like a credit card. You can see where your credit stands by viewing your credit score on Myfico.com.