Credit Card Interest Rates to Rise, Too
Many cardholders don't know their interest rates. Now would be a good time to know yours.
If you’re carrying a credit card balance, knowing your interest rate might seem like a no-brainer. Unfortunately, for many cardholders, it’s not. In a December Bankrate study, 41% of card-holders carrying a balance didn’t know their interest rate. Currently, the average interest rate on cards is about 16%, but rates can go as high as 25% or more.
The Federal Reserve Board is expected to start raising short-term interest rates in March in an effort to keep inflation in check. As those rates increase, interest rates on credit cards, home equity lines of credit and other loan products will go up as well, which means it will cost you more to pay off your debt.
If you’re carrying a balance on a high-interest-rate card, plan to pay it off as soon as possible, without adding any new purchases. If you receive a tax refund—and most taxpayers do—use that money to pay down your debt. Even if the refund doesn’t pay off the balance in full, the reduced total will trim the amount of interest assessed.
Another option is to apply for a balance-transfer card. Recently, cards from Wells Fargo, Capital One, Bank of America and others allowed balance transfers with an introductory rate of 0% for five to 18 months. You can also check to see if any current cards in your wallet are offering balance-transfer promotions.
Chase, for example, recently offered current Freedom cardholders a 0% promotional rate for transfers made by March 31 (new applicants are no longer being accepted). The 0% rate lasts through the April 2023 billing cycle, with a transfer fee of $5 or 4% of your balance, whichever is greater. And you can’t transfer a balance from one Chase-issued credit card to another; the transfer must be from another financial institution or retail card.
Keep in mind that with any balance transfer, if you don’t pay your balance by the time the promotion ends, any balance left over is generally subject to your card’s normal interest rate. And read the fine print—your balance could be subject to retroactive interest charges