Credit card interest rates are expected to reach record heights following the US Federal Reserve’s decision to up its benchmark interest rate by another 0.75 points. The average variable credit card rate, which is now 18.16% according to Bankrate.com, is expected to follow in the next 30 to 45 days, thereby reaching its 27-year peak.
“In the next few months, there’s a very good chance that the average rate will surpass the all-time record of 19% from July 1991,” Ted Rossman, senior industry analyst at Bankrate.com, observed. “Today’s hike means that most credit cardholders will soon face rates that are three full percentage points higher than they were at the start of the year.”
According to a report compiled by CreditCards.com, 60% of credit card debtors have said that they carry credit card debts that have lasted over a year – up from 50% in 2021 – while 40% still carry debts for over two years, up from 32% last year. The report found that credit card debt mostly affects cardholders with under $50,000 in annual household income (59% of respondents).
In order to avoid mounting credit card interest rates, Rossman recommended that consumers to sign up for a 0% balance transfer card, which enables holders to pause interest payments for up to 21 months. A low-rate personal loan with interest as low as 6% over five years may also be an option.