United States citizens who are looking for a new credit card should expect to pay more in the upcoming months. According to a report from USA Today, the average interest rate on a credit card managed to hit a record number – 16.71% – marking the 10th consecutive week rates have hit new highs.
Credit card interest rates have risen especially because the Federal Reserve continues to hike its key borrowing rates as the economy has a tendency of getting stronger.
A new interest rate increase, coming soon
Currently, the national average credit-card rate managed to rise by 0.56% over the past six months, according to information from 100 of the most popular cards from dozens of lenders, but excluding introductory rates. Also, there are very high chances for costs to jump at least another half percentage point in 2018 if the Federal Reserve keeps raising rates, up to two more times, as expected.
Credit-card borrowers will most likely pay more on stuff they buy with their cards, unless they pay the balance off every month. For example, at the end of 2017, the average credit-card balance of an American was $6,354. Also, more than four in 10 cardholders were carrying balances in the last quarter of 2017, says a report the American Bankers Association.
Considering the average rate for a new card, the annual interest rate could reach $1,092, or $91 a month, for somebody carrying a total balance of $6,354, for example.
Be cautious, as much as possible
In this situation, what does a borrower need to do, in an attempt to keep credit card interest rates as low as possible? Obviously, the best approach is to try keeping a $0 balance for as long as possible, but also boost your credit card score. Then, try shopping for the best card deals, review your cards annualy and, of course, ask for a lower rate if you been on time with paying your bills.
Using credit cards is considered risky by a lot of people and not just because of the high credit card interest rates. People often believe that plastic leads to overspending, making them splash the cash on unnecessary things. We know, the offers are tempting, but think twice before making a purchase on credit.