The Federal Reserve is expected to cut rates by at least 25 basis points at its September meeting. But what does that mean for your borrowing costs? Yahoo Finance Senior Credit Cards Writer Kendall Little joins Wealth! to break down how falling interest rates may impact your credit card.
Little notes that higher interest rates have put a strain on credit card holders as balances and delinquencies are on the rise. She highlights that total credit card debt crossed $1 trillion just last year, and the average interest rate today hovers around 21%. However, she explains that interest rate cuts have historically not had a significant impact on credit card interest rates.
Therefore, before the Fed initiates an interest rate cut, consumers should start taking action to eliminate their credit card debt. She encourages them to make plans to get their balances down while interest rates are high. She recommends opening a balance transfer credit card, which usually offers 0% APR for about the first year, to make payments toward debt.
Personal loans are also a consolidation option for people with credit card debt. While personal loans have higher interest rates than balance transfer credit cards, they will likely be lower than the current credit card interest rate, allowing you to save money on interest charges.
Finally, Little encourages consumers to pay attention to their spending habits and cut back on overspending to not add more debt to the pile. One way to do this is to use debit cards or cash instead of credit cards, so you’re not spending more than you can afford.
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