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Taking an Interest in Interest Rates: What Does the Most Recent Interest Rate Increase Mean for Credit Card Debt?
On July 29, 2022, the Federal Reserve once again raised national interest rates in an effort to combat inflation and, hopefully, mitigate a potential recession.
Thus, this move marked its second consecutive rate increase of 0.75 percent.
Amidst the flurry of financial jargon, however, you may feel lost when it comes to understanding how this change specifically impacts you and your credit card. But that’s why we’re here with an explanation:
Breaking Down the Interest Basics
Not all forms of debt feature the same interest rate, the likes of which will determine how much you are impacted by the latest interest rate adjustment. Mortgages, for example, are a type of loan that oftentimes comes with a “fixed” interest rate.
However, “the interest rate on existing credit products may go up if you have a variable rate,” according to the Consumer Financial Protection Bureau (CFPB). Most credit cards fall under this category.
Thus, if you’re wondering just how much this rise in interest will cost you, you’ll want to look at your credit card’s APR.
“APR means annual percentage rate. It is how much interest you pay during a whole year,” the Federal Trade Commission explains (FTC) explains. “A lower interest rate means you pay less money. A higher interest rate means you pay more money.”
Protecting Yourself from Interest-Related Pains
One of the most direct ways to avoid paying more in credit card interest is to simply pay down your credit card debt overall. The less you owe, the less you can be charged in interest for that balance.
That being said, we understand that this option is not viable for everybody.
“If you’re unable to pay your creditors, filing for bankruptcy can help you get a fresh start,” the U.S. Government confirms. “Bankruptcy involves determining whether any of your assets are not exempt and may be subject to liquidation to pay your debts, or it can mean creating a payment plan.”
And as credit card debt is a form of non-priority unsecured debt, you can likely have your existing balance discharged through the bankruptcy process.
Calling On Credit Comfort
While the economy at large may feel unstable, you can always rest easy knowing you have reliable help with Dolaghan Law.
Here at Dolaghan Law, we remain committed to helping you navigate the filing process with ease. After all, bankruptcy offers you a fresh financial slate, and you deserve to feel confident as you move forward.
In short, with Dolaghan Law, you’re not alone.