40% of credit card debtors don’t know the interest rate, according to Bankrate
Many Americans ignore an important aspect of their credit cards.
Of those with a balance, 40% don’t know the interest rate they’re being charged on their primary card, according to a new survey from The bank rate find.
It could end up costing them a lot of money.
“As much as we’ve heard of record high rates on other products, credit card rates are already high and likely to rise,” said Ted Rossman, senior industry analyst at Bankrate and CreditCards.com.
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The average credit card rate is 16.3%, according to Bankrate. With the Federal Reserve planning to raise interest rates this year, credit card rates will be closer to an average of 17% by the end of the year, Rossman predicts.
Still, those with balances tend to have even higher rates, possibly due to lower credit scores, he said. Accounts assessed at interest had an average Interest rate of 17.13% in the third quarter of 2021, according to the Fed.
At the higher rate, if you’ve made minimum payments on your average credit card balance of $5,525, depending on Experian — it would take you 16 years to repay the debt. You owe over $6,500 in interest, calculated by Bankrate.
What to do
To repay your debt as quickly as possible, several options are available to you.
The best solution is to transfer it to a zero-rate credit card, which can defer interest for up to 21 months, suggests Rossman.
“They were very hard to get in 2020,” he said. “Lenders were very worried about the risk.”
“Now there’s a lot of competition again,” Rossman added. “You can use this to your advantage.”
Also consider increasing your income to pay off debt, such as taking on a side hustle or trying to negotiate a raise at work.
If you can’t get a zero interest rate card, consider a personal loan as a form of debt consolidation, suggests Rossman. Although there is no zero rate, if you have good credit it may possibly be 5% to 7%. The term can be up to five years.
For those who need help, consider nonprofit credit counseling, which can help develop debt management plans. You don’t necessarily need good credit to qualify, Rossman said.
One thing you shouldn’t do is focus on credit cards that offer rewards.
While they’re great if you pay your bill in full each month, your first priority should be paying off the debt, Rossman said.
“Don’t chase cash back if you’re paying 15% to 20% interest,” he said. “Keep the reward running until you are free from debt.
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