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Credit Cards, Rate Hikes, and You

By: Michael Millington

There are many studies, articles and reports that talk about credit cards everyday. They always tell you how using credit can affect your rating, your ability to live a financially stable life, and more. However, most of it is conjecture based on surveys or a debt “success story” to give people hope. What many seem to neglect is the truth of the matter. In order to know what to do with your credit cards, it pays to know what will happen with your credit cards’ rates.

To make a long story short, the way that a credit card’s interest rate can be affected is if the Federal Reserve announces a rate increase (which they have as of Wednesday, December 13th). The prime rate is a base rate that, when added to a credit card’s APR, let you know what your interest rate is. This might be the driving influence behind your credit card usage, as a higher interest rate may cause you to scale back your usage or encourage you to pay off debts in a more immediate fashion.

In the long run, the increase isn’t the last one to affect us in the near (or far) future. Within the year of 2017 we’ve seen three separate rate increases, and chances are we’ll see another three increases in 2018. While the increases might seem slight on an individual basis, when constantly implemented it can add up to a lot. The objective is that you pay attention to your credit usage in the face of rising interest rates. Even with the constantly changing rates, the responsibility of keeping your credit related debt under control is still your main obligation. Keep your credit usage down to under 30% and your credit rating should improve and you shouldn’t be subject to interest rates too harsh on your pockets.