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In your debt: forget about the Fed, agree on credit card debt Lifestyle

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The cost of everything is constantly growing. And if you have credit card debt, it will also become a little more expensive, thanks to a series of interest rate hikes starting this month.

Due to the highest inflation rate since the early 1980s, the Federal Reserve is adjusting interest rates to rebuild the U.S. economy. In short, the Fed is changing the rate of federal funds, which changes the primary rate – a rate that banks charge customers with high credit ratings. Credit card issuers add to the principal rate to set their interest rates, so if the primary rate rises, then so will what you will pay if you have debt.

Got it all? Excellent. Now forget about what you just read, and pay attention to this part: if you have significant credit card debt, it doesn’t really matter what the Fed does. Your credit card debt has always been and will remain expensive.

THE REAL VALUE OF CREDIT CARD DEBT OVER TIME

If you have $ 5,000 left on your credit card from month to month and the interest rate is 16%, you will spend $ 800 on interest during the year. If your interest rate rises to 16.25%, that means only an extra $ 13 percent over the year.

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Technically this means it’s not so much a tariff increase as a quiet slope. But $ 800 is a lot, and that’s without taking into account that you still have to spend extra money that you may not be able to get back. Accounts don’t stop just because you’re in debt.

That’s why squeezing a stress ball while watching the news in this case doesn’t help. It is helpful to face money problems face to face.

“The hardest part is tearing up the patch and just putting in the numbers to see how much you need,” says Akeiva Ellis, a certified financial planner and founder of The Bemused, a financial literacy brand for young people. “But if you are able to get to that point, it’s really all about making a plan. Don’t let your debt overwhelm you. The sooner you come across the numbers and work out a plan to pay them off, the easier it will be for you to breathe. ”

HOW CAN YOU PAY LESS PROTESTS

– WORK FOR BUILDINGS: The US FICO grade point average increased to 716 by August 2021, and this increase was more common for those with lower credit scores. (FICO scores of 690 or higher are considered good credit.) “It may happen that when you applied for the account you have, your credit score was lower,” said Bruce McClary, senior vice president of communications for the National credit fund. Counseling. It recommends checking your credit report and rating to see if you have moved to a higher score range. If so, you may be able to agree on the best interest rate on your credit card.

– CONSOLIDATING YOUR DEBTS: This higher credit score can also make you a contender for a balance transfer a credit card with an interest-free advertising period or a personal loan with low interest rates. They can both give you a reprieve from high interest rates, but note that it depends on the terms you can qualify for. And in the case of cards with a balance transfer, the interest rate will rise again after the end of the 0% period.

– REVIEW YOUR BUDGET: The more money you can spend on your monthly credit card payment, the sooner you can get rid of debt. But that’s easier said than done at a time of high prices. “Raising interest rates doesn’t live in a vacuum,” McClary says. “Other things continue to happen that increase the financial pressure on every American.” If you don’t know where to start, McClary recommends getting budgeting help from a financial advisor or nonprofit credit counseling agency. “Anything people can do to be proactive, they will express their gratitude later.”

– USE THE METHOD OF SETTLEMENT: It can help you stay organized and motivated, especially if you have several debts at once. Ellis offers an avalanche of debt repayment method when you list your debts in order from highest to lowest interest rate, make minimum payments on all of them and contribute any extra money to your budget primarily on the debt with the highest interest rate. Once you pay it off, focus on the next debt on the list and so on. “For most people, credit card debt is the most expensive debt,” says Ellis. “So that’s what I would normally encourage people to focus on in the first place.”

This column was provided by The Associated Press on the NerdWallet personal finance website. Sarah Ratner is a writer at NerdWallet. Email: srathner@nerdwallet.com. Twitter: @SaraKRathner.

FICO: The average score on the US FICO is 716, indicating an improvement in consumer credit behavior despite the pandemic https://www.fico.com/blogs/average-us-ficor-score-716-indicating-improvement-consumer-credit-behaviors-despite-pandemic

NerdWallet: what is a balance transfer and should it be done? https://bit.ly/nerdwallet-balance-transfer

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or distributed without permission.

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