INDIANAPOLIS — Rising interest rates coupled with high inflation — are forcing more Americans to reach for the plastic when it comes to paying for things, but it all comes with a warning.
When interest rates increase, historically so do credit card rates, meaning it is more expensive to use them and will cost more to pay back any debts.
Right now, credit card minimum interest rates are averaging some 18%, according to LendingTree.
“That is at a historic high as well, so a lot of you know consumers. Basically half of those, I should say, that carry credit card debt are month to month,” Central-Indiana based financial expert Roy Lederman said.
Financial experts urge consumers to pay off credit cards and pay them off on time. The best advice to keep out of credit card debt it to budget. For instance, consumers should look at subscription services and see if several could be cut.
“Find ways that you can actually save and apply more money towards that debt. So you know, eventually you'll get out of debt faster,” Lederman said.
Another tip from Lederman for those who may already be in credit card debt, use the thirds rule, which means put a third of any discretionary income towards paying off those bills.
For those in debt, economists and financial experts urge you to pay it off as soon as possible.
In the meantime, other tips to avoid worsening that debt includes paying down the balance and looking to use zero balance transfer cards.
“That’s what, by the way, the Federal Reserve is hoping you'll do is instead of going out and buying something new going on a trip using your credit card that you'll pay off that debt that will slow the economy we hope just a little bit,” Dr. Michael Hicks, Director of the Center for Business and Economic Research at Ball State University, said.