Greg McBride: Mind your credit card rates
Credit card rates will be moving higher this year, but your best defense is a good offense.
Here’s what to do if you’re worried about your credit card balance in a rising rate environment.
Get those no-rate cards while you can
Credit card debt is typically the highest-cost debt that households have, and as interest rates rise it is about to get costlier. But don’t take this sitting down. Your best defense is to go on the offensive. Look to grab the 0% or other low-rate balance transfer offers on new cards now.
And keep in mind that the low rate will be in effect for only 12 to 21 months, so don’t waste any time in aggressively paying down the debt. The low rate is like a tailwind toward debt repayment, with more of each dollar paying down the balance and less going toward interest.
But be wary of what happens when your low, promotional rate expires.
Your new rate may surprise you
Not only will the interest rate jump, the rate it jumps to is likely to have increased between now and then as the Federal Reserve raises interest rates. The Fed has hiked rates once and has warned that there’s more where that came from. This is all the more reason to get a new credit card’s balance paid off entirely before the teaser rate expires.