In May of 2018, the average credit card interest rate surged over 17% for the first time. While this new average rate is unprecedented, it’s not too surprising since credit card interest rates have been inching up all year.

What does this rate mean for consumers? For the average family with credit card debt, it could mean higher interest costs as well as the potential for additional financial consequences. For consumers who don’t use credit cards — or those who use credit cards but pay their balances in full each month — it won’t make any difference.

Why Credit Card Interest Rates Matter

As of 2017, the average adult with credit card debt carried $5,839 in balances. Meanwhile, the average household with credit card debt reported $9,100 in balances. With these figures in mind, here’s how credit card interest rates make a difference and why consumers should pay attention:

  • Higher interest rates result in more interest charged.
  • Higher interest charges make it so less of your monthly payment is allocated toward the principal of your balance.

Keep in mind that credit card interest is charged daily based on your credit card balance. The higher your balance and the higher your interest rate, the more interest accrues. It’s also important to note that, when you don’t pay your balance in full each month, interest is charged not only on your carried balance but also on purchases beginning on the day you make them. Credit cards are one of the most expensive ways to borrow money, but higher interest rates compound the problem by ensuring more interest is tacked on to your payment than usual.

Also consider how high interest rates can lead to much higher interest costs over time. While one month of excess interest may hurt, imagine how those additional interest payments can compound over and over throughout the years.

To understand how this might affect someone over a lifetime, picture the average household with credit card debt of $9,100 at 9% APR. If this family was able to pay $200 per month toward their debt, it would take them 56 months to become debt-free. During that time, they would pay $9,100 in principal and $2,072 in interest for a grand total of $11,172 paid.

Now, let’s ratchet up that interest rate to today’s average — 17.04% as of June 207, 2018. With this new rate, the same family paying $200 per month would need to pay that amount for 74 months to become debt-free. During that time, they would pay $9,100 in principal and $5,634 in interest to reach a grand total of $14,734.

Not only is the family paying 17.04% APR forking over a lot more interest over time, but they would also need to make the $200 payment for 18 months longer. This could obviously have a marked effect on their ability to save money or reach other financial goals.

Avoid Financial Stress Caused by High Interest Rates

If you’re a consumer without credit card debt and you’re worried about rising rates, don’t be. As long as you avoid carrying a balance from one month to the next, you will avoid interest charges altogether. If you have credit card debt already, on the other hand, there are several steps you can take to minimize the impact of rising rates:

  • Avoid racking up more credit card debt than you already have. If you’re spending more than you can repay each month with credit cards, consider switching to debit or cash for a while. One of the best ways to reduce the long-term impact of credit card debt is to stop adding more debt to your life.
  • Pay more than the minimum payment on your credit cards. Because credit card interest is charged based on the balance you carry each month as well as new purchases, paying extra money toward the principal of your balance can help you save money on interest charges. Even small amounts paid extra toward your balances can make a large impact. Play around with a credit card payment calculator to determine how much you could save by paying extra each month.
  • Transfer credit card balances to a 0% APR balance transfer card. You can also consider transferring your credit card balance to a new balance transfer card that charges 0% APR. Many balance transfer cards let you pay zero interest for up to 21 months, although some charge a balance transfer fee that is usually equal to 3% to 5% of the balance you transfer. There are also a handful of cards that don’t charge a balance transfer fee on balances transferred within a specific around of time — usually 45 or 60 days — so make sure to shop around for balance transfer cards and compare options before you apply.