Here's What Happens to Your Credit Card Debt as Interest Rates Rise

The Federal Reserve is expected to raise rates three or four times this year, starting as early as March.

Banks, Credit Card Debt

1/20/2022 4:01:00 AM

The Fed eral Reserve is expected to raise rates three or four times this year, starting as early as March.

The Fed eral Reserve is raising rates in 2022. That means anyone who carries a balance on their credit card will soon have to cough up more dough just to cover the interest charges.

 found.To put it in context, if you only made the minimum payments on an average credit card balance, it would take more than 16 years to get out of debt and cost you more than $6,000 in interest alone, Rossman calculated.If your annual percentage rate rises — even by less than a percentage point — in 2022, that will set you back another $300 to $400 in interest over that time.

Meanwhile, Americans are spending more as the economy bounces back from the Covid pandemic.After , helped by government stimulus checks and fewer opportunities for discretionary purchases, credit card balances are heading higher once again. 

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Bankrate  found. To put it in context, if you only made the minimum payments on an average credit card balance, it would take more than 16 years to get out of debt and cost you more than $6,000 in interest alone, Rossman calculated. If your annual percentage rate rises — even by less than a percentage point — in 2022, that will set you back another $300 to $400 in interest over that time. Meanwhile, Americans are spending more as the economy bounces back from the Covid pandemic. After  , helped by government stimulus checks and fewer opportunities for discretionary purchases, credit card balances are heading higher once again.  Overall, credit card balances rose by   in the third quarter of 2021, according to the most recent data from the Federal Reserve Bank of New York.   consumer credit report and revolving debt, which is mostly based on credit card balances, has now surpassed $1 trillion. "Since rates are really likely to go up, people's credit card debt is only going to get more expensive," said Matt Schulz, chief credit analyst for LendingTree."Now is the time to take some sort of action." Borrowers could call their card issuer and ask for a lower rate, switch to a zero-interest balance transfer credit card or consolidate and pay off high-interest credit cards with a