If you’re overwhelmed with your credit card payments, you’re not alone. According to stats in the US the sharp rise in credit card debt to $1.02 trillion is a reason to be concerned. There are several other things taking place in the economy, notably quantitative tightening. Simply put, this means that the Fed FOMC (Federal Open Market Committee) is embarking upon a rather aggressive policy of interest rate hikes.

Since December 2015, the Fed has been raising interest rates. Why does this matter to you and your credit card repayments?

When interest rates are rising, so too are the APRs on your credit card repayments. This means that less money is available in your paycheck at the end of every month. There’s also something else happening that is a little concerning. In January 2018, 200,000+ new jobs were created in the US economy. That’s good news. But, there are also increasing wages which are now helping to drive up inflation. When wages rise, the costs of goods and services rise accordingly. This means that you’re going to have to pay more for things that you consume – rental, food, transportation, entertainment etc.

This adds further pressure to your finances, and results in less discretionary spending, and less personal disposable income. If you already have high credit card debt, expect to be paying more in the weeks and months to come. Evidence of the mood of the moment can be seen with the CME Group FedWatch tool. According to stats, there is now a 71.9% likelihood of interest rates rising 25-basis points in the region of 1.50% – 1.75% on Wednesday, 21 March 2018. Food for thought…

How Can You Combat Rising Credit Card Debts?

There are many ways to start cutting back on credit card spending. Some of them are obvious, while others require further explanation. Let’s start with some of the easier ways to reduce your expenditure, and the debt burden that you and your household may be facing:

• Reduce Unnecessary Expenditure Items that are automatically deducted from your credit card. These include things like automatic Starbucks refills, Netflix payments, home telephone lines, meal kits subscription services, magazines subscription services etc.
• Switch from High APR Credit Cards to Low APR Credit Cards. This is something that should be done ASAP. There’s no point paying extortionary interest rates on things that you buy with your credit card. And if you must use a credit card, make sure you are using an interest-free card, or a low interest card. You can certainly benefit from the cost savings you will enjoy.
• Pay off High Interest Debt as Quickly As Possible and Make it a Priority. When faced with multiple credit card debts, where do you typically focus your attention? If you prefer to pay off lower-interest credit card debt first, think again. Your focus should always be on the expensive credit cards. Reduce your debt burden on them first before switching to lower-interest credit card debt. It may be possible for you to consolidate credit card debts from high interest credit cards to low interest credit cards but be advised that there may be transfer fees.
• Learn How to Consolidate Debt. Believe it or not, one of the best things you can do is read up on how to consolidate debt . Debt consolidation options are possibly the most beneficial financial strategies that you can employ to get on top of your debt burden. There is no point paying a penny more than you have to if the option of debt consolidation is available to you. In essence, debt consolidation groups all of your debts together and then you repay it with a lower-interest loan from a bank or a financial institution. The money savings can go towards paying down the principal, or even putting away as savings for an emergency.

There are more extreme measures to adopt such as putting your credit cards on ice – literally or metaphorically. When they are out of your possession, they likely cannot be used unless you have them stored online, or in your apps. Practice caution with all spending, employ the services of a money management expert, or financial coach if need be. You certainly don’t want to file bankruptcy, since this will hurt your credit score and make it difficult for you and your family to access automobile loans, mortgage loans, or other lines of credit in an emergency. Take care of credit card debt by employing an umbrella approach to your spending patterns.