Summer is in full swing (fun!). But it’s not just the temperatures that are higher. Credit card rates are higher, too (not so fun!), as the Federal Reserve continues to hike up the Fed Funds rate, the rate banks charge to borrow from each other.

So, what exactly does that rate have to do with you?

Well, if you have a variable-rate loan like a credit card or home equity line, the answer is, a lot.

When the Fed funds rate rises, the Prime rate rises, and that rate just so happens to be the rate on which many credit card rates are based.

Yes, that.

So, if you’re carrying credit card balances that means higher monthly payments and less money in your budget.

But rest assured, there are some things you can do about it.  In fact, Scott Glazer, our Assistant Vice President of Card Issuing, offers five tips to help you fight back against rising credit card rates:

1. It’s still OK to use credit cards to pay your expenses, but be smart. There are some great advantages of using your credit card to pay your monthly expenses. You can rack up rewards and easily track your spending. But if you do that, be sure to pay off your balances in full before billing cycle ends.
2. Don’t use a credit card for things outside of your normal budget. It’s summer and maybe you want to buy new clothes or get a vacation rental for a week. It may not be a bad idea, provided you have the money to afford it. That’s the key according to Scott.  “Never use credit cards to purchase things that are out of your normal budget plan,that’s when people can get into real trouble.”
3. Pay off your balances. If you carry credit card debt, now’s a great time to start shedding it.  Scott suggests paying off high-interest debt first. “You may also want to look at balance transfer offers,” he advises. “For example, if you have a credit card that’s charging 12% interest, you could qualify to transfer your balances to a credit card with Avidia with a potentially lower interest rate.” Also, if you have extra money in the bank, use it to pay off your debt. You’ll save more in interest by paying it off than you would earn if you kept it in the bank.
4. Seek help with debt consolidation. Debt can be crippling for many people. That’s why, there’s no shortage of debt consolidation programs available from different providers, who can negotiate your debt with your creditors and lower your monthly payments.  If you go this route, Scott cautions you to choose wisely. “There are many fly-by-night companies that will take your money and never contact you again. Do careful research to ensure you’re working with a company you can trust.”
5. Beware of deferred interest (0% financing). You may have seen furniture stores or other retailers touting 0% interest for a fixed period. Before you jump in to such an offer, Scott advises you to know what you’re getting into.  “Say you buy something that offers deferred interest for 24 months. If you don’t pay off the full amount and carry any balance into month 25, you’ll be charged interest on the entire purchase not just the balance you owe. What’s worse, is those cards often have high rates – in the mid-twenties.” Scott warns about another factor to beware of: “The minimum monthly payment retailers give you will NOT pay off the total you owe. So, if you want to pay it off within the deferred interest period, you’ll need to calculate your own monthly payment.” Do the math carefully as it could really cost you.

Ready to further your credit card knowledge? Check out resources available with the Consumer Financial Protection Bureau. Of course, Avidia can help you keep your credit card cool, too. Just stop into any branch or give us a call at 800-508-2265.