The experts at Symple Lending discuss how rising interest rates are make paying down credit cards more difficult

Cash-strapped consumers who have been relying on plastic to make their purchases are now paying the price. When the second quarter of 2023 ended, the Federal Reserve Bank of New York revealed the cold hard facts about the state of U.S. consumers’ credit card balances. According to their report, revolving credit spiked $45 billion between the first and second quarters, catapulting total credit card debt north of $1 trillion. Credit card debt among average credit cardholders is $6,568 up from $5,963 in Q2 2022.

After the Federal Reserve’s annual meeting in Jackson Hole, WY in late August, Fed Chair Jerome Powell said the inflation battle is still ongoing. Thus, he couldn’t rule out additional rate hikes later in 2023. For anyone keeping count, the Fed has raised rates by 5.25 percentage points since March 2022. That’s 10 consecutive hikes. These increases have a direct correlation to credit cards, as most issuers charge variable rates on average daily balances. As interest rates continue to creep higher, cardholders will see their monthly interest charges rise also.

Delinquencies on the rise

The personal loan experts at Symple Lending continuously track the markets, analyzing large chunks of data. Additionally, they monitor the financial shape of cardholders who are feeling the intense pressure of carrying a staggering amount of credit card debt. They have found that a growing number of borrowers are struggling to stay current with their payments. Many households have made valiant efforts to be responsible borrowers and repay their loans promptly. However, paying down bloated credit card balances is increasingly difficult, especially in the era of ever-climbing interest rates. A study conducted by Wells Fargo noted that credit card late payments are at an all-time-high. Falling behind on payments creates a new set of problems for borrowers because lending institutions tack on late fees.

How borrowers can put a cap on interest charges

For decades, the specialists at Symple Lending have been advising consumers about the advantages of a personal loan; it’s an effective strategy for paying off debt because the interest rate remains static. Juggling multiple cards with high annual percentage rates (APRs), various payment amounts, and different due dates can be exhausting — and expensive. How expensive? A study by NerdWallet reports that American households can expect to pay an average of $1,380 in interest alone in 2023; the amount in 2022 was $1,029. Expect that amount to soar even higher if the Fed raises interest rates again.

Personal loan companies, like Symple Lending, help families put the brakes on interest accumulation. Additionally, loan specialists provide guidance on how to construct a practical budget. Personal loan experts offer borrowers one of several repayment plans that will best suit their budget. This option is extremely appealing to many cardholders, as interest rates on personal loans are typically lower than retailers.

Once credit card balances are consolidated into one personal loan — at a fixed interest rate — borrowers will have better visibility into debt and learn how to manage it. Interest rates on personal loans vary and are dependent upon a borrower’s credit, loan amount and income.

Concealing financial problems is counterproductive

The recent runaway inflation and surge in interest rates have compounded financial woes for millions of Americans. To make ends meet, many have resorted to buying on credit. In their experience, Symple Lending has discovered that consumers who over-extended themselves by their dependence on credit cards are often reluctant due to social stigma to discuss their financial situation with anyone — especially a stranger. Their professionals do more than help clients — in a nonjudgmental atmosphere — to reduce interest rates; they advise them on how to chart a path toward a brighter financial future.

Student loan payments to resume

Credit cards may be used more frequently when student loan payments resume in October 2023. After mortgages, student loan debt ranks second in the amount owed by Americans; the current debt is now approaching $1.8 trillion. Borrowers who enjoyed the three-year reprieve may be in for a rude awakening.

Symple Lending experts have a reminder: According to the U.S. Treasury, students may not make federal student loan payments with a credit card. Similarly, most private loan lenders will not accept them either.

Beginning a journey to financial freedom

Many who have been so consumed with getting out of debt may not have given much thought to building a savings account. Speaking with a seasoned personal loan advisor will provide you with helpful tips on how to establish a pattern of both short and long-term savings.

Remember, debt can be a necessity at times, as large purchases and emergency situations can force you to rely on it. The type of debt, your plan for the debt and how quickly the interest compounds should be a focus when using credit in a responsible way.

Getting into debt was easy; living debt-free will take work — but it is possible! Symple Lending reminds us that if you take proactive steps like creating a budget, building a safety net and avoiding debt in the future, you will begin the process of a less stressful, more manageable financial future.

Originally published at https://finchannel.com/ on September 6, 2023