January tends to be the month of regret - or at least the month of added stress. For many people, dealing with the credit card bills that come after buying expensive gifts during the month of December is more than a little stressful. This year, there’s even more stress added to the mix thanks to a new hike in interest rates.
Federal Reserve Interest Rate Hikes
You might have heard that the Federal Reserve has decided to boost interest rates by one-quarter of a percentage point. What does that mean? In a nutshell, it means that you will be paying higher interest rates on your credit cards over the next few billing cycles - and don’t trust your credit providers to let you know about this news.
Credit card companies do not have to warn you or tell you about the new interest rate hike. They assume that you already know, and that means that you are responsible for paying the amount due (whether or not you actually did know). So the gift that you purchased in December will cost you a lot more if you don’t pay off those credit cards now.
How to Start Paying
The best way to pay back debt is to put aside the money that you didn’t spend. For example: if you bought a few things on credit to earn points or to hedge until you got paid, take the cash now and put it aside to pay off your credit cards. Do this before that interest starts to rack up. The faster you pay back your purchases, the more money you will save - especially now that interest rates are higher.
It’s almost never a good idea to purchase items on credit. If you have done so this past holiday season, make sure that you don’t end up paying double or triple the original price by paying back your credit cards as soon as possible. While a higher interest rate might seem like no big deal right now, it will end up costing you a lot more money soon.