What could happen to credit card rates now that inflation is holding steady?
Inflation isn't climbing, but that doesn't necessarily mean relief is coming for credit card users. Here's why.
With inflation holding steady at 3.4% in August, credit card users may face ongoing challenges. While the Consumer Price Index (CPI) indicates inflation is moving toward the Federal Reserve's 2% target, it remains well above that goal. This could prompt the Fed to raise interest rates at their September meeting, potentially increasing variable credit card APRs tied to the prime rate.
Most credit cards have variable interest rates that adjust with changes in the federal funds rate, which often moves alongside the Fed's benchmark rate. Therefore, a rate hike could lead to higher credit card rates, making it more expensive for borrowers to carry balances.
However, the situation isn't entirely bleak. Core inflation, which excludes volatile food and energy costs, eased slightly in August. This positive sign might influence the Fed's decision. If policymakers choose to keep rates unchanged, credit card APRs may stay near their current high levels rather than rising significantly.
Borrowers can still take steps to lower their credit card rates. They could ask their issuer for a lower rate, inquire about a credit card hardship program, consider a 0% balance transfer, or take out a lower-rate consolidation loan. Each option has its pros and cons, so borrowers should carefully evaluate their financial situation and credit profile to determine the best course of action.
Written by urgent.news from CBS News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
