Why High Credit Card Rates Might Not Go Down Anytime Soon

There’s a reason credit card debt can be so dangerous. Credit cards are notorious for charging large amounts of interest. And not only that, but credit cards tend to compound interest on a daily basis so that for each 24 hours you carry a balance, it costs you more.

Making matters worse is that credit card interest rates are notably high right now. And they may not fall for quite some time for one key reason.

It’s a matter of stubbornly high inflation

You’ve probably noticed that in recent years, your essential expenses have been costing you more money. That may even be the reason why you’ve gotten into credit card debt in the first place.

Inflation has been battering the economy since the pandemic started to ease. And while it’s cooled quite a bit since peaking in mid-2022, it’s still annoyingly high.

Not only does high inflation make everyday goods cost more, but it also lends to higher interest rates. And that explains why your credit card debt may be costing you extra these days.

When inflation soars, it’s the job of the Federal Reserve to try to tamp it down. And the Fed commonly does so by raising interest rates.

Interest rate hikes discourage consumer spending for a couple of reasons. First, they make borrowing more expensive. Secondly, they tend to drive savings account rates up, which tends to motivate people to keep more money in the bank.

So getting back to your credit card’s interest rate — the reason it’s so high now is because the Fed raised rates numerous times in 2022 and 2023 to try to bring inflation down. But because inflation is still high, the Fed can only lower rates so much. And until the Fed makes more significant rate cuts, you’re probably going to be stuck paying a lot of interest on your credit card.

The Fed is specifically trying to get annual inflation down to 2%. But as of February, it was still at 2.8%, which is pretty far off from that target. And the fear is that tariff policies will drive inflation upward even more. So all told, there’s reason to believe that credit card rates could remain high for the rest of 2025.

How to shed your credit card debt

The sooner you pay off your credit cards, the less interest you might end up facing. So to that end, see if it makes sense to consolidate your debt.

If you move expensive credit card balances into a personal loan with a lower interest rate, it could make your debt easier to pay off. Consolidating with a home equity loan or even a balance transfer could make sense, too (though it’s a good idea to consult a financial advisor for guidance on your specific situation).

Working a second job is also a great way to free up money to pay off debt with. The gig economy is still going strong, so there’s plenty of opportunity there.

And also, look at your spending carefully and see if it’s possible to cut back. The less you spend, the more money you can put toward your credit card balances. 

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