What the Fed's interest rate pause means for your credit card debt
The Federal Reserve's Federal Open Market Committee (FOMC) meeting concluded earlier today. And, the Fed announced that it will be keeping its target federal funds rate unchanged. That means that this benchmark rate will remain elevated at a 23-year high. That's bad news for borrowers because the federal funds rate affects the benchmark for consumer interest rates.
But what if you have credit card debt? What does the Federal Reserve's decision to keep its benchmark rate unchanged mean in terms of your credit card interest rates and minimum payments?
Find out how a debt relief service can help you eliminate credit card debt now.
What the Federal Reserve's news means for your credit card debt
The Federal Reserve's decision to keep its federal funds rate target unchanged means that elevated credit card interest rates, and in turn, minimum payments, may not fall any time soon. And that could be a painful reality if you have credit card debt, especially in today's inflationary environment. But, a debt relief service could provide the relief you need to make it through this inflationary period.
"As inflation continues, borrowers who are barely scraping by should consider debt relief services because it can help them climb out of overwhelming debt," explains Ryan Moore, financial advisor at the retirement planning firm, TBS Retirement Planning. So, how can debt relief help you with your credit card debt?
Debt relief could get you a lower interest rate
One way that debt relief services can help you is by reducing your interest rate - which could provide meaningful relief with the federal funds rate being so high. Debt relief services typically achieve this in one of two ways:
- Negotiations: Some debt relief providers will negotiate your interest rate with your credit card companies. They'll usually use the financial information they collect when you enroll into the service when completing these negotiations. For example, if you're going through financial hardship, they may use your hardship details to negotiate a better rate for you.
- New loans: If you have a solid credit score, a debt relief service may recommend a debt consolidation loan. This loan would presumably have a lower interest rate than your average interest rate on your current credit card debt.
Learn more about how debt relief services may be able to reduce your interest rates now.
Debt relief could make your payments more manageable
Beyond reducing your interest rate, which could lead to lower minimum payments, debt relief services may make your payments more manageable.
"Debt relief programs can help a borrower pay back debt under one entire loan," says Moore. And, making one debt consolidation loan payment simplifies the payment process when compared to making multiple credit card payments.
However, you don't have to opt for a debt consolidation loan to tap into this simplicity.
Debt forgiveness and debt consolidation programs can also help. With these programs, you'll typically send one monthly payment to your debt relief provider. In the case of debt consolidation, your provider will send individual payments to your credit card companies on your behalf. In the case of debt forgiveness, your payments will usually be saved in a special purpose savings account until you've saved enough to settle your debt. In either case, your debt will become more manageable as you'll only be required to make one monthly payment - rather than keeping up with multiple payments.
Debt relief could reduce your principal balance
If you opt for credit card debt forgiveness, your debt relief service provider may be able to reduce your principal balance through negotiations. But, this option should only be used as a last resort before bankruptcy as credit card debt forgiveness may cause long-term damage to your credit score.
The bottom line
The Federal Reserve has decided to keep its Federal Funds rate unchanged. Unfortunately, that means credit card users who carry balances from month to month may have to continue contending with high interest rates and minimum payments.
But, if you're having a hard time making your minimum payments, you have options. Debt relief solutions may be able to reduce your interest rates, make your payments more manageable and even reduce your principal credit card balances. Find out how much relief a debt relief expert could provide today.
