Interest Rate Freeze: Credit Card Debt Holders Could Face Continued High Costs

The Federal Open Market Committee (FOMC) meeting of the Federal Reserve came to an end earlier today. Additionally, the Federal Reserve declared that it will not be raising its target federal funds rate.

This implies that the benchmark rate will stay high, having reached a 23-year peak. For borrowers, this is terrible news because the benchmark for consumer interest rates is influenced by the federal funds rate.

But what if you owe money on your credit cards? What effect does the Federal Reserve's decision to maintain its target rate have on the interest rates and minimum payments associated with your credit card?

What This Means for Your Credit Card Debt

Because the Federal Reserve decided to maintain its target federal funds rate at a high level, high credit card interest rates and thus high minimum payments are unlikely to decrease very soon. And in the current inflationary climate, having credit card debt may make that an unpleasant reality. However, you might be able to get the support you need from a debt relief organization to get through this inflationary phase.

Debt Relief Can Result in Lower Interest Rate

Reducing your interest rate is one method debt relief services might assist you; with the current high federal funds rate, this could be a significant relief. Usually, debt relief businesses do this in one of two ways:

• Negotiations: A few debt reduction businesses will bargain with your credit card companies to lower your interest rate. When they finish these discussions, they often use the financial data that they get when you sign up for the service. For instance, they could leverage the information about your financial difficulty to get a better rate for you if you're experiencing it.
• New loans: A debt reduction firm can suggest a debt consolidation loan if your credit is good. Presumably, the interest rate on this loan would be less than the average interest rate on your existing credit card debt.

Debt Relief Can Result in Reduced Principal Balance

Your debt relief service provider might be able to negotiate a lower principle balance with you if you choose to forgo credit card debt forgiveness. But, since credit card debt forgiveness may negatively impact your credit score over time, you should only consider this option as a last resort before filing for bankruptcy.

The content provided on MoneyTimes.com is for informational purposes only and is not intended as financial advice. Please consult with a professional financial advisor before making any investment decisions.