Why now is a critical time to pay off credit card debt
Prices are rising due to inflation, and chances are that you've felt the pinch at the pump, the grocery store and just about anywhere else you spend money.
At the same time, interest rates are high. The federal funds rate — which is the interest rate consumer lending and deposit rates are based on — is currently paused at a 23-year high. So, not only are the cost of goods up but so is the cost of borrowing. That's why, if you're carrying a balance, you may have noticed higher credit card minimum payments lately.
In turn, your credit card debt may be a burden right now. After all, higher minimum monthly payments can be tough to afford when the prices of goods and services like gas, food and healthcare are rising. As such, now may be a critical time to pay off your credit card debt.
Find out how quickly you could pay your debts off with a debt relief service now.
Why now is a critical time to pay off credit card debt
There are a few reasons why this is an important time to pay your credit card debt off, including:
Prices are rising
The average prices of goods and services were up 3.2% in February compared to one year earlier and up 0.4% from January. And while the inflation rate is down from its 9.1% peak in mid-2022, there's still room for improvement.
With the ongoing inflation issues impacting the economy, you can expect to pay more for basic goods and services right now. If you're unable to fit the increasing costs in your budget, eliminating high-interest credit card debt could help.
Chat with a debt relief expert about your options today.
Interest rates may not fall any time soon
As inflation fell from its peak, economists projected that the Fed would cut its benchmark interest rate in early- to mid-2024. But with the recent uptick in inflation, economists now expect rate cuts to start later in 2024. In turn, high rates, and high minimum credit card payments, are likely to remain the norm for the foreseeable future.
Delaying the payoff costs you more in interest
"Credit card companies charge high interest rates and only require customers to make the minimum monthly payments," says Justin Leto, co-founder and CEO of Idea Financial. "This allows interest to compound daily, driving up the cost for consumers."
Because of this, some high amounts of credit card debt can take decades to pay off, resulting in thousands of dollars in interest charges. So, paying off your debt now could lead to significant savings in terms of interest.
Pay your debts off faster with a debt relief service
More than one-third of American adults owe more money to credit card companies than they have in emergency savings, according to Bankrate. If that's the case for you, paying off your credit card debt could be difficult.
But the good news is that there are programs that can help, like debt relief solutions. When you utilize one of these programs, you may be offered one of the following services:
- Credit card debt management: Credit card debt management companies help you pay your debts off faster by negotiating better interest rates and terms with your lenders.
- Credit card debt forgiveness: Credit card debt forgiveness companies, also called credit card debt settlement companies, negotiate your principal balances on your behalf. This can provide more relief than credit card debt management, but it can also have a detrimental credit score and tax implications.
The bottom line
This could be the right time to pay off your credit card debt. Between high and rising prices and the high-rate environment, paying your credit cards off now may put you on better financial footing. If you can't afford to pay your debts off immediately, then consider reaching out to a debt relief service for help.
