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Last week was a surprise 50 basis point cut rate by the Federal Reserve is good news for borrowers, as a larger than expected reduction can have a positive impact on the interest rates offered by lenders. And that, in turn, can making borrowing more affordable in the next month. For example, home buyers or those considering mortgage refinancing will likely see some relief over time, as will the borrower who wants to use a personal loan for things like debt consolidation.
But while loans may be cheaper now that the Fed has reduced rates, borrowers who have been using short-term loan options, like a credit cardstill facing high interest rates. Currently, credit card interest rates are nearly 23%, record high. These rates are steeper than other types of consumer credit, which can lead to major financial problems over time.
If you bring balance on your credit card, the current high rates may cost you a lot of money, so you may want to explore options for reducing credit card debt, including forgiving credit card debt (also known as loan debt). With debt forgiveness, the goal is to negotiate with the creditor lower lump-sum loan paymentssave money for debt. And there are some specific reasons why it makes sense to consider this strategy in October.
Need help with credit card debt? Explore our top debt relief options today.
Why credit card debt can help you this October
There are several reasons you may want to pursue this type of debt relief today, including:
Recent Fed rate cuts may not provide enough relief
While the Federal Reserve’s rate cuts may help lower the cost of certain types of debt, Credit card debt works a little differently. Most credit card interest rates are variable, meaning they are influenced by the Fed’s benchmark interest rate, but they don’t always react immediately to changes. Next, it may take months to reduce anything lower rates for credit card holders. And, there’s always the possibility that card rates won’t drop, because credit card issuers aren’t obligated to lower rates.
But even if the rates are cut resulting in some relief for credit card users, the reduction is likely to be marginal. Considering the average credit card APR is close to 23%, even a 0.5% or 1% reduction may not make much of a difference. So waiting for relief from the Fed may not be the best strategy, especially if you’ve been struggling to keep up. high monthly card payments.
Learn more about credit card debt forgiveness (and other debt relief options) today.
Credit card interest charges compound quickly
Credit card companies usually charge you interest on a daily basis, which means you’re not only paying interest on your principal balance, but you’re also charged interest on any interest you’ve earned since your last payment. This can cause balance to spiral out of controlespecially if you only make minimum payments.
Let’s say you have a $10,000 balance on a credit card with a 23% APR and you can only make the minimum monthly payment. Because of compounding interest, it could take you more than 29 years to pay off that balance, and you could pay more than $18,000 in interest over that time. If you’re stuck in this type of cycle, waiting for your APR to drop may not be enough to stop you. serious financial consequences. Looking into debt forgiveness options may provide faster relief.
Paying off debt can lead to big savings
Debt forgiveness can provide a practical solution for those struggling with credit card balances that felt insurmountable. Settlement amounts can vary, but in most cases, pursuing these debt relief options will reduce your balance between 30% and 50%with the remaining amount “forgiven” by the credit card company. For example, if you have $10,000 in credit card debt, a successful settlement can reduce your balance by 50%, meaning you only pay $5,000 toward your debt.
When debt forgiveness will have short-term impact on credit scorescan provide quick relief from excessive debt and prevent more interest from accruing on the balance. In the long run, it can be a powerful tool to reset your financial situation. So for those who have been paying high credit card interest, pay off your debt can offer greater savings than waiting for Fed rate cuts to affect card rates.
Bottom line
Credit card debt has become a huge problem for millions of Americans, but while the Fed is working on the credit situation in other areas of the economy, credit card users may not be able to see new or future Fed rate cuts right away. And given the record high interest rates and the compounding nature of credit card debt, it may make sense to explore debt this October. Acting now can result in significant savings and provide much-needed financial assistance.
