Credit card interest rates continue spiral upward

Average now at 26%, some store cards near 30%

Thomas Perumean
October 15, 2019 - 8:28 am

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A new report from Creditcards.com says the average annual percentage interest rate is 26.01%.  And, cards issued by chain stores can have an average rate of 29.99%.  

The new, higher rates come as prime lending rate, the rate charged by the Federal Reserve Bank to its best customers, hits a new low.  

We asked Financial Planner Randall Waesche why credit card interest rates are going in "wrong" direction.  "There's a lot illiquidity in short term money.  And you may see credit card companies taking advantage of that and moving up their interest rates to the consumer."  

Waesche is unabashed about his feelings about predatory lenders like credit card companies:  "For them to move it to 26-28 percentage points, that's simply corporate policy trying to extract every nickel from every person who can't afford to pay it!"

If paying 26% sounds like a lot, imagine making a major store purchase utilizing a store credit card, those can charge right up to 1/10th short of 30%.  Waesche explains way store credit is an even worse deal when it comes to borrowing: "From the company's perspective, they've had difficult times moving the product price up.  So the purchase-versus-sales margin are shrinking.  And so they're making it up offering credit at extraordinary rates."

And Waesche says you might never know the interest rate until you find out when the bill arrives.  

"You're talking to a financial advisor that doesn't like debt to begin with!" Waesche exclaims.  He understands the need to carry some debt, but too much debt is a killer.  

He says bad things like unforseen events, loss of income due to job loss or injury happen you need to get out of debt, fast: "If possible, pay off the highest interest balance first.  Second, pay off the smallest balence next. That will give you more dollars to pay off the next highest card balance."

And if you're in a period of lost or lowered income, "Put your credit card on ice, cut it up, get rid of it."

Waesche says credit card companies tease people with low initial interest rates, but as time goes on those rates go slowly or all at once if you have a late or missed payment.  

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