Credit card rates face 27-year high amid Fed's interest rate hikes

Yahoo Finance columnist Kerry Hannon explains how the Fed's latest interest rate hikes are affecting credit card rates for consumers.

Video Transcript

RACHELLE AKUFFO: All right. Well, the fed's recent rate hike could be having an impact on your credit card. Yahoo Finance's Kerry Hannon is here with the details. Kerry, what are you keeping an eye on?

KERRY HANNON: Well, hi, Rachelle. Yeah, up, up, and away as they say. This is-- credit card rates go in tandem with the fed rating price increase. So it usually takes 30 to 45 days before you see it. But right now, the variable credit card rates are already almost at their all time highs. It's the highest it's been in 27 years at 18.1%. By the end of the year, the experts I've talked to say we're going to easily top 19%, which would be-- surpass the all time high, right?

So this is something to pay attention to because credit cards charge three, four, five times what other consumer credit, like mortgages, or car loans are. So it's really important that you get to paying these things off now. Because it is really since the beginning of the year, Rachelle, I mean, rates, percentage rates, have climbed close to four percentage points since the start of the year.

So consumers are really feeling the bite, and particularly those that are carrying this debt. This is who we're talking about, the variable rates month to month. And a recent study by creditcards.com says that 60% of people say they've been carrying debt revolving month to month for over a year. So now is the time to really buckle down and pay attention.

SEANA SMITH: So Kerry, for people out there who do have debt, they want to pay it off, they want to do that quickly, what are some of your tips on the best way to do that?

KERRY HANNON: Yeah, really. OK, so if you qualify, look to see if you can get one of these balance transfer credit cards. This can be a 0% percentage rate for 21 months or so. And it gives you that pause button where you can start paying down. Then it will adjust back up. But there's a small transfer fee of maybe 3% to 5% in order to switch your balance to one of these cards. But really look for one if you can. Because that will give you some breathing room.

Number two, of course, do a budget. What can you-- start on a payment plan and do automatic payments so you're not late, that you're more than the minimum payment at least. You can widdle, widdle away. Some people look for consumer loans. That's a possibility. It's definitely going to be a lower rate if you can qualify for one, around 6%.

And the final thing is if you're really in a pinch and you're really backed into a corner, there are nonprofit credit counselors out there who can help negotiate with your credit card issuer. And the Department of Justice has a link on its site to ones that they have vetted. So that's what I would suggest to people. But really, this isn't the time to let this keep snowballing because it is a huge domino effect.

SEANA SMITH: Very important info for people out there who are looking to lower their credit card debt. Kerry Hannon, thanks so much. Have a great-- good weekend.