‘Now is the time to act’ on credit card debt, experts say

The new year may bring higher interest rates that could increase the debt burden for many Americans.

“If the Fed were to raise rates another 100 basis points, one full percent, your credit card rate would go up one percent,” said Bankrate.com’s Chief Financial Analyst. Greg McBride on Yahoo Finance Live (video above) . “So this is very important. If you’re carrying a balance, now is the time to take action.”

He advises credit card holders to increase their payments as soon as possible and look for a 0% balance transfer card, which has no interest on balance transfers. for a set period, usually six to 18 months.

“Take one of those low-cost trade-in offers, and your debt repayment efforts will be compromised because the most expensive debt you have will continue to be very expensive,” McBride said.

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According to McBride, a good credit score will also be important this year when making big purchases like cars. He predicts the cost of car loans will increase to 6.9% for new cars and 7.75% for used cars.

“Your credit score is going to be more important, especially when we start to see a weaker economy,” McBride said. “That would be the difference between paying 7% or paying a rate that might double.”

While car loan rates may go up, McBride said the increase won’t be enough to keep people who own cars from buying cars.

“It’s not the wind that I think a lot of people think it is. Currently, car loan rates, another percentage increase makes a difference of about 25 dollars a month in payment, but $25 on what is already paid is $800. Anyone going down from the SUV in the comparison based on the price increase? Probably not,” McBride said.

McBride told Yahoo Finance Live that there is one important step to keep in mind no matter how high the credit score is and the cost of the loan.

“The important thing for borrowers here is to make sure you have good credit and shop around,” McBride said.

Ella Vincent is the personal finance writer for Yahoo Money. Follow him on Twitter @bookgirlchicago.

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