If you have a credit card then you may worry that interest rate rises will be a big problem for you. This could be the case but it very much depends on how you use your credit card. People use their cards in different ways and for some a change in interest rates will make no difference at all but for others they will find that it does. So it is good to think about the way that you use your card and whether it will have a big impact on how much interest you will pay.

If you repay in full

If you repay your credit card in full each month then you will never be paying interest on it. This is because you only pay interest on any outstanding balance that you leave from month to month. So, if you repay in full all of the time then you never pay interest and so the interest rate will not be relevant to you.

However, it can be wise to protect against forgetting to repay in full. If you set up a direct debit to repay for you each month just like you would with a regular loan then if there ever is a circumstance where you forget about paying the bill, it will be repaid for you. You may think this will not happen but sometimes we get busy or distracted, perhaps there is an emergency or something and it just goes out of our head. It is also good to always stay aware of your spending to make sure that you are not spending more on the credit card than you will be able to afford to repay. If you just make sure that you check the balance every so often or if you have bought something expensive, are careful about everything else you buy then you should be okay.

If you have a card balance

If you do not repay your card balance in full each month then you will be paying interest on the outstanding balance. It could be that you repay just the minimum or that you pay a bit more but do not clear the whole amount. In either case you will pay interest on any unpaid balance. If the interest rates go up then you will end up paying more interest on those unpaid balances. Therefore, the credit card will get more expensive.

If the rate only goes up by a small amount then it may not make a significant difference to the cost of the credit card. However, if it goes up a lot, this will make a difference as will a series of small increases. It is wise to watch out for these as there is action that you can take in order to help. There is not necessarily a need to worry, but a need to act.

What can I do about rate rises?

There are things that you can do which should help you if the rates go up. Firstly, see whether you can repay any of the balance that is outstanding. If you have any spare money then use it to repay a bit and this will mean that there is a lower balance to charge interest on and you should be able to manage the interest payments easily. It is in fact wise to keep your balance as low as possible all of the time so that you can save money.

Another thing you should do is to look around to see how rates compare. You may find that you could swap to a credit card that is cheaper because it has lower interest. This is well worth considering even if you do not have an outstanding balance as if ever you cannot repay in full, you will not be paying so much. There are comparison websites where you can compare credit card rates which can be handy but not all credit cards will be on there. Therefore, do a bit of your own research as well so that you can be sure that you have taken all of the cards into consideration.

We have no influence over rate rises and predicting them can be hard as well. Therefore, the best thing that you can do is to have a plan that you can put into place if they do go up. Think about whether there are places that you could cut down your spending so that you can afford the higher interest, for example. You might also be able to earn more money somehow that would cover those costs. Think about some realistic things that you could try and you could try them right away and use the money you gain to whittle down the credit card bill or you could just keep the ideas ready for when you might need them in the future

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