Credit cardholders expect further interest rate shocks in 2023 Be prepared.

Greg McBride, Chief Financial Analyst for Bankrate at the CFA, expects average credit card interest rates to rise to 20.5% this year as the Federal Reserve continues to raise interest rates. I'm here. As of December 28, 2022, the average interest rate was close to 19.6% for him, according to Bankrate data. By comparison, the average credit card interest rate was around 16.3% at the beginning of 2022.

“Credit card rates will reach record highs in 2022 and rise further in 2023,” says McBride. “A brisk Fed means interest costs will continue to rise for cardholders with outstanding balances. This means that your interest rate will increase by 1 percentage point.The average interest rate available to new cardholders will increase overall in 2023 due to factors such as the introduction of new offers and the retirement of older cards.

Interest Rates

• Average credit card interest rate sat close to 16.3% in early 2022, jumping to 19.6% by the end of 2022
• Card interest rates will continue to rise in 2023 after record highs in 2022

What Happened to Credit Card Rates in 2022

Credit Card Interest rates have spiked with the Fed rate hike in 2022.

According to bank rate data, The lowest average credit card rate was 16.28% from late January to mid-February, but in July the average interest rate exceeded 17%, 17.01% to be exact.Just two months later, The average rate broke through the 18% barrier (18.03%), and in early November the average rate exceeded 19% (19.04%).

We ended the year with the highest average rate of 19.6% as of December 28, 2022.

Interest rates continued to rise throughout 2022 and credit card balances continued to grow. “It was because inflation was so high that it put a strain on household budgets,” he says McBride.

“Inflation is rising and household finances are very tight, so as long as many consumers are shopping with credit cards, the high interest rates alone will discourage the use of credit cards.” not because we need it, but because we need it.”

— Greg McBride, CFABankrate Chief Financial Analyst

Popular to buy now, likely to pay later

As credit card interest rates continue to rise, more consumers may turn to buy now, pay later (BNPL) instead. BNPL allows customers to make recurring, interest-free payments for purchases such as TVs and sofas for a set period of time.

David Shipper said his advisory firm Aite-Novarica said, “As consumers want to avoid credit card interest rates and take advantage of the fixed payments and terms of BNPL loans, they are turning to BNPL.” will continue to shift.”

The research firm Insider Intelligence reports that his number of BNPL users in the United States will increase from 79 million in 2022 to 88.2 million in 2023, a year-on-year increase. He predicts an 11.7% increase.

Consumers' Next Steps

Consumers can't stop card issuers from raising interest rates, but credit card interest rates steps can be taken to ensure that they do not overuse their budgets. Here are four recommendations:

Track interest rates

If any of your credit cards are offered at floating rates, meaning that the APR goes up or down in response to the Fed's actions, Ligia Vado, senior economist at the Credit Union National Association, advises to monitor changes in the card's rates. Advice.

In the current environment of rising interest rates and heightened uncertainty, consumers need to ensure that rising interest rates do not catch them off guard with unnecessary and large financial burdens. There is,” she says Vado.

Pay off credit card debt

Mr. and perhaps combine that effort with a 0% balance transfer offer offering 0% APR for 12-21 months. This type of offer allows you to transfer high interest credit card debt to a balance transfer credit card with the goal of getting rid of that debt before the 0% interest rate expires.

Avoid Unnecessary Purchases

McBride will not add any more purchases to your credit card unless you are able to pay the balance in full at the end of the month to avoid interest charges. It is recommended. For years, many consumers have not understood the impact of rising interest rates on them,” Schipper adds. “Best advice is nothing new. Stay within your budget and keep your credit card balance as low as possible.”

Look for 0% first-year APR offers. sho

When you look for a house or a car, you do some shopping. Experts suggest doing the same with new credit cards.

“Credit card rates rise rapidly when rates rise and fall when rates fall,” he says McBride. “The Federal Reserve does not expect to start cutting rates before 2024, so for cardholders, their best hope for relief from high interest rates is to hunt for better deals. Or take advantage of other low-interest balance transfer offers to speed up your debt repayment efforts and pay off your credit card debt in full.”