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As interest rates climb, credit card debt may skyrocket

Credit cards are an unavoidable part of life for many in Florida. Whether used to build credit or bridge the gap between paychecks, these tiny rectangles have undoubtedly become part of everyday life. Unfortunately, so is credit card debt, and for some people it could be getting worse.

In March 2018, the interest rate for credit cards reached its highest pinnacle in at 18 years. Averaging out to 15.32 percent, this could leave some consumers with more debt than they are able to repay. This high average interest likely affects struggling consumers the most, as they are more likely to have higher overall interest rates than those who can afford to pay their bills in a timely manner.

But why are interest rates shooting up now? Most people obtain credit cards that come with variable interest rates. While these interest rates cannot be reassessed and increased based on a person's perceived risk as was once done in the past, they can still change. Individual interest rates are directly linked to the United States' prime rate, which is linked to its federal funds rate. Because of this, any increase by the Federal Reserve also increases interest rates for consumer credit cards.

High interest rates can quickly turn a manageable balance into something that is impossible to overcome. Many Florida consumers struggle with repaying this type of massive credit card debt, with some only paying off interest for years while the balance continues to grow out of control. Although it may feel isolating, countless consumers face this problem and struggle to find a solution. For some, the most reasonable approach is to seek protection through bankruptcy, which can help address current debts while paving the way for a more secure financial future.

Source: Forbes, "Cost Of Credit Card Debt Continues To Soar", Nick Clements, May 17, 2018

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