Why credit card payments may go up

The Federal Reserve may increase interest rates up to three times a year until 2019. For a Florida resident with a $5,000 credit card balance, that could mean paying an extra $525 per year. Currently, the average interest rate on a credit card is 15.07 percent. Those who have credit card balances are advised to either pay their debts as soon as possible or refinance them.

Credit card debt is not the only type of debt that could get more expensive as rates rise. Individuals who have mortgages or home equity loans with variable rates could see their payments increase soon. Home equity loan payments on a $30,000 loan at 5 percent interest could increase by $18 a month assuming that three quarter-point rate hikes occur in a year. Borrowers may see higher payments on their home equity loans in the next few weeks.

Those who have an adjustable-rate mortgage may not see an increase to their monthly payment for several months. This is because rates are modified on a yearly basis, and those with a $200,000 mortgage could pay an additional $84 a month assuming three quarter-point rate hikes in a year. However, individuals with a fixed-rate 30-year mortgage may not see a change in their interest rate as Fed decisions don’t necessarily play a large role in determining what lenders charge.

Those who are struggling with debt may want to consider filing for bankruptcy. This may stop creditor harassment or prevent a creditor from moving forward with wage garnishment, foreclosure or repossession. Those who have a mortgage or home equity line of credit may be able to use bankruptcy as leverage with creditors to negotiate new loan terms. Unsecured credit card debts may also be reorganized or discharged in bankruptcy.