Credit Card Interest Rate Hikes Could Be Coming. Here's How to Prepare

Consider yourself warned.

If you owe money on your credit cards, you're no doubt in good company. Sometimes credit card debt is inevitable, such as if you get stuck with a costly home or car repair and you don't have the money in savings to cover it.

But if you're carrying a credit card balance, now is a really good time to do what you can to pay it down. That's because your balance has the potential to get more expensive over time. In fact, the interest rate on your credit card debt could end up rising sooner than expected for one big reason.

Your debt could start costing you more

When you lock in a fixed-rate loan, like a home equity loan or personal loan, you get the benefit of having the same interest rate apply to your debt throughout the life of your repayment period. But when you carry a credit card balance, you don't get that benefit. Rather, credit card interest rates can be variable, which means the interest rate you start off paying on your debt could grow over time.

That's a risk those with balances on their credit cards face today. The Federal Reserve has plans to meet later this month, and there's a strong chance it will opt to raise interest rates once again. The Fed has actually been raising rates all year in an attempt to cool inflation. And if it implements yet another rate hike in late July, it could hurt credit card borrowers in a very big way.

That's why now's a really good time to work on chipping away at your existing credit card balances. The sooner you do, the more financial pain you might spare yourself.

How to get rid of credit card debt

If you have a large credit card balance, you may not be in a position to eliminate it in full anytime soon. But any amount you're able to whittle down will mean spending less on interest.

To that end, it pays to take a deep dive into your expenses and find some to cut. Any cash you're able to free up can be used to chip away at your existing balances. Similarly, if you're able to work a side hustle, the earnings you bring in can go toward paying off your debt.

Meanwhile, if you owe money on different credit cards, it pays to look at doing a balance transfer if your credit is strong and you're therefore likely to qualify for one of these offers. Doing so is a good way to consolidate your debt, and since many balance transfer offers come with a 0% introductory interest rate, that's a good way to buy yourself a reprieve from interest as you work to pay off your balance.

Another option to consider is taking out a personal loan or home equity loan, using its proceeds to pay off your credit cards in full, and then paying that loan back in installments. The benefit there is getting to lock in a fixed interest rate on your debt before borrowing gets more expensive.

Although credit card debt is bad news, right now, it's an especially dangerous thing in light of potential interest rate hikes. The best way to protect yourself is by taking steps to work your way out of debt, all the while making it as inexpensive to pay off as possible.