Think about the credit cards in your wallet right now. Can you rattle off the rewards you earn for each of them? What about the interest rates: Can you list those? Turns out, 38% of us don’t know the interest rates for our credit cards, according to Nerdwallet’s 2019 Consumer Credit Card Report.
Half of Nerdwallet’s survey respondents don’t pay their entire balance each month. On top of that, 44% don’t know what interest rate is reasonable for their credit score. When we consider applying for a credit card, we tend to pay a bit more attention to the rewards than we do the interest rate.
Of course you don’t think you’ll need to worry about the interest rate. You’re going to pay the balance in full every single month! But those best-laid plans can easily go awry, leaving you in debt and paying way more than you intended, thanks to hefty interest rates.
Interest rates are still rising
Interest rates have risen in the past five years, from an average rate of 12.74% in 2014 to 17.14% this spring. If you take a look at the last 20 years, interest rates are at their highest right now.
As we’ve mentioned before, paying off debt is one of the best ways you can future-proof your finances from the effects of an economic downturn. If you carry a balance or think you may someday need to, check your credit card terms for your interest rate. Since many credit card interest rates are variable, they can shift slightly over time; when you pay your bill or review your statement is a good time to make sure you know your rate. That knowledge can help you make a better decision about what card to use if you have to charge an unexpected purchase or have some sort of financial emergency.
And if you’re in good standing, it may be worth a phone call to ask if you can get your interest rate lowered. Just because the average is 17% doesn’t mean there’s no chance of getting a better one.