NASHVILLE, Tenn. (WTVF) — Paying more for something than it actually costs doesn't really seem like a good idea, right? But that's exactly what financial experts say is happening because interest rates on credit cards are now at an all time high.
This is why it's important to think about how much you're going to spend and how much you can afford to spend and come up with a budget now, so you don't go overboard and get stuck with a lot of high interest debt!
It's no secret the cost of basically everything it much higher than it used to be. That includes the cost of having a credit card from a retailer.
"It does become a security for some people and they have to spend it but if you can avoid it, avoid it."
That sentiment stands true with financial experts, saying if you use it pay off the whole balance at the end of the month.
"Your credit utilization is the second biggest factor impacting your credit score. So when you're maxing your credit cards out that can have a very significant impact on your credit score."
And with average interest rates at record highs for retail credit cards it can be a balancing act to stay on top.
"Credit card debt is one of those things that is easy to get into and hard to get out of."
Financial experts like Ted Rossman say the interest rates for general purpose credit cards are at an average record high of about 21%...But retail credit cards have an interest rate of about 8 points higher... Coming in at about 29%
"In part it reflects that these cards are easier to get they're not as selective about credit quality and that leads to higher rate," Rossman said.
With holiday shopping around the corner more and more retail credit cards will be used.
"We are going to be offered these at the check out counter this holiday season in fact the fourth quarter by far is the time of year that most people sign up for these."
Not only is credit card debt is the highest it's ever been and interest rates are at an all time high, but more Americans are piling up credit card balances and falling behind on their payments. Some people are pulling money out of their 401k's to help pay what they owe. Something financial experts say you should only do as a last resort.
