For those struggling with bad credit, making payments on time may be the the most important consideration. For that reason, it’s important to stay on top of interest rates, as they directly affect how much consumers have to pay.
According to new figures released by Synovate, interest rates have hit a nine-year high. CNNMoney says that the current average is sitting at about 14.7 percent, up from 13.1 percent a year earlier. That number is 11.45 percentage rates above the prime rate, which is the largest gap in 22 years.
The passing of the CARD act last year restricted the credit card companies’ ability to raise rates after a missed payment, so many raised the average rate as a way to maintain profits.
However, the economy has also played a factor in the higher rates. Despite consumers struggling with debt, it hasn’t stopped many from swiping their cards, with activity up 6 percent in the first half of 2010.
“This is largely due to consumers still charging on their credit cards, but being unable to pay,” said study director Lauren Guenever. “Default rates should remain high as long as unemployment remains high.”
Bad credit consumers who are looking into a car loan may want to curtail their spending so that their payments are manageable in light of interest rate increases.