How Inflation and Rising Interest Rates Make Debt Relief More Valuable

Even in a stable economy, managing finances is challenging due to unexpected expenses, fluctuating utility costs, and balancing your budget with self-reward. Add surging inflation and rising interest rates to the mix, and having enough in your paycheck to cover your expenses and save some money can feel impossible. In times like these, high-value debt relief programs like those offered by Century Support Services can be the key to weathering the economic instability.

Is Unsecured Debt Holding You Back?

Unsecured debt, like credit cards and personal loans, can quickly become a heavy burden if you have to rely on them to fill financial gaps. As inflation goes up, every dollar counts, so giving away more of your money to lenders in the form of interest rates starts to set you back even further. Debt relief programs are in place to help you get out of situations like this. Let’s take a look at how inflation and interest rates impact your wallet and how a strategy to reduce what you owe can protect your long-term financial health.

What Is Inflation and How Does It Affect You?

Inflation is a measure of the rate at which the general level of prices for goods and services is rising. When inflation goes up, the purchasing power of your money goes down. Simply put, the $100 bill in your wallet today buys fewer groceries than it did a few years or even a few months ago.

While inflation has always been a factor in the economy, the recent spike is tied to the onset of the COVID-19 pandemic. Supply chain disruptions, increased demand, and various economic factors created a perfect storm, pushing prices higher across the board. For most of us, the cost of living increases, but our income doesn’t. Now you have to make tough choices between cutting back on savings or relying on credit cards to bridge the gap.

How Inflation Affects Interest Rates

High and unpredictable inflation can be dangerous to the economy, so the Federal Reserve (Fed) typically steps in by raising interest rates. Why? If the Fed makes borrowing more expensive (by raising interest rates), consumers and businesses spend less. As spending is cut back, demand for goods and services falls, which, in theory, should stabilize prices. It’s a balancing act intended to bring inflation back to a manageable level, but the effects carry over to anyone already carrying debt.

How Interest Hikes Impact Your Credit Card APR

The Fed’s decisions affect mortgage, auto, and business loans, but they also affect your credit card’s Annual Percentage Rate (APR). Most credit cards have variable interest rates tied to the “prime rate.” When the Fed raises the federal funds rate, the prime rate goes up, and credit card issuers almost immediately pass that increase on to you.

If you carry a balance on your credit cards, a higher APR means more of your monthly payment goes toward interest rather than paying down the principal. Higher interest rates cost you more and extend the time it takes to pay off your debt. Even a slight increase in your interest rate can add hundreds or thousands of dollars to the cost of your debt over the course of a year.

The Squeeze on Your Budget

This situation is a double whammy for anyone with debt. First, inflation lowers the value of the dollar. As mentioned, the cash you used to buy milk, eggs, and gas previously now covers only a fraction of those same items.

When cash flow gets tight, you might have to turn to credit cards to cover the shortage. You might use a card to pay for a tank of gas or a week’s worth of groceries, intending to pay it off later. However, because everyday goods cost more, those balances grow faster than they used to.

Consequently, you’re now facing higher balances combined with higher interest rates. It becomes a cycle that’s difficult to break: you need credit to afford daily necessities because of inflation, but that credit is becoming increasingly expensive to maintain.

Why Debt Relief Is Vital Right Now

In times of rising interest rates and increased costs caused by high inflation, debt relief is the answer for many. These programs take different approaches to helping you get control of high amounts of unsecured debt. Good debt relief programs provide an avenue to pay down debts, reducing how much you spend on interest while freeing up cash flow so you don’t have to continue relying on credit cards. Options include:

• Credit Counseling – One option is to work with an agency to create a Debt Management Plan (DMP). They negotiate with your creditors to lower your interest rates, and you make a single payment to the agency, and they disburse it to your creditors. You can save on interest, but you’re still responsible for paying back your current principal.
• Debt Consolidation Loans – This option doesn’t reduce your total principal either. All of your unsecured debt is consolidated into a single new loan, usually at a lower interest rate, to simplify your payment structure and save on finance charges.
• Bankruptcy – This should be a last resort. It will reduce what you owe, but it’s a legal process that becomes public record and carries severe credit penalties that will remain on your record for 7 to 10 years, no matter how financially responsible you are afterward.
• Debt Settlement – Unlike counseling or consolidation, this does reduce what you owe, and unlike bankruptcy, it’s not a legal process. While it will lower your credit score as debt is settled, you can build it back on your own without the lengthy record of bankruptcy.

How Century Support Services Can Help

We offer inflation debt relief through our SmartTrack™ debt settlement program. It offers a direct path to reducing your balance, often by up to 50% before fees. Advantages include:

• No upfront fees or hidden costs
• Expert support from real people
• Real savings on your principal and total interest
• Results-based program; our fee is collected as each debt is settled

Learn More About Debt Relief

The Certified Debt Specialists at Century Support Services are available to explain the benefits of debt relief if you have high unsecured debt and you’re struggling to make payments. Inflation and interest rates can make hard times even more challenging. Contact us today for a free consultation to see if you qualify for our debt settlement program.