If you have credit card debt, do not get caught when interest rates rise!

Updated

Telling people that they should pay off their credit cards on a personal finance blog is a little bit like a hitting coach telling Manny Ramirez to "Keep your eye on the ball!"

But this time, I'm serious. There are special circumstances that make it more important than ever to pay off any credit card debt you might have now. Before it's too late. Here's what's happening: In an effort to get the economy moving, the Fed is holding down interest rates at artificially low levels. But at some point, those interest rates will have to rise in order to fend off the specter of inflation.

When that happens, your minimum monthly payments will soar -- and if you're looking to get out of debt faster, you'll have to peddle a heck of a lot faster to keep pace. As I wrote on DailyFinance:

Of households that have one or more credit cards, the average debt load is around $10,600. The prime rate is currently 3.25%, so an account with a balance of $10,600 with a variable rate of prime plus 8% would require a minimum monthly payment of $205, according to this calculator (the actual number will vary depending on how a given borrower's minimum payment is calculated).

That's manageable because the prime rate is very low right now. But in the late 1970s, it soared to well over 10%, and hit 19%. What if it goes to 12% on inflationary concerns? The minimum monthly payment jumps to $283 -- an increase of 38%.

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