The Federal Reserve recently announced that it will raise its benchmark rate by a quarter of a percentage point. More rate increases are expected in the months ahead.
Many people don’t keep up with the actions of the Fed. They don’t realize how much they can impact their own finances.
However, it’s important to realize that they affect anyone who has a credit card balance. That includes some 157 million Americans. An analysis by WalletHub estimates that this recently-announced rate hike will mean an additional $1.6 billion in finance charges this year for credit card holders with balances.
On average, this means an extra $17 per year per person. While that seems minor, a spokesperson for NerdWallet says that “these rates are expected to continue to rise, and each change adds up and increases your debt burden.”
It’s not just credit card holders who will be impacted. There are many other types of variable-rate credit, including adjustable-rate mortgages, home equity lines of credit and car loans. Those loans and lines of credit can carry significantly larger balances than credit cards. The quarter-percentage-point rate hike means that people will pay $2.50 on every $1,000 of debt, each year, according to NerdWallet.
If you’re already mired in credit card debt, any interest rate hike will only make things worse. If you’re only paying the minimum required payment each month, the bulk of your payment is going towards interest.
An experienced New Jersey bankruptcy attorney can help you sort through your options and find the one that is best for you to get out from under your credit card debt and get your financial life back on track.
Source: CNBC, “Fed hike will cost consumers $1.6 billion in credit card interest,” Jessica Dickler, March 15, 2017