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How will the latest rate hike impact your credit card debt?

Some New Jersey residents, as well other Americans, choose not to follow the goings-on in Washington, D.C. However, many decisions by those elected and appointed to jobs in the federal government can have significant impacts on people's lives and finances.

A prime example is the recent quarter-point increase in the interest rate charged for federal funds. This seemingly-small change is predicted to result in about $1.5 billion dollars more in finance charges collected on credit cards alone.

Therefore, if you carry a balance on any of your credit cards, you'll be paying more just for having that balance. According to NerdWallet, that breaks down to about $2.50 a year for every $1,000 in unpaid credit card debt.

That may not seem like much, but other debit products will be impacted as well. For example, if you have a variable rate mortgage, expect your interest rate to increase. If you get a new mortgage, with a fixed-interest rate, it's now over 4 percent — up half a percent from five years ago.

The good news is that if you are still paying off federal student loan debt, as many Americans are, those interest rates are fixed and therefore won't be impacted by the rate hike. But if you have a loan from a private entity, you will probably see an increase.

If your credit card debt is already out of control — as it is for many people — an interest rate hike will only make it worse. It may be time to seek a solution for getting out from under overwhelming debt. An experienced New Jersey bankruptcy attorney can provide you with options and guidance.

Source: CNBC, "How the Fed rate hike will affect your finances," Jessica Dickler, June 14, 2017

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