With the Federal Reserve raising interest rates by another 25 basis points, United States consumers can expect to pay hundreds of millions of dollars more in additional credit card interest this year, says a new report.
According to new analysis from WalletHub, a personal finance website, the next 25-basis point increase in its target interest rate is expected to cost American consumers approximately $1.6 billion in extra credit card finance charges in 2017.
This is bad news for an already deeply indebted population. The U.S. is roughly $3 billion away from breaking the all-time credit card debt record of $981 billion set in 2007. The average household maintains a little more than $8,000 in credit card debt.
When rates go up, it is going to cost more U.S. households to service that debt.
Researchers from WalletHub note that it can be difficult to project where auto loans and mortgages are headed, but it is safe to say that it’s going to impact your pocketbook. Here is what the website found in regards to new car loans and 30-year fixed rate mortgages:
“The APR on the average 30-year fixed rate mortgage rose from 3.48% in late June 2016 to 4.32% at the end of the year,” the analysis noted.
“The average APR on a 48-month new car loan rose from 4.25% in August 2016 to 4.45% in November (the most recent data available).”
You can expect to face higher interest rates in the coming years as the Fed will likely raise rates to combat rising inflation.
The answer is simple, do not carry a credit card balance for longer than 6 months. Or better yet pay the balance off each month. The average $8,000 credit card debtor will have to pay an additional $20 per month and that amount comes down as the balance drops. I think most borrowers can handle it. I moved half of my credit card debt to a fixed interest rate loan last year.
I also pay more than the payment on the loan each month to save even more in interest charges. Also, as the balance comes down I cannot borrow more money, like a credit card.