The Federal Reserve raising interest rates the last few times has resulted in billions more in interest payments. With the latest rate hike by the Eccles Building from 2.25 percent to 2.5% on Wednesday, American borrowers can expect to pay even more to service their debt.
According to CompareCards.com, a credit card website, consumers can expect to pay an additional $2.4 billion in credit card interest payments. Since cardholders maintain $1 trillion in collective credit card debt, the 25-basis-point hike will drastically boost the debt payments.
“This latest increase is yet another reason why Americans need to make 2019 the year they focus on wiping out their credit card debt,” said Matt Schulz, chief industry analyst for CompareCards. “As rates rise, it only gets more expensive and takes more time to pay off that debt. That means big trouble for Americans who are already loaded down with debt and struggling to make it from paycheck to paycheck.”
Before interest rates go up even further, it would be a prudent step to do one of three things:
– Pay off your debt.
– Refinance your debt.
– Consolidate it now.
It should be interesting to see if Americans will rein in their spending and start focusing on their obligations. Either way, borrowing and servicing the debt will be enormous.
I do not think that most people with credit card debt will change their spending habits. Many have just added debt payments to their budgets and continue to add more debt each month. These small increases are just not enough to do it. I for one have paid off $15,000 in credit card debt since starting my SS benefits at age 62 in March 2018. I will be debt free in Nov 2019, with interest payments on credit card debt at zero in March 2019, thanks to several cards with zero interest until Nov 2019.