Rates are rising for consumers; it will not hurt banks but households will start to feel it. Watch for another announcement today, June 13, as USA Today sets the stage.
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Credit-card borrowers brace yourselves.
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The U.S. central bank is expected to hike its key interest rate another quarter of a percentage point Wednesday.
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And that means higher interest rates on plastic.
USA Today projects the impact will be $2.2 billion for this hike, plus a similar hit earlier this year. With two more hikes anticipated in 2018, that’s close to $10 billion more in consumer liability. Figuing that there are 130 million US households, the math is pretty simple. Increased interest will cost households close to $1,000 a year. Another way to look at it is to consider that is $88 a month out of consumer budgets.
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At the end of March, the average interest rate charge on cards, according to the Fed, was 15.32%, an 18-year high.
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But that exorbitant rate is likely to go up to 15.57% within two billing cycles, CompareCards says, as lenders pass along the higher rates to clients.
Many other factors affect the consumer’s financial well-being. Watch for inflationary signs as gas prices wobble. If you are a bank, it is time to focus on infrastructure and collection management; if you are a consumer, buckle your belt and pay down every penny of your debt quickly!