No Lack of Interest in Credit Cards as Consumers Face Another Hike

by Brian Riley 0

Stack of credit cards

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.

  • Credit-card borrowers brace yourselves.

  • The U.S. central bank is expected to hike its key interest rate another quarter of a percentage point Wednesday.

  • 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.

  • At the end of March, the average interest rate charge on cards, according to the Fed, was 15.32%, an 18-year high.

  • 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!

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