Your credit card debt is about to get much more expensive. Rising APRs means revolving balances will be more expensive to pay off. The average credit card balance was $5,221 in 2021, according to Experian, and balances have been growing, according to the Federal Reserve (although it does not provide an average balance for individuals).
On Wednesday, the Fed announced it's raising its benchmark interest rate by 0.75%, the fourth hike this year.
The goal of raising rates is to help bring down inflation, which surpassed 9% in June. When loans are more expensive, there's less demand. But doing so means—at least short-term—that Americans who have racked up debt because consumer prices have increased so much over the past year are going to pay even more when financial companies in turn increase the APRs on credit cards.
The average credit card interest rate hit 17.46% last week, according to CreditCards.com. That's a 1.3 percentage point-increase from a year ago, "the single biggest yearly increase that CreditCards.com has recorded in more than a decade."
Nearly 40% of consumers already cannot put any money into savings, according to a recent analysis by the American Consumer Credit Counseling. Higher interest rates will continue to set people back, with experts expecting balances to reach an all-time high this year, even before the holiday season.
Many are already reigning in spending.
