The Federal Reserve’s move this week may have dire ramifications for people who carry balances on their credit cards from month to month.
The central bank gassed up its benchmark interest rate another three-quarters of a point — the fourth time it has done so this year. That, in turn, will trigger credit card interest rate hikes, which typically go hand in hand with Fed increases.
“Most credit cardholders should see the Fed rate hike passed through to their rate within a statement cycle or two,” Ted Rossman, senior industry analyst at Bankrate.com told Yahoo Money.
Credit card debt has never been pretty. But this is particularly bleak. The average variable credit card rate is now 18.77%, the highest since February of 1993, according to Rossman.
“It will soon blow past the all-time record of 19.00% set in July 1991,” he said. At the start of the year, the average credit card charged 16.30%.
Consider this: The average credit card balance is $5,270 according to TransUnion. Factoring in this week’s hike, if you make minimum payments at 19.52% APR, that will keep you in debt for 197 months and cost $7,128 in interest.
“Every quarter-point increase equates to about $100 in additional interest over the life of your minimum payments,” Rossman said.
Credit card debt carried month to month is the most common type of debt held by 42% of adults age 30 and over, according to a new report by AARP. The survey of 4,817 adults ages 30+ was conducted by NORC at the University of Chic
