Credit cardholders collectively carry more than $1 trillion in credit card debt across approximately 578 million credit card accounts, according to data from the New York Fed. Plus, the share of U.S. households carrying a credit card balance — revealed to be about 47%, according to a 2023 NerdWallet analysis — exceeds that of mortgages (40%) and car loans (41%).
"The Fed began influencing higher interest rates (through the target federal funds rate) in March 2022. Consumers have seen the immediate impact of this in higher interest rates on long-term loans like mortgages and auto loans, but also on their credit card interest rates," says Elizabeth Renter, data analyst at NerdWallet, who is based in Kansas.
Average interest rates charged on credit card accounts have risen from just over 16% in February 2022, before the Fed began raising rates, to just over 22% as of May 2023, says Renter. "And if you carry a balance from one month to the next, this quiet increase could be costing you hundreds or even thousands of dollars," Renter tells FOX Business.
Raising credit card interest rates from around 16% to 22% may not seem like a big jump, but depending on your balance and how long it takes you to pay it off, those few percentage points can make that debt far more expensive, according to Renter
For example, Renter illustrates, if you have $10,000 in credit card debt and want to pay it off in three years, that higher interest rate means making bigger payments and therefore pay
