Tags: credit card | Federal Reserve | interest | rate

CNBC: Credit Card Debt Could Come Back to Bite Amid Fed Rate Hikes

CNBC: Credit Card Debt Could Come Back to Bite Amid Fed Rate Hikes

By    |   Monday, 10 August 2015 01:28 PM

While the Federal Reserve prepares to begin raising interest rates as soon as next month, credit card debt is on the rise.

That may prove to be a toxic combination for the people running up that debt, because Fed rate hikes will push up rates for credit card debt too, CNBC reports.

Credit card debt rose 3.2 percent in the 12 months through May to $901 billion. That represents a 7.3 percent increase from $839.5 billion at the end of 2010.

Many people have major debt loads. The National Foundation for Credit Counseling figures that 35 million people carry at least $2,500 in credit card debt every month.

Sean McQuay, a credit card associate at Nerdwallet, told CNBC a 1 percentage-point Fed rate increase would cost credit-card-debt holders another $9 billion a year.

The Fed is expected to boost rates 25 to 50 basis points this year and to reach a total of 100 basis points next year. The central bank has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.

Another ominous sign for American consumers is a decline in economic confidence. Gallup's Economic Confidence Index fell to negative 14 for the week ending July 26, a 10-month low and down from negative 12 a week earlier.

The index has gradually slid since peaking at positive 5 in late January, a record high since Gallup began tracking economic confidence daily in 2008. The weekly numbers have consistently stood in negative territory since mid-March.

Gallup's Economic Confidence Index averages two components: how Americans view the economy currently and whether they see it improving or getting worse.

The current conditions component slid 4 points in the latest week to negative 9. The economic outlook component registered negative 18, unchanged from a week earlier.

So what's causing the pessimism?

"A number of factors may be affecting how Americans view the direction of the country's economy, including unsettled economic conditions in Europe and in China and the volatility of the U.S. stock market," writes Rebecca Riffkin of Gallup.

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While the Federal Reserve prepares to begin raising interest rates as soon as next month, credit card debt is on the rise.
credit card, Federal Reserve, interest, rate
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2015-28-10
Monday, 10 August 2015 01:28 PM
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