Tags: Fed | Rate Hike | Consumers | Credit Card Interest

CNBC: Fed Rate Hike Will Cost Consumers $1.6 Billion in Credit Card Interest

CNBC: Fed Rate Hike Will Cost Consumers $1.6 Billion in Credit Card Interest

By    |   Wednesday, 15 March 2017 12:39 PM

The Federal Reserve’s expected interest-rate hike is much more than a soundbite on TV or headline on a website.

It will reach into your wallet and take out a few bucks, if not quite a few more.

For the 157 million Americans who carry a balance on their credit cards, today's expected Fed action will be bad news, CNBC.com reported.

A quarter-percentage-point increase in the Fed funds rate will cost the 157 million Americans who carry a balance on their credit cards roughly $1.6 billion in extra finance charges in 2017, according to a WalletHub analysis.

Consumer borrowing is closely watched for signs of consumers' willingness to take on more debt to support their spending. Consumer spending accounts for 70 percent of economic activity.

"The cumulative effect of interest rate hikes is going to begin mounting," Greg McBride, Bankrate.com's chief financial analyst, particularly on variable rate loans such as credit cards, home equity lines of credit and adjustable-rate mortgages, which could rise within one to two statement cycles, told CNBC.com.

Many credit cards carry a variable rate, which means there's a direct connection to the Fed's benchmark rate. The quarter-percentage-point rate hike means you'll pay an extra $2.50 a year for every $1,000 of debt, according to NerdWallet.

The Fed's increase is likely to raise the amount the average household pays in credit card interest to $1,350 from $1,333 a year, NerdWallet said (assuming the average credit card APR jumps to 19.61 percent from 19.36 percent).

Meanwhile, total consumer borrowing rose $8.8 billion in January compared to an increase of $14.8 billion in December, the Federal Reserve recently reported. It was the smallest monthly gain since borrowing only went up $7.6 billion in July 2012. The Fed's monthly credit report does not cover mortgages or other debt secured by real estate such as home equity loans.

A recent survey by the Federal Reserve Bank of New York showed that total outstanding household debt, which does cover home mortgages, rose to $12.58 trillion at the end of last year. That's about $100 billion shy of the all-time high set in the third quarter of 2008, just before a financial crisis set off by sub-prime mortgages plunged the country into the worst economic downturn since the 1930s.

Meanwhile, a good chunk of the $330 billion or so that will be refunded back to taxpayers in 2017 will go to overdue bills and necessities.

The percentage of consumers planning to put some of their refund toward paying down debt rose to 35.5 percent, from 34.9 percent last year, according to an online survey of 7,609 taxpayers by the National Retail Federation and Prosper Insights & Analytics.

The percent of consumers saying they needed to put the refund toward everyday expenses fell to a record low of 20.9 percent.

(Newsmax wires services the Associated Press, Bloomberg and Reuters contributed to this report).
 

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The Federal Reserve's expected interest-rate hike is much more than a soundbite on TV or headline on a website.It will reach into your wallet and take out a few bucks, if not quite a few more.
Fed, Rate Hike, Consumers, Credit Card Interest
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2017-39-15
Wednesday, 15 March 2017 12:39 PM
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