Fed Rate Hike to Cost Credit Card Holders This Much More in Interest

The Federal Reserve’s third quarter-point increase in its short-term lending rate since the financial crisis should be of concern to U.S. credit consumers, who are racking up credit card debt at a record pace.
WalletHub recently reported that Americans added $60.4 billion in credit card debt by the end of the fourth quarter last year, bringing total outstanding card debt to $978.9 billion — that’s the highest since the fourth quarter 2007, which saw the outstanding debt mark at $981.8 billion.
With the latest 25 basis-point increase in its target interest rate, the Fed policy makers are virtually ensuring that consumers will spend more on credit card interest. WalletHub says that the latest Fed move will cost U.S. consumers roughly $1.6 billion in extra credit card finance charges during 2017.
Paying more in finance charges adds to an already debt-ridden situation for credit card users, since WalletHub expects outstanding balances to break the all-time record (set in 2007) in 2017 — likely surpassing the $1 trillion mark.
Higher mortgage and auto loan rates are more challenging to predict because they are longer-term borrowing products with fixed rates. WalletHub says that if markets react to this month’s Fed hike like they did to the Fed’s December 2016 move, the following could happen:
• The APR on the average 30-year fixed rate mortgage rose from 3.48% in late June 2016 to 4.32% at the end of the year.
• The average APR on a 48-month new car loan rose from 4.25% in August 2016 to 4.45% in November (the most recent data available).

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