The latest increase will likely raise the APR on your credit card 0.25%. In combination with other factors, such as your credit score, the prime rate helps determine the Annual Percentage Rate, or APR, on your credit card. But the Fed’s rate is the basis for your bank’s prime rate. The Fed doesn’t directly dictate how much interest you pay on your credit card debt. HOW WILL AN INCREASE AFFECT CREDIT CARD RATES? Total credit card balances were $986 billion in the fourth quarter of 2022, according to the Fed, a record high, though that amount isn’t adjusted for inflation.įor those who don’t qualify for low-rate credit cards because of weak credit scores, the higher interest rates are already affecting their balances. ![]() ![]() The most recent data available showed that 46% of people were carrying debt from month to month, up from 39% a year ago. “Even if this proves to be the final Fed rate hike, interest rates are still high and will remain that way.”Įven before the Fed’s latest move, credit card borrowing had reached the highest level since 1996, according to. “Consumers should focus on building up emergency savings and paying down debt,” said Greg McBride, 's chief financial analyst. The new rate will also increase monthly payments and costs for any consumer who is already paying interest on credit card debt. ![]() The Fed’s goal is to slow consumer spending, thereby reducing demand for homes, cars and other goods and services, eventually cooling the economy and lowering prices.įed Chair Jerome Powell has acknowledged in the past that aggressively raising rates would bring “some pain” for households but said that doing so is necessary to crush high inflation.Īnyone borrowing money to make a large purchase, such as a home, car or large appliance, will likely take a hit.
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