The Federal Reserve has some control over how much you pay to finance your credit card debt. It sets the federal funds rate, which impacts how much interest is charged on credit cards with a variable interest. When the federal funds rate goes up, the cost of holding a credit card balance does the same.
Currently, card holders seem safe from a sudden increase in this rate. The Federal Reserve has indicated numerous times this year that it is reluctant to move on a big rate increase due to a number of economic and geopolitical factors. Members of the Federal Open Market Committee did note that rates are likely to rise by at least a fraction of a percentage point by the end of the year.
Experts point out that the Fed’s posturing on the federal funds rate could change any day. A shift in the economy or other impact could drive the Fed to raise rates quicker than expected. While a 1 percent increase in the federal funds rate only equates to approximately $150 or so in extra finance charges per year on a $15,000 balance, anything that makes it harder to pay off debt can be taxing on Americans today.
Some financial experts are noting that now is a good time to get financial ships in order, and we think it’s always a good time to right a personal finance vessel. If you are sinking in credit card debt, it’s important that you know you have options. Instead of falling prey to scams and consolidation schemes being floated online, though, consider speaking to a lawyer about debt relief options that include settlements and bankruptcy.
Source: Bankrate, “Pay off your credit cards now. Here’s why.,” Mike Cetera, July 06, 2016