People in Nashville use credit cards for all types of reasons. For some, it is the only way they can afford big purchases such as new appliances, while for others with low incomes using credit can help them with their everyday expenses. Anytime a credit card balance is not paid off at the end of the month, the user ends up being charged interest on any remaining amounts.
According to USA Today, the Federal Reserve recently approved an interest hike that will affect any consumers that have accounts with variable rates of interest. This includes credit cards, as well as adjustable rate mortgages and home equity loans.
While the current rate hike is only a quarter of a percentage point, additional hikes are likely to occur later in 2017, as well as over the next few years. Such a small increase may not mean much initially. But for people who carry big balances over the long term, the interest hike may mean higher monthly payments.
As the Motley Fool points out, the average annual percentage rate for credit cards is currently 16.49 percent, which means the rate hike would up that number to 16.74 percent, translating to huge profits for credit card companies and $1.5 billion out of the pockets of American consumers. People who only pay the minimum amount due each month will feel the hit of any interest hikes harder than those who are able to afford to pay more than the minimum. For people who are already struggling with large amounts of debt, even a small increase could have big consequences.