Bad vietnam news for those with credit card debt: The Federal Reserve hiked its key rate on Wednesday by a quarter percentage point and, as a result, your own interest rates could rise almost immediately.
The Fed raised the rate for federal funds by a quarter percentage point, to 0.75% to 1% at the end of its two-day meeting on Wednesday, and signaled two further rates rises in 2017. In other words, the Fed announced an increase in how much banks will be charged to borrow money from Federal Reserve banks. (The Fed raises and lowers interest rates in an attempt to control inflation.)
That increase will most likely eventually be passed on to consumers, said Sean McQuay, a credit card expert at the personal finance website NerdWallet. Many households with credit card debt — the average household carrying credit card debt has more than $16,000 — will likely take a hit.
Here’s how the latest Fed rate increase could impact your credit cards and bank accounts.
Credit cards
Because a rise in the federal funds rate means banks will likely pay more to borrow from the Federal Reserve, they may pass that cost on to consumers.
The Fed raised the rate for federal funds by a quarter percentage point, to 0.75% to 1% at the end of its two-day meeting on Wednesday, and signaled two further rates rises in 2017. In other words, the Fed announced an increase in how much banks will be charged to borrow money from Federal Reserve banks. (The Fed raises and lowers interest rates in an attempt to control inflation.)
That increase will most likely eventually be passed on to consumers, said Sean McQuay, a credit card expert at the personal finance website NerdWallet. Many households with credit card debt — the average household carrying credit card debt has more than $16,000 — will likely take a hit.
Here’s how the latest Fed rate increase could impact your credit cards and bank accounts.
Credit cards
Because a rise in the federal funds rate means banks will likely pay more to borrow from the Federal Reserve, they may pass that cost on to consumers.