Credit Card Rates to Rise?
Credit Card Debt Down Again
After a blip in January that may well have been a result of holiday spending, American credit card debt resumed its precipitous fall in February. Last week, the Federal Reserve released its latest data on consumer credit, which showed that the change in the annual rate in February’s “revolving credit” (which mostly comprises credit card debt) was -13.1 percent.
To put that into context, consumers owed $858.1 billion in revolving credit in February, compared with $958.1 billion during the last quarter of 2008. Yes, that does make a difference of precisely $100 billion, and–yes, again–that is a suspiciously round number. However, it seems more likely it’s more coincidence than error on the Fed’s part. Well, let’s hope so, anyway.
Credit Card Rates Set to Rise Further?
Those same Fed data also indicate that the average rate for credit cards is currently 14.67 percent. Now, it’s not been made clear how that’s calculated, but many of those living in the real world–who actually have to pay credit card bills–would perhaps prefer to believe index credit cards‘ figure, which at the time of writing is 16.80 percent.
On Saturday, the New York Times ran a story suggesting that credit card rates are set to rise. Actually, it said that interest rates for all sorts of borrowing were likely to rise, and that those increases–in mortgages, auto loans, and lines of credit, as well as credit card bills–had already started.
More Expensive Credit All Round?
The open paragraph of the Timespiece summed up its argument:
Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates… The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.
And it went on to quote one expert who thought that credit card rates could increase by anything from nearly two percent to nearly three percent between now and the fall.
Credit Card Use and You
Your personal pattern of credit card use is likely to determine just how bothered you are by rising rates. If you clear your balance in full every month then you probably won’t care much about credit card rates, not least because you never pay interest.
However, if you often prefer to carry balances forward, now could be a good time for you to review the plastic you have in your pocketbook. There’s a good chance, depending on your personal usage, that you should be trading in generous rewards points and low annual fees for low interest rates.
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