Paying credit card debt down is getting harder

foxbusiness.com:

BlackRock Global Fixed Income CIO Rick Rieder discusses whether the Fed is close to ending the current rate hike cycle on 'The Claman Countdown.'

Most Americans are well aware of their mortgage rate — especially after the Federal Reserve kept rates unchanged this week, leaving the 30-year fixed rate at 7.19% — but as for their credit cards, not many are aware of what they're paying. 

Credit cardholders collectively carry more than $1 trillion in credit card debt across approximately 578 million credit card accounts, according to data from the New York Fed. Plus, the share of U.S. households carrying a credit card balance — revealed to be about 47%, according to a 2023 NerdWallet analysis — exceeds that of mortgages (40%) and car loans (41%). 

«The Fed began influencing higher interest rates (through the target federal funds rate) in March 2022. Consumers have seen the immediate impact of this in higher interest rates on long-term loans like mortgages and auto loans, but also on their credit card interest rates,» says Elizabeth Renter, data analyst at NerdWallet, who is based in Kansas.

CREDIT CARD DEBT HITS $1T FOR THE FIRST TIME EVER

Average interest rates charged on credit card accounts have risen from just over 16% in February 2022, before the Fed began raising rates, to just over 22% as of May 2023, says Renter.  «And if you carry a balance from one month to the next, this quiet increase could be costing you hundreds or even thousands of dollars,» Renter tells FOX Business. 

Raising credit card interest rates from around 16% to 22% may not seem like a big jump, but depending on your balance and how long it takes you to pay it off, those few percentage points can make that debt far more expensive, according to Renter