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Federal Reserve To Hike Interest Rates Due To Increased Consumer Spending

Posted By:  |  August 7, 2015  |  0 Comment(s)

In the article Why Credit Card Debt is Getting Riskier, published on, Kelley Holland mentions how consumers have been taking on more credit card debt and not paying it off each month. According to the Commerce Department, U.S. economic growth is accelerating due to steady consumer spending in the second fiscal quarter, but what does this mean for the average American consumer with credit card debt? This spike in purchasing has not gone unnoticed by the Federal Reserve and it is likely consumers will see a hike in credit card interest rates later this year.

According to data published by the Federal Reserve, consumers have been taking on more credit debt, which is the third largest household debt type following mortgages and student loans. In May credit card debt totaled an astonishing $901 billion, up almost 3.2 percent from the previous year. Although higher spending may accelerate the economy, leading to more jobs and higher incomes, it also puts those with lower to average paying jobs at risk for borrowing simply to make ends meet. With this spike in interest rates, 35 million consumers are rolling over approximately $2,500 in credit debt each month meaning the use of credit is getting more expensive according to the Federal Reserve.

Provided by CNBC

Credit card associate from Nerdwallet, Sean McQuay, has calculated a one percent point hike will lead to consumers paying $9 billion more per year on interest rates alone. However, research has found the percentage of households carrying excessive credit debt is steadily decreasing with only 34 percent in 2014 from 44 percent in 2009. We are also seeing an increase in credit consumers paying off balances as opposed to previous years, says Matt Shultz, senior analyst at

While these statistics may alarm credit consumers, options are available to reduce and pay off debt entirely. Contacting lenders to inquire about waiving any late fees is a good start, as well as finding out if they offer a reduced interest rate on cards, experts suggest. Those who have inquired about these options were found to be successful in their attempts by 85 percent in fee waivers and 60 percent success rates in applying for lower interest, according to a Nerdwallet survey. Transferring debt using a lenders zero interest transfer offer is another option consumers can take advantage of. Schultz claims these zero interest balance offers may quickly be a thing of the past and jumping on these possible options will be of great benefit to credit consumers. And of course there is “the old fashioned way” as stated by McQuay, to simply pay attention to what and where those hard earned dollars are being spent.


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