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For: Luis Diaz Updated 27 Jan 2022 , 15: 15 pm EST
After the Federal Reserve (Fed) will announce that it will tighten its monetary policy by raising the costs of interest rates, that is loans for consumers and businesses, causing demand to decrease and such a strategy would curb prices, but this would directly affect consumers by reducing their ability to acquire debt.
The objective of the Fed is to normalize the economic policy of the United States during the rest of 2022. Various Wall Street analysts expect the central bank to raise rates three or four times this year, with each increase pushing the benchmark fed funds rate up between 0.15% and 0.5% if inflation continues.
InTouch Credit Union informed CBS that each increase of 0.25% equals $25 additional dollars per year in interest for $000,000 dollars in debt. Under this criterion, if the Fed raises rates by a total of 1% for four hikes this year, consumers will pay $100 additional dollars per year for that debt .
These actions will directly affect consumers, since the rates set by banks for credit cards will be higher and the most expensive loans . This means that after the increase in interest rates, projected for March, Americans should consider whether it is good for their personal and family finances to acquire some type of debt.
At the end of 2021, LendingTree revealed that a large number of citizens acquired debt in the context of the holidays, which, in many cases, have already begun to pay or will soon.
According to LendingTree, consumers went into debt to acquire gifts, airline tickets, and holiday-related items, so the 15% of US consumers owe an average of $1,249 dollars.
The study indicated that the majority of buyers acquired debt through their credit cards , although the 40% of these used and l called buy now, pay later financing to spread out your expenses.
Matt Schulz, chief credit analyst at LendingTree, told CBS that it is likely that credit card rates rise little by little in line with the Fed’s move, since card charges are based on the Bank prime rate.
Under this criterion, People with credit card debt, loans or mortgages should be on the lookout for possible hikes for one or two billing cycles after the Fed rate hike.
According to Schulz, to avoid being hit by higher credit card rates, those with debt should call their card issuers and request a lower rate. LendingTree reported that about 8 out of every people manage to obtain a lower rate simply by requesting it
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