Fed raises interest rate, affecting credit card debt

This time of year, the income and expenses of many in Mississippi just aren't matching up. Too much debt may cause some to wonder how they can placate creditors, stop garnishment and escape threatening letters and phone calls. Still, countless consumers postpone thinking about their financial challenges until after the holidays. However, a recent event may spur some to hasten any financial improvement plans they had in store for the New Year. For the first time in over ten years, a rate increase has occurred with the Federal Reserve. The short-term interest rate was last raised in 2006.

Since 2008, the rate has been fairly low, staying around zero. However, earlier this month it was raised 0.25 percent. According to a Fed Chair, the move signals increased confidence in the U.S. economy. However, it could have varying implications for those carrying large amounts of consumer debt, including credit card debt.

According to the Consumer Financial Protection Bureau, if rates for credit cards rise by a quarter of a point, it would add more than a billion dollars to the costs of cardholders. Still, putting matters into perspective, the same increase would add about $2.50 in yearly costs per $1,000 of debt. A press conference given by a Fed Chair emphasized that the central bank intends to only gradually raise interest rates. However, steeper rate increases could come next.

With the Federal Reserve making changes that could affect consumers, it's important to have one's financial situation -- including credit card debt -- under control. If this is not possible, it might be time to talk with a bankruptcy attorney.

Source: CBS News, "Fed interest rate hike means it's time to review your credit cards," Liz Weston, Dec. 16, 2015

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