Fed interest rate hike could impact credit card APR
FARGO, N.D. (Valley News Live) - The federal reserve continues to fight back against high inflation by announcing a new interest rate hike.
“The FMOC has raised its policy interest rate by three-quarters of a percentage point. We anticipate ongoing increases will be appropriate,” said Jerome Powell, the chair of the Federal Reserve.
Some local consumers say they are disturbed by the news.
“Everything is so high already and it’s hard to live even when you are working 40 hours a week,” said Loree Berg.
The hike could create a domino effect, impacting things like mortgage and credit card interest rates.
“Banks do have the potential to increase rates,” said Dr. Angel Carrete, an assistant professor of finance at Concordia College.
Most credit card companies base their variable rates on the prime rate, which is tied to the federal funds rate.
Any increase in APR means it may take longer to pay down existing credit card debt.
“I think that’s a ripoff and a scam for having credit cards,” Berg said. “They’re not going to get ahead to pay off their bills.”
Carrete says he foresees the rate increase impacting those seeking new credit cards.
He says those who already have debt could fall deeper.
“Some people, they borrow more money to pay money that they owe,” he said. “They get a new credit card to pay old credit cards. New credit card they get, they will be borrowing at a higher rate.”
Carrete also says, if you are looking for a new card, the time to apply is now.
“I would say go ahead and get one now. The fed has said they will keep increasing rates in the future. Inflation does not seem to be going away.”
Copyright 2022 KVLY. All rights reserved.