There's been a lot of talk in the media recently about a possible interest rate hike by the Federal Reserve. Therefore, many people with credit card and other debt are concerned about the financial impact on them. When the Fed raises rates, the prime rate goes up, which in turn impacts adjustable-rate products.
Experts say that for most Americans, a rate hike will mean no more than a few extra dollars a month. If the Fed raises the interest rate by a quarter of a point, which is what's anticipated, 82 percent of consumers will see a monthly impact of $10 or less. The average is estimated to be $6.45, according to the credit information company TransUnion.
However, TransUnion also predicts that more than nine million borrowers won't be able to absorb even that small of a rate increase. Of course, if the Fed goes with a more aggressive rate hike, people will see a larger spike in the amount they owe on adjustable-rate products, meaning that even more borrowers will be unable to keep up their payments.
An executive with TransUnion advises people to "identify and recognize what products in their credit wallet have adjustable rates" in case the Fed decides on a rate hike. She recommends that people be proactive in preparing for a rate hike. She says, "Start thinking about budget changes (like), 'Do I have to spend $5 for my Starbuck's coffee.'"
She also advises people to call their credit card issuer or other lender if they are in danger of failing to be able to make their payments to discuss making some type of arrangements. Lenders would generally prefer to get something from customers rather than have to turn an account over to collectors and risk getting nothing.
If you're having difficulty dealing with credit card or other debt, it may be wise to seek legal guidance from an experienced Arizona bankruptcy attorney. He or she can advise you of your options for getting out from under overwhelming financial burdens.
Source: CNBC, "Here's how much a Fed rate hike would hit most people's wallets," Jeff Cox, Sep. 19, 2016