Blow for consumers as credit interest rates ‘higher at any point’ in the last 30 years
Rising interest rates are hurting American credit cardholders who are dealing with record-high debt.
Interest rates for credit cards are “higher than now than at any other point” in the last 30 years, according to new research.
Personal finance experts at WalletHub recently analyzed data on credit interest rates and debt published by the Federal Reserve.
Over the past year, the central bank has hiked the Federal Funds Rate numerous times in a bid to rein in inflation.
While this decision has been beneficial for savers, those straddled with credit card debt have been detrimentally impacted.
Despite signs inflation is easing, there is no indication from the Federal Reserve rates will come down significantly in the near future.
Martin Lewis discusses interest rates
According to WalletHub, the average credit card interest rate for existing accounts is sitting at 22.77 percent.
The personal finance website’s research determined these sky-high rates are costing customers more than $163billion a year.
Collectively, the US has raked up $1.23trillion in credit card debt for August 2023, which is 10 lower than the record for the month.
However, it is still seven percent higher than during the same period of the year, after adjusting for inflation.
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Odysseas Papadimitriou, WalletHub CEO, broke down the cost for American credit cardholders.
He explained: “Credit card interest rates are higher now than at any other point since the Federal Reserve started tracking interest rates in 1994.
“The average interest rate on new credit card offers has gone up by more than 12 percent in the past year alone, forced higher by Fed rate hikes in support of the fight against inflation.
“Fortunately, the Fed is expected to start cutting its target rate next year, which should provide some interest-rate relief for people with credit card debt.”
According to the personal finance expert, the issue of rising interest rates is exacerbated by the US’ existing debt woes.
Mr Papadimitriou added: “Record-high credit card interest rates are costing consumers more than $163billion on an annual basis.
“We collectively owe more than $1trillion to credit card companies, and the combination of near-record debt and record interest rates is not something most people can afford.
“The silver lining is that nearly three in five people say record interest rates are pushing them to pay off credit card debt, according to a new WalletHub survey.”
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