‘Very high’ interest rates causing majority of Americans to spend less money
Interest rate rises are putting pressure on people's bank accounts and savings.
The majority of Americans are spending less of their hard-earned cash due to rising interest rates, according to new research.
Personal finance experts from Nerdwallet carried out a survey of 2,000 Americans to determine peoples’ spending habits amid the rise in the cost of living.
The organization’s 2023 Banking Survey highlighted the concerns many households have with soaring rates.
Over the past year, the Federal Reserve has opted to hike rate multiple times in a bid to tackle inflation.
As it stands, the Federal Funds Rate is sitting at a range of between 5.25 percent and 5.5 percent.
Martin Lewis discusses interest rates
Last month, the central bank opted to pause its stream of interest rate increases, but indicated further action may be taken if inflation does not drop to two percent.
One of the consequences of the bank’s decision is that credit card rates have shot up dramatically.
According to the survey, more than three in five Americans believe high interest rates are making them want to spend less money.
Some 56 percent of people admit that they are keeping more money in their bank accounts right now versus last year due to higher interest rates.
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Around 46 percent of people polled share that they are hesitant to put their money in a small bank or credit union.
Furthermore, an estimated 56 percent of Americans cited that they care more about interest rates for bank account than on credit cards.
To help those concerned about high rates, Wallethub shared advice people should take on when considering credit card offerings.
The experts explained: “Even though bank account rates are very high right now, credit card interest rates are still way higher.
“As a result, earning five percent from your bank account won’t help you too much if you’re paying credit card interest at a 20 percent to 36 percent annual rate.
“So, take advantage of credit card offers with zero percent introductory APRs for purchases or balance transfers if you have the good or excellent credit needed to qualify and work on creating a sustainable budget.
“That way, the interest you earn on your deposits can be pure savings.”
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