The Fed’s Rate Increase Affects Your Credit Card Debt

The Federal Funds Rate Has Increased

The Federal Reserve (the Fed) has increased the federal fund rate by 25 basis points this week.

It’s worth noting that the Fed’s decisions on interest rates are based on a variety of economic indicators, such as inflation, employment, and GDP growth. These indicators help the Fed assess the overall health of the economy and determine whether to raise or lower interest rates.

How Does the Fed’s Rate Affect my Credit Card Debt?

The federal funds rate has an important influence on many other interest rates, such as those for consumer loans, mortgages, and credit cards.

Changes in the Federal Reserve’s federal funds rate can have an impact on credit card debt, particularly in terms of the cost of carrying a balance on a credit card.

Most credit cards have variable interest rates that are tied to the prime rate, which is the interest rate that banks charge their most creditworthy customers. The prime rate, in turn, is influenced by changes in the federal funds rate.

When the Federal Reserve raises interest rates, the prime rate tends to increase as well, which can result in higher credit card interest rates. This means that consumers who carry a balance on their credit cards will face higher interest charges, making it more expensive for them to repay their debt.


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