Why seniors with credit card debt could be worse off in 2022
“The Federal Reserve just gave consumers with revolving credit card balances their top New Year’s resolution: Dump that debt ASAP..” So begins a December 17th column in The Washington Post. The question is how do older Americans, especially retirees, dump their credit card debt? Credit card issuers typically base their APR or annual percentage rate on the U.S. prime rate plus a hefty margin to account for credit risk and profit. CreditCards-com reports the average interest rate charged today is 16.13%. Of course, there are cards with much higher rates, some as high as a 24% APR.
So how many seniors are carrying credit card debt? Forbes cites Federal Reserve data revealing…
In the effort to curb soaring inflation, the Federal Reserve announced three planned rate hikes in 2022. The Fed plans to increase the federal funds rate to .9% by the end of 2022, 1.6% by the end of 2023, and to 2.1% by the end of 2024. The danger for credit card holders is if the Fed finds themselves having to increase rates more aggressively if inflation worsens which in turn would increase the U.S. prime rate and subsequently credit card interest rates. If the rate increases are in fact in line with the Feds plan credit card holders would only see a modest increase in interest charged.
