This year, the Federal Reserve decided to increase nationwide interest rates on multiple occasions. The idea behind interest rates is they’re supposed to stop inflation from spiraling and instead bring it down.
Unfortunately, this has not been the result of what the Federal Reserve’s doing. In fact, just several weeks ago, inflation wound up increasing to 8.7%.
With the central bank repeatedly opting to bring up interest rates, America’s economists claim that a recession could follow this policy.
As a likely recession looms, consumers are getting eaten alive by credit card interest rates, especially those attached to new credit cards, per Washington Examiner.
The Dark Reality of New Credit Cards
Credit card analyst Matt Schulz has some disturbing news involving credit cards in America today. Schulz recently revealed that June’s credit card interest rate stood at 20.17%.
This rate is higher than it’s been in years; however, what’s truly frightening is there’s no real limit as to how high interest rates could climb. This is what makes new credit card holders vulnerable, especially if they’re already faced with debt or other financial issues.
This is a great policy if your view is that poor people should not have credit cards. Maybe they shouldn't! But that's the consequence of interest rate caps and all the empirical evidence at the state level backs it up. https://t.co/V9QD0vqcOR
— Foster (@foster_type) July 1, 2022
Coincidentally, credit card debt in the United States is growing as interest rates do. This means Americans who are in the red will have increasingly more trouble digging themselves out of this hole.
With no real end in sight to this, Schulz is advising consumers to work with their credit card providers to see if there’s any room for negotiations on rates.
Unfortunately, with everyday living costs getting more expensive, debt appears likely to keep rising, rather than falling. Economists have said this could play a pivotal role in a recession sweeping across America.
Questionable Proposals to Tackle Credit Card Debt
Recently, Rep. Alexandria Ocasio-Cortez proposed putting a cap on the interest rates that credit card companies can charge. The Democratic congresswoman says this is about keeping people from being taken to the cleaners by these companies.
However, critics warn that what Ocasio-Cortez is pushing for will simply keep low-income individuals from having access to credit cards.
Check your @Chase Credit cards, the Interest rate to use them is not even worth having them, 25.24%, I've been a customer for years, and this is the 1st time I have seen them so high. PAY OFF YOUR CCs immediately or transfer what you have, to a lower APR card that are out there!
— YRC🇵🇷⚓ (@yazelroque) July 1, 2022
Others suggested for consumers to use balance transfer features to move debt to credit cards with lower interest rates. However, even this is not a foolproof plan for every single person who finds themselves saddled with credit card debt.
Groceries, fuel prices, and other costs that Americans don’t have the luxury of avoiding are going up on a consistent basis. Ultimately, this means inflation is a major factor that’s feeding the machine of rising credit card debt.
Are you worried about the growing interest rates of credit cards in the United States? Do you believe consumers have any options to avoid massive debt and financial ruin? Please share your thoughts in the comments field.