Federal interest spike expected to deal blow to those with credit card debt

WICHITA, Kan. (KSNW) – In the wake of The Federal Reserve once increasing interest rates, this time by another three-quarters of a percent, nearly everyone will feel that interest rate increase.

But while experts say that increase is pretty substantial, it will deal a blow to some loans much sooner than others.

“Variable is going to get hit first, and that happens to be on credit cards,” Michael Proctor, President, Leading Edge Financial Planning, LLC, said. “So, not only are you paying a higher interest rate, you’re paying the higher cost of living at the store, at the gas pump, pretty much everywhere right now.”

Proctor says while many providers will alert consumers of an interest-rate increase in the coming weeks, others won’t, and it’s not required of them to do so.

“A lot of times, it’s built into the terms when you sign up for it – it will be prime plus a certain amount, so you may want to bump up what your payment is,” Proctor said.

Proctor says while it may seem tempting for those with credit card debt to sign up for a 0% interest rate credit, that can create its own set of problems.

“If you don’t read the fine print and understand all the terms that may come with either having to pay off the entire balance by the end of the zero percent term or missing a payment, you could have a lot of unexpected penalties that makes the problem worse, ”Proctor said.

Another expert says those with long-term debt, such as potential homebuyers, could benefit from the federal interest rate in the coming weeks.

“The initial reaction that markets had would suggest that mortgage rates might fall very slightly based on this change,” Dr. Stan Longhofer, Director of the Center Real Estate, said.

Dr. Longhofer says while we shouldn’t expect mortgage rates to fall to historic lows (like we saw in 2020 or 2021), the federal increase could prove somewhat beneficial in the long run.

“If inflation is really brought into check by this, then I might expect that interest rates might drop slightly over the coming year or so. If anything, what that did is helped ensure that mortgage rates would not go higher, ”Dr. Longhofer said.

Dr. Longhofer points out the federal increase is just a part of the puzzle that determines mortgage rates, so there are many other variables to consider in the coming weeks, such as housing prices that could contribute to mortgage rates rising or falling.

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