Federal Chairperson Janet Yellen raised interest rates on December 14, from the previous 0.5 percent to the present 0.75 percent- a rise of a quarter percentage point. People who save money will be rewarded. Individuals oppressed by adjustable mortages and credit card debt could be hurt. However, Americans, for all practical purposes, will not be affected. The only way to make a dent in their finances if this hike in rates is followed by a number of others rate hikes.
Cumulative rate hike
Greg McBride of Bankrate said for all analysts when he pointed that single rate hike is inconsequential. What really makes the dent is the cumulative effect of all rates. These could happen, as new projections show that Federal officials expect a rise of a three quarter point in 2017. This is one up from two forecast rises made in September.
The rise of interest rates affects millions of Americans. The Federal Reserve increased rates for a total of 17 times between June 2004 and June 2006. This increased the financial burden of a substantial number of people living in the United States. Federal officials will repeat this scenario if there is a worry about the American economy overheating in the future 2017 and 2018 years. There is no proof that this scenario may happen at all.
Rise and consequence
Millions of Americans could be affected by quarter point rise. In the United States, as per TransUnion, average balance in credit cards is calculated to be $5,437. Credit card rates could go up by an incg post risse in federal funds rate. The same effect could be applicable on adjustable rate mortgages, lines of credit related to home equity and personal loans. It is estimated by TransUnion that about 92 million Americans may witness the rise of debt payments as a consequence of quarter point rate rise. They will have to pay about $6.45 more on an average per month. If it is one percent, debt payments will increase by $50. In a sentence, many people would find it unaffordable. If data extracted from TransUnion is believed, approximately 9.3 million consumers may have problems in making extra debt payments. This numbers may rise more if the rates continue to go up.
Consumers saddled with large debts have a way out. They could transfer their balances to cards with lower rates. It is found that a few credit cards now provide introductory rates which can be as low as zero percent for about 21 months.