The Federal Reserve's latest rate hike will cost Americans with outstanding credit card debt more than $5 billion in additional interest over the next 12 months, according to an estimate from the personal-finance site WalletHub.
The company found that the Fed's aggressive streak of rate increases this year has heaped about $25.6 billion in additional interest onto Americans' yearly credit card bills. WalletHub's calculation is based on an estimated $1.18 trillion in outstanding credit card debt for 2022, with 58% of cardholder accounts carrying balances.
The Federal Open Market Committee raised rates by 75 basis points on Wednesday — its fourth such jumbo hike in a row and its sixth increase this year — in an effort to tamp down
Most credit cards have variable rates that are tied to the federal funds rate, meaning cardholders can see their interest rates go up overnight, according to WalletHub analyst Jill Gonzalez. So far, the central bank's rate hikes have driven average annual percentage rates above 18% to
That's put American consumers in a "financial Catch-22," forcing them to increasingly swipe plastic to keep up with soaring prices while also facing higher borrowing costs, said Gonzalez. A
"We're seeing new debt incurred and being put on credit cards," Gonzalez said. "And they're not spending on frivolous things — it's basic necessities due to inflation."
While the Fed's hawkish monetary policy aims to restore price stability and give relief to U.S. consumers, economists worry the central bank will raise rates too much and
