WASHINGTON (1/21/16)--Average percentage rates (APR) on credit card debt jumped 22 basis points in the fourth quarter, according to a recent report from consumer finance website Card Hub.
The increase matches the decision by the Federal Reserve last month to raise the federal funds rate to a range of 0.25% to 0.5% from its “near zero” level of 0% to 0.25%.
As a result of that increase, the Federal Reserve said that the rate hike will cost consumers roughly $1.3 billion in additional credit card debt payments in 2016.
Unfortunately for consumers, rising interest rates on savings accounts likely won’t materialize to help offset that additional cost burden.
Greg McBride, senior vice president/chief financial analyst at Bankrate, recently wrote that increases on certificates of deposit (CD) rates will barely rise in 2016.
“By the end of the year, I predict that the average yield on one-year CDs will be 0.65%, while the average five-year CD will pay 1.25%,” McBride said. “Those rates are higher than the current levels, but still pretty modest.”
Meanwhile, while interest rates on credit card debt have climbed of late, Card Hub found that two types of credit cards have actually seen rates fall: excellent-credit credit cards and secured credit cards.
“Falling rates in the excellent credit segment reflect continued competition for customers who have proven themselves trustworthy in an uncertain market,” Card Hub said. “And declines in secured card rates are a function of issuers not bearing any cost of funds for such products.”