The prospect of a Federal Reserve interest rate hike has plenty of investors on edge, but there is another group that needs to take notice: people who carry a balance on their credit cards, NBC News reports.
Consumers have been taking on more credit card debt, and they are not paying it off every month. If interest rates rise, that behavior could become significantly more costly. The National Foundation for Credit Counseling calculated that some 35 million people are rolling over at least $2,500 in credit card debt every month.
With an interest rate hike, "the same amount of debt that Americans are carrying is going to get more expensive — but the underlying problem is they are carrying more debt every year," said Sean McQuay, credit card associate at Nerdwallet. Using current average household credit card debt, he calculated that a 1 percentage point rate hike would cost that household $160 per year. In the aggregate, consumers would pay $9 billion more per year in credit card interest.