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Interest rate increases hit struggling families hard

On Behalf of | Jul 23, 2018 | Bankruptcy

Consumers in Virginia and around the country pay more than $100 billion in credit card fees and interest each year according to figures from the Federal Deposit Insurance Corporation. That figure looks certain to rise in the years ahead as the U.S. Federal Reserve pushes interest rates higher to keep inflation under control. The central bank has already increased borrowing costs twice in 2018, and two more rate hikes have been promised. Experts say that these increases will cost American consumers $110 billion in additional credit card fees and interest.

These costs may be difficult to meet for Americans who carry a large amount of revolving debt or use credit cards to pay for basic needs. Much of the money charged to credit cards is paid off almost immediately, but data from the credit reporting agency Experian reveals that the amount of revolving debt that is not paid off each month has now risen to $687 billion. While the average American consumer owes about $6,000 in revolving debt, almost half pay their credit card bills in full each month.

This means that Americans who carry revolving debt owe far more than figures reflecting the nation as a whole would suggest. The figures also suggest that individuals and families who are already finding it difficult to make their minimum monthly credit card payments will be pushed further into debt by interest rate increases and will bear most of the costs.

Many people find themselves facing inescapable amounts of debt after turning to their credit cards during a time of need such as an illness or layoff. Creditors have little sympathy for those who have suffered financial setbacks, and their relentless demands for payment can make already difficult situations almost unbearable. Attorneys with debt relief experience may explain how the automatic stay generated by a personal bankruptcy petition could stop creditor harassment and prevents paychecks from being garnished and assets from being seized.