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Potential Fed interest rate increase can affect credit card debt

Consumer debt is a major problem for many people in Kentucky and across the U.S. From unemployment to using credit cards for too many expenses, debt can accrue for a number of reasons. There are also less obvious issues that can cause debtors to struggle. An example is an interest rate increase from the U.S. Federal Reserve.

Those with a balance on credit cards need to be aware of how a rate hike will affect them. Consumer credit card debt across the U.S. totaled more than $901 billion as recently as May. That is a rise of more than three percent from a year before. The average household credit card debt is nearly $16,000. For the average debtor, maintaining a balance will lead to the possibility of an average of $160 annually being increased if the rate is raised by only 1 percent.

Although credit card debt is, on the whole, decreasing, that does not mean that all people with debt are taking steps to reduce it. Many are stagnant and just barely making their payments. The financial crises in recent years resulted in many people choosing to file for bankruptcy. That, in part, is one reason that the number of households with a balance is reducing.

Individuals can consider various options to guard against a possible Fed rate increase. These include consolidating debt on a credit card with a lower annual percentage rate. They can also consider contacting the credit card company to try to find a way to have certain fees waived if they are late on payments. Of course, if credit card debt grows too onerous and can no longer be paid, speaking to a legal professional about alternatives like filing for bankruptcy might be the first step to the road to a better financial situation.

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