Why Do Credit Card Rates Keep Climbing?
why do credit card rates keep climbing interest rates federal reserve apr credit card debt consumer borrowing penalties fees banking industry profit
YEET Magazine
Why Do Credit Card Rates Keep Climbing?
Credit card rates keep climbing because the federal funds rate has risen, and credit card interest rates are tied to the broader interest rate environment. When the Federal Reserve raises rates, credit card APRs typically follow.
But there is more to the story. Credit card issuers also price in risk. Borrowers with lower credit scores are charged higher rates because the lender assumes a higher chance of default. And issuers have been increasing fees and penalty rates as part of their revenue strategy.
The result is that credit card debt has become significantly more expensive in recent years, which makes it harder for borrowers to pay down balances. For the broader context, our coverage of US consumer debt hitting $18.25 trillion shows how widespread the problem is. For related discussions, see why student debt is still crushing graduates and why everything costs so much now.
What do you think? Should credit card interest rates be capped? Share your thoughts.
Source: YEET Magazine