Your credit card debt is about to get more expensive What you can do about it
The Fed announced today that it was going to increase the target range for the federal funds rate by one quarter percentage point to 3.75% to 4.00%.The rate increase was widely expected, and in the immediate aftermath of the announcement, stocks traded down with the Dow shedding 0.80% and the S&P 500 losing 0.24%.
Treasury yields on 10-year notes remained below the psychologically important 5.00% level.The relatively muted reaction from markets may have been an expression of mild relief that the central bank isn’t beholden to political pressure from the Executive branch, which has been pushing for an interest rate cut since Trump took office in January 2025.It may also signal some faith that the Fed is willing to take the appropriate steps to quell remaining inflation.But the rise in short-term rates should be making individual borrowers ask what that means for their debt.
According to the New York Fed, total non-household debt (everything but the mortgage) in the U.S.was $5.1 trillion in Q2 2026. An analysis by The Motley Fool calculates the average American has $11,694 in unsecured personal loan debt with an interest rate of 11.86% on a 24 month loan, and according to the consumer credit bureau Experian, the average credit card balance is $6,659.
Bankrate data puts the current average interest rate on all credit cards at 19.56%.Even when the Federal Reserve began to cut rates late last year in the face of a softening job market, credit card rates in 2026 did not drop proportionately.Issuers have maintained a high margin (the Prime Rate + 12% to 13%), keeping the floor for consumer revolving debt painfully high for most.
The current hike in interest rates should only push the interest on credit cards higher.The debate on whether this rate hike will be good for the average American has revolved around two views that can be summed up by a tweet from market researcher Jim Bianco:The crux of the debate between Bianco and Moody’s Chief Economist Mark Zandi ...