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A ‘double whammy’: Consumers are feeling the pain of rising interest rates and ballooning credit card debt, economist says – News Opener

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To keep up with rising prices, many Americans are falling back on their credit cards once again.

Credit card balances rose year over year, reaching $841 billion in the first three months of 2022, according to the most recent data from the Federal Reserve Bank of New York.

At this rate, balances could soon reach record levels amid higher prices for gas, groceries and housing, among other necessities, according to Ted Rossman, a senior industry analyst at CreditCards.com.

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For its part, the Federal Reserve has been hiking its target federal funds rate in an effort to calm runaway inflation.

However, anyone carrying a balance will also see the annual percentage rate on their credit card head higher as the Fed continues to raise rates to try and tamp down rising prices.

Beware of the inflation and credit ‘double whammy’

“Rates are rising and consumers are running out of options for cheap credit,” said Nela Richardson, chief economist for payroll processor ADP. 

As people spend down their savings and shift to credit for their purchases, they’re also getting hit with higher interest rates as Fed policymakers try to slow inflation — what she calls a “double whammy.”

“That means consumers are not only making purchases at today’s inflated prices, they’re paying even more on top of that to cover the rising cost of borrowing.”

How to avoid record-high interest rates on credit cards

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