We explain how the increase in interest rates from the Federal Reserve affects you if you accumulate credit card debt and what to do to minimize the impact.
It impacts from mortgages to loans for the purchase of cars.
As planned, the Federal Reserve raised interest rates for the first time since December 2021, this amid soaring inflation coupled with gasoline prices and the economic fallout from the war between Russia and Ukraine.
The central bank reported Wednesday that the fed funds rate now stands at 0.25-0.5%.
Credit card holders will now find it more difficult to pay off large debt, so you must understand how the Annual Percentage Rate (APR) is calculated and how it is applied to outstanding balances, to maintain the most control. possible on the growth of the debt.
That information could help you make decisions about which credit cards you can afford and how much it costs you each day to borrow from your credit card company. The monthly APR can also help you understand how much it costs you to carry a balance each month that you’re not paying in full.
THE THREE TYPES OF APR
The APR is calculated and determined by your credit card company. The three main types of APRs are fixed rate, variable rate, and promotional rate.
With fixed rates, your APR is likely to remain unchanged for as long as you have your card, unless otherwise noted. In this case, the increase in the interest rate of the Federal Reserve could affect you.
Variable rates may increase or decrease based on federal rates.
Promotional rates include zero-interest or low-interest periods offered as incentives by companies to new account holders.
You can determine what fees are associated with your credit card by reviewing the agreement with your credit card company, as well as your monthly statements.
HOW TO CALCULATE THE MONTHLY APR
It can be done in three easy steps:
- Check the current APR credit card and your balance on your statement. You can call your bank if you don’t have that information.
- Divide your current APR by 12 (for all twelve months of the year) to find your monthly periodic rate.
- Multiply that number by the amount of your current balance.
Let’s say you owe $500 on your credit card for the entire month and your current APR is 17.99%. You can then calculate your monthly interest rate by dividing 17.99% by 12, which is approximately 1.49%. Then multiply $500 x 0.0149 to get an amount of $7.45 each month. Therefore, your bank would charge you $7.45 in interest charges based on your $500 balance.
HOW TO CALCULATE THE DAILY APR
As in the previous case, you can do it in three steps:
- Check the current APR and your balance on your credit card statement. You can call your bank if you don’t have that information.
- Divide the APR rate by 365 (for all 365 days of the year) to find the daily periodic rate.
- Multiply your current balance by your daily periodic rate.
For example, if your current balance is $500 for the entire month and your APR is 17.99%, then you would need to divide your current APR by 365. In this case, your daily APR would be approximately 0.0492%. By multiplying $500 by 0.00049, you will find that your daily periodic rate is $0.25. To calculate the monthly interest charges on your balance, you simply need to multiply this daily periodic rate by the number of days in your billing cycle. For most credit cards, the average billing cycle is 30 days.
These numbers can help you calculate the payments you need to make each month to minimize the impact of daily compounding.
WHY DO I NEED TO KNOW THE DAILY AND MONTHLY APR?
Your credit card balance can fluctuate daily, weekly and monthly. By calculating your daily and monthly APR, you can better understand how much of your money is going to interest. This is why credit card holders have the feeling that they pay the minimum without this meaning that they advance enough to cover the total debt.
Having a clear understanding of how much of your money is going toward interest rather than paying off the debt in full can help you formulate a payment plan, as well as help you decide what really necessary purchases you can make with your credit card without affecting your finances.
By breaking down interest rates on a daily and monthly basis, you can learn more about the interest you’re accruing over time and use this information to make better financial decisions.
WHAT DOES THE FEDERAL RESERVE DECISION MEAN AND HOW DOES IT AFFECT ME IF I HAVE CREDIT CARD DEBT?
Economic instability and unemployment in the wake of the pandemic led millions of Americans into credit card debt, but paying off balances would be much harder going forward.
As the federal funds rate rises, so do credit card interest rates. It may be an indirect connection, since the fed funds rate only directly affects loans between banks, but this in turn affects the banks’ costs, which in turn are passed on to consumers.
The prime rate that is the basis for all loan rates for bank customers is derived from the fed funds rate. Premiums are aggregated based on applicant creditworthiness and institutional factors. This produces effective interest rates, like credit card annual percentage rates.
Once the Fed action takes effect, credit card APRs will adjust almost immediately, typically within one or two billing cycles.
Total US household debt reached $15.8 trillion in the fourth quarter of 2021, the New York Federal Reserve recently reported. , up $333 billion from the previous quarter. Credit card balances alone reached $860 billion, an increase of $52 billion over the same period. That’s the largest quarterly increase the Federal Reserve has seen in the 22 years it has been collecting data, the researchers say. According to the report, the increase in debt was generally driven by home and car purchases.
The recent acceleration in debt is likely due to the fastest inflation in decades, according to the Federal Reserve. Americans used pandemic-era government aid to pay off their debts, meaning they had credit available to use for new purchases.
With the rate increasing by at least a quarter percentage point, the average APR on new cards could jump as high as 16.38% this spring, depending on how banks respond to higher base rates.
But if the Federal Reserve raises rates at least four times over the next year, as some analysts predict, the average APR on new cards could end 2022 at 17.13% or more. However, it is still uncertain.
HOW LONG WOULD IT TAKE TO PAY OFF MY DEBT WITH THE PROBABLE INCREASES IF YOU MADE THE MINIMUM PAYMENT EVERY MONTH?
If you pay your credit card bill in full every month, you don’t have to worry. But if you carry a balance on that card, carrying it month to month will cost you more once rates go up.
Suppose you have a debt of $3,500. The current average credit card interest rate is 16.13%, according to CreditCards.com . If you only make a minimum payment of $50, it would take 17 years and 8 months to pay off your balance, and you would pay a total of $7,093 in interest.
But with a higher interest rate, such as 16.38%, which could result in March, it would take 19 years and 2 months to pay off your balance, paying a total of $7,978 in interest.
Now, let’s assume that the worst case scenario occurs and the interest rate hits 17.13%. In that case, it will take 42 years and 4 months to pay off your balance, and you will pay a total of $21,895 in interest.
WHY ARE CREDIT CARD RATES AFFECTED BY THE FEDERAL RESERVE DECISION?
Most credit cards are tied to the US prime rate, which is directly influenced by the Federal Reserve’s benchmark interest rate, the fed funds rate. When the fed funds rate changes, the prime rate generally changes by the same amount.
Lenders are free to set APRs on new cards as they wish, and are technically not required to change APRs when a card’s base rate changes. On the other hand, lenders are required to match changes in the prime rate on open credit card accounts that are contractually bound.
That’s what happened in the spring of 2020. After the Federal Reserve cut rates by a point and a half in March 2020 in response to the economic meltdown in the wake of the coronavirus pandemic, almost all lenders cut APRs as well. of new cards except Capital One, according to CreditCards.com.
Since then, most of the new cards included in the weekly rate report have continued to advertise the same APRs they had in spring 2020. As a result, the card’s national average APR has barely budged for over a year, remaining at 16% since April 2020.
But if the Federal Reserve raises its benchmark interest rate this year, as projected, most credit card offerings are likely to follow suit. Existing credit card holders will also see their rates go up, making their debt much more expensive to maintain.
WHAT DO I DO TO PAY OFF DEBT FASTER, OR AT LEAST REDUCE IT?
According to an Experian analysis , the average credit card holder reduced their card balance by nearly $400 in 2021 compared to 2020.
But millions of Americans have failed to reach that milestone.
One option may be balance transfer credit cards, if you have a good credit score. These cards allow you to transfer a balance from another card, as long as it is from a different bank, and pay it without interest for a certain period, generally between 12 and 18 months. Some cards offer up to 21 months.
However, most cards charge a balance transfer fee, typically 3% of the amount transferred, although some cards charge no fees.
You can use Bankrate’s calculator to estimate how long it will take to pay off that balance based on how much you could afford to pay each month, but keep in mind that once the promotional period ends, the card’s regular APR kicks in and you’ll start paying interest. on any remaining balance.
On the other hand, the average American consumer has about three credit cards, so there’s a chance that your credit card debt will be spread out over multiple balances. There are two popular methods for paying off multiple balances: the snowball method and the avalanche method.
The snowball method suggests starting by paying off your smallest debt first, regardless of its interest rate, and work your way up to paying off the debt with the highest balance. Proponents of this method argue that this strategy allows the consumer to create a snowball effect or momentum that encourages them to pay off multiple debts.
The avalanche method, on the other hand, proposes that the consumer start with the debt with the highest interest rate. Once that high-interest balance is paid off, you can move on to the balance with the next higher interest rate, and so on.
How To Choose The Right Commercial Contractor For Your Project?
Choosing the right contractor for any building project is certainly going to be key to the success of the project itself. After all, the main contractor could very well be involved in every single detail of the project. With that in mind, we can’t really overstate the importance of finding the right Calgary commercial renovation contractors for your particular project. What should you be looking for though, when you’re out searching for that right contractor? The easiest thing to point out, yet potentially the hardest thing to find is a contractor that you know you can trust. If this person or company is going to be involved in every aspect of the project trust is key. How can you build that trust or reach a certain comfort level with a group of people that you potentially just met?
The way that we see it, the contractor’s reputation has to speak for itself. This can make it hard for new companies to break into the market because as an investor what you probably want is someone with a proven track record. Staying on that subject of the proven track record another key to picking the right general contractor, commercial renovation oriented, is making sure they have experience in your niche. The term commercial building encapsulates so many different things. Yet, working on building a new hospital wing is not necessarily similar to setting up a restaurant. Making sure that the contractor you hire has experience with a similar project is another box that you potentially want to check.
The Price Tags Are All Over The Place
One of the things that you’re potentially going to find in your search for a contractor is that the price tags for the services of these contractors can be all over the place. Some of the more established companies in the region are going to have a high fee that you need to cover, and they won’t budge off that. On the other hand, up-and-coming contractors may be more willing to give you a bargain deal. More expensive work is not necessarily better work, but these companies are able to bring a higher level of experience to the table. This is in many ways what we’ve mentioned as the key to finding that right contractor. Finding the perfect balance between experience and a decent price with a sense of trust between both sides is pretty much all that you can ask for.
Make Of List Of The Things That Are Important To You
Should the company that you hire have experience with similar projects? That’s probably a must for sure! Is there a price tag that you don’t want to go over? What are other specific needs you have? If you make a list of the things that you want and you can cross reference that with what you’re being offered by the options that you look into you can make the selection process much smoother. Even if there is no perfect way to be able to find the right commercial contractor.
Why You Should by Custom Pins?
You can have custom pins made in any shape, size or variety. You might get a reproduction of your organization’s logo. There are various expert reasons you could do this, whether it be for special purposes, part of a uniform, or even a sponsorship for a non-benefit occasion. As an individual, you might need to have a family pin made to distribute at the yearly get-together. Then again, perhaps your book club is praising its fifth year together and you would like a method for celebrating the event. Something different that has filled in ubiquity is to have a wedding pin made to pass out to every visitor as memorabilia of your exceptional day. There are numerous different motivations to use this one-of-a-kind help. Individuals love substantial articles, regardless of anything the size or worth. Basically, individuals love the stuff! Regardless of the occasion, what is preferable to give over something modified that they can wear on their lapel, satchel, cap, scarf, or tie?
Custom pins are accessible is a few assortments. One such assortment is Cloisonne. Cloisonne is the method of brightening metal. The hard lacquer Cloisonne pin is a metal pin that is played with polish and afterward prepared at a high temperature to fix the paint. It is then cleaned. At the point when done in this mold, the pin is smooth across the top.
Another assortment is the delicate finish. Delicate finish custom pins additionally have veneer fill, however, they are air-dried instead of prepared. The fill sits lower than the metal edges that structure the frameworks of the pin. This style of pin isn’t totally smooth across the top. It has a fairly raised frame. The delicate finish is a more affordable option in contrast to the hard polish.
The bite the dust struck pin is normally found in metal shades. It very well might be shaded, however, most frequently isn’t. These are the main sort of pins that made be done three correspondingly.
The photograph scratched pin is an option in contrast to the finish pin when you are needing something with a ton of detail. This is a more slender choice than the hard or delicate veneer.
At last, there is the photograph arch pin. These custom pins are fitted with a copy of the image you give and the epoxy is streamlined from the top to a pleasant domed completion.
You can track down organizations online that offer this kind of altered work. Some have valuing data accessible on their sites while others expect you to submit data on their statement structure. The data they will require normally incorporates your contact data, a depiction of the sort of custom pins you are hoping to arrange, and a duplicate of your craftsmanship. When you present this structure, the organization will handle your statement solicitation and reach you with an expected cost. Prior to consenting to have any work done, make certain to peruse the reached terms completely. Ask about creation time, yet additionally delivering time. You need to ensure that your request will get to you in time for the planned occasion.
What are Micro-Credentials & what are their Benefits?
With rapid changes and development in technology, the current job structure has completely transformed. Many new job roles are emerging and becoming immensely vital for the organization. There is also a need for acquiring newer skill sets which means that the workforce has to gain new expertise to be able to flourish in the modern workforce.
Micro-credentials become extremely important in this scenario as they are the best tool for upskilling. They are a feasible means of acquiring competencies that allow one to carry out job responsibilities effectively.
Micro-credentials are mini qualification that allow an individual to gain knowledge or expertise in a given area or domain. The skills that these nano degrees provide are very narrow and limited to particular expertise. Unlike diplomas or degrees that take several years to complete, micro-credentials imbibe all the necessary knowledge in a short time frame.
The expertise that you gain from these mini qualifications is immediately applicable to your job role. You can acquire a micro-credential in various fields ranging from social media marketing to even business communications.
These nano degrees are offered as digital badges which are given after you have successfully acquired a skill. Along with universities and colleges, you can also get these badges at work through practical job training.
Need of the hour
The business landscape has shifted drastically after the pandemic as every industry has adopted newer technological tools. This has greatly impacted job roles as responsibilities have upgraded. Revamping of work culture and the introduction of modern tools including the digitalization of every sector has left vast room for upskilling.
For example, the traditional form of marketing which was once the norm has now been replaced by digital marketing. Those part of the workforce who lost their job due to all these changes or are looking to adapt to the new work tactics can gain a lot from a micro-credential.
Also, the millennials and Gen Zs are keener to acquire skills that are directly applicable to the workplace and benefit a lot from such digital badges. There are many benefits that micro-credentials have which makes them immensely popular and useful in the current times
Benefit of microcredentials
Some of the main advantages that micro-credentials have are the following:
- Practical skill-building
In the age of micro content and bite-sized videos, everyone is looking for easier ways to gain new skills. Gaining any expertise is only useful if it is applicable to one’s current job role or can help them switch to something better.
Obtaining a micro-credential has an edge over other qualifications here as it imbibes necessary training that can be immediately applied to one’s work. It also allows you to illustrate to your employers that you have the necessary practical knowledge needed for the job profile. Those who are looking to become technologically competent can make great use of this mini qualification as well. They can easily learn how to navigate through the digital landscape in a short time.
- Feasible to learn
Talking of learning in a short time, not everyone can afford to go back to college or university to continually upskill. From a practical point of view, it makes no sense as it becomes a time-consuming and expensive way of learning.
On the other hand, micro-credentials can be acquired in a smaller time frame without burning a hole in your pocket.
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