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.
Top 5 Coins Worth Collecting and How To Tell Whether They Are Real Or Fake
Traveling through time, thousands of coins around the world have been minted. Some of these coins were stamped in thousands, while others were limited due to their uniqueness in design or event. Collectors of the globe are willing to pay millions to get a hold of one of these pieces.
Gold and Silver proofs are some of the most famous precious metals used prior to the legislative ban on stamping rare metal coins. Numismatics worldwide look for authenticity and brilliance as some historical coins add value to their collection.
The history they hold of being around in possession of a king or the pocket of a soldier in war makes them remarkable. Some of these precious coins are the property of Millionaires as collector coins in Canada, the U.S., China, or other leading countries. It all depends on the buyer’s preference and If they are willing to spend a whopping amount on these beauties. Some of the ultimate collector options with credibility are mentioned below
1 St. Gaudens Double Eagle 1933
This is one of the rarest coins highly sought out by Numismatics. The surprising aspect of this coin is that this was not rare in the initial phases of minting, and many pieces were struck. But many of these were melted after the legislation of not owning gold coins.
The ones that survived hold high value because people think that this is one of the most beautiful coins ever made. This coin was sold privately in 2002 for a shocking $7.6 Million. Experts inquire about the credibility of this coin by gauging the luster.
If the coin is too reddish, it might undoubtedly be chemically treated and thus fake. Another exceptional feature in the indentation of ‘In God We Trust ’ was not initially added by designer Augustus Saint Gaudens but was later modified.
2 Flowing Hair Silver Dollar 1794
Sitting on the pedestal is the 1794 Flowing Silver Hair Dollar auctioned in 2013 for above $10 Million. Numismatics believe that this might be one of the first dollars ever coined. The Lady Liberty with flowing hair frontal is the prime feature of this magnificent coin. The back of the coin has an American Eagle embossed on it.
A small amount of these coins was struck in production, and fewer remained, which makes them extremely rare. The thickness comparison is a credible feature to look out for in this coin. It’s made of high-quality metal, so If you see a rusty version produced by the ‘wear technique’ used by scammers, it’s probably fake.
The lettering might also not be as clearly embossed in the counterfeit coins.
3 D-3 Legged Buffalo Nickel 1937
One of the coin collector’s favorites is the 1937 D-3 Legged Buffalo. This coin missed fame from the beginning. Once people noticed the missing leg of the Buffalo on the reverse side of the coin, It quickly became rare. Back in the day, due to the cost of coin minting, people used to extend the life of the dies by polishing them.
Some coin maker mistakenly ground the surface of the die, which removed a leg of the buffalo. Because of this uniqueness, they hold extreme value. A counterfeit coin might have visible signs of the removal of one leg by the seller. You can clearly feel the indentation on the coin if the leg has been physically removed and polished. Avoid purchasing these fake coins.
4 Brasher Doubloon
One of the most expensive coins in the world is the Brasher Doubloon, crafted by Ephraim Brasher. It is well-known as the U.S.’s first gold coin ever made. A total of seven of these coins were ever struck, while only one of the coins has the creator’s initials embossed.
The initials are embossed on the breast of the eagle on one side of the coin. The selling of this coin took place privately for a stunning $9.36 Million in 2021. The real Brasher Doubloon is made of 22k gold, while the fake ones might be made of copper. The stars on one side of the counterfeit coin are not pointed as the original die but just raised to look the same.
5 Umayyad Gold Dinar
The 1,300-year-old coin holds its value as one of Numismatic’s most sought-after coins worldwide by Numismatic. The Umayyad Gold dinar was first made in 723 AD in Damascus. Both sides have incredible inscriptions on them. It is one of the first coins to have a location inscribed. Only a dozen are still in existence, making them extremely rare and precious. In 2019, the selling of this coin was for £3.72 Million.
The stunning gold color and the raised inscription are prime features to look out for when dealing with fake coins. The actual Umayyad Gold dinar weighs 4.24 grams. These coins are rare, and one of them is on display at the British Museum London as part of an essential Islamic History artifact of value.
Coin collectors in all parts of the world are always searching for rare, historically important currencies. They not only add value to their collection but also symbolize the time the coin has been through. Some of these gold and silver-proof commemorative coins are worth Millions and are significant in possession of rulers and world leaders.
Understanding the difference between legit and counterfeit coins requires skill and an understanding of their history, which Numismatists take on as their favorite task. Their rarity, quality of material, and condition over hundreds of years make them prized and ownership worthy.
Which field is best for business management?
Earning a business degree in any branch tends to be a worthwhile investment. Studying Business Management can be a great way to achieve financial freedom. However, a successful career in business requires hard work, consistency, and perseverance.
If truth be told, any degree you seek will require some investment. It can be measured in money, time, and energy. Every student expects each investment to be a payoff- increased earning potential, skills to climb the career ladder, economic stability, subject-specific knowledge, and increased marketability.
A business management degree, in general, offers a wealth of benefits to succeed in the business domain. A business management degree is a better return on investment, ranging from increased marketability to improved self-esteem. In this blog, we will explore all fields in business management with the best potential return on investment.
7 best business management fields that can make you a fat cat
Based on findings, here are the top seven best-paying business management fields:
Accounting is one of the best-paying specializations in business management. To organize their finances, accountants are in high demand in all companies, from start-ups to conglomerates. Accountants earn big fat pay cheques to create financial reports, follow accounting practices, and conduct audits. According to payscale, the average salary for an accountant in Canada is CAD 53,327 per year. Best paying accounting jobs include Business Strategy Analyst, Finance Manager, and Marketing Director.
Managers are imperative to manage company teams and successfully run a business. Some managers look after finance operations, while others lead crucial teams. However, all the verticals in a company are managed by managers to deal with the complex challenges in the business domain. In a nutshell, business managers supervise and oversee business practices and operations to achieve efficiency. According to payscale, a business manager in Canada makes CAD 67,124 per year.
Economists working in a corporate are directly involved in microeconomic issues. They research economic problems, collect data, analyze it using mathematical models, and forecast consumer demand. An economist is crucial for an organization, and they are well paid. The Indeed report suggests that an Economist earns about CAD 86,162 per year.
Professionals with an entrepreneurial mindset are in high demand in large companies. Companies are desperately looking for individuals who can contribute significantly to growing their businesses. In addition, studying entrepreneurship can provide skills and knowledge to start or grow a business as well. Indeed reports that the average salary for an entrepreneur in Canada is CAD 55,720 per year.
- Supply chain management
This field of business management studies economics, logistics, and finance. Supply chain managers manage logistics and overcome challenges with their problem-solving abilities. They also perform data analytics and inventory management. According to payscale, a supply chain manager in Canada makes CAD 80,652 per year.
That’s not all. A career in Human Resources management and marketing are also among those business management fields that have the potential to make you rich. So, apply for a business management course in Canada now!
This article is written by Monika Sinha.
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.
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