Interest rates make the financial world go around! These are unique times as interest rates have doubled this calendar year.
As a youngster, did you ever throw a rock into a lake to see how the ripples get wider and wider until you can no longer see them? This is what happens with interest rate changes as their ripple effects run further and wider than the eye can see.
The Federal Open Market Committee, or FOMC, is the Federal Reserve’s monetary policymaking body. It is responsible for the formulation of a policy designed to promote stable prices and economic growth. Simply put, the FOMC manages the nation’s money supply! The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings (usually every six weeks) during the year.
When the Federal Reserve raises interest rates, this increase influences almost all the borrowing costs throughout the economy.
The Good News is:
The Bad News is:
According to the Federal Reserve Bank of New York, the total U.S. credit card debt has reached an astronomical $930 billion! Households have increased debt at the fastest pace seen in 15 years due to hefty increases in credit card usage and mortgage balances.
I recently had 2 clients with credit card interest rate issues where it made sense to advise them to cash out their existing expensive whole life insurance policies, replacing them with inexpensive term insurance policies, and using a portion of the influx of cash to pay off their existing credit card debt.
If ever there was a time to take action, it is NOW! For those in a similar credit card balance carryover situation, doing nothing and drowning in debt with your monthly minimums increasing can be financially disastrous.
My Lucky 7 suggestions for those that are feeling the credit card rate increase crunch in the short term:
Individuals feeling the “credit interest rate crunch” are not alone. This is happening on a macro level as there is a looming default risk crisis internationally. There are small poor nations that owe big $$$$ to big nations. The perfect storm of rapid inflation, slowing growth, a stronger dollar, and rapidly rising interest rates have some nations teetering on bankruptcy.
To give you an example, Sri Lanka’s Central Bank negotiated a “barter deal” to pay for Iranian oil with tea leaves!
There is a saying that I always liked, “Action Diffuses Anxiety!” If you are in this situation, take action and you will start feeling better almost immediately. Doing nothing and “kicking the can down the road” will only exacerbate the problem later!