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Also, the more indebted the consumer, the higher the impact of rising interest rates on consumer spending. Every time the Fed raises rates by 0.25 percentage po
by runeks 10y ago
Also, the more indebted the consumer, the higher the impact of rising interest rates on consumer spending. Every time the Fed raises rates by 0.25 percentage points, consumers need to pay an additional $10B in interest per year. Consequently, the rate of interest increasing by 1 percentage point today is not the same as it increasing by 1 percentage point pre-2008 (when total consumer debt was lower).
- provost 10y agoThis is interesting.. source?
- rootusrootus 10y agoThat doesn't quite make sense. The interest on revolving debt is fixed at the level it was when you acquired the debt. Raising the rate across the board will definitely cause a lot of people to pay more, but only to the extent that they cannot stop themselves from buying more things on the card.
- Spooky23 10y agoOn secured loans sure. Credit cards are always priced at prime+margin, based on 30-60 day average balance. That can change every 30 days.