ATLANTA — The Federal Reserve announced the largest interest rate hike in decades on Wednesday in an effort to help with inflation and bring some relief to consumers. In the wake of rising prices, people say they've been utilizing their credit cards more -- and that could hurt them in the long run, economists say.
Government officials announced the rate would increase by 3/4 of a percentage point. This comes as the central bank struggles to regain control of soaring consumer prices.
11Alive turned to financial expert Andrew Poulos to get a better understanding of how this affects the average person who uses a credit card.
“Everyone is impacted when we begin to have interest rate hikes. Some are impacted in different ways than others," Poulos said.
To put this in perspective, if one has a credit card debt of $5,000 with an interest rate right now of 17% and only makes the minimum payment - the credit card holder will end up paying more than $6,500, including interest.
Poulos says the interest hike will impact every credit card company differently depending on their terms, but if one's credit card interest increased by 4% - the same amount will now cost more than $8,100 to pay off.
The financial expert said because prices are so high and a consumer's money isn’t going as far, people should re-evaluate how much they are saving.
"If you were putting away 500 before now, you probably have to have about 600 plus saved away per month in order to have that same buying power, because our buying power is rapidly eroding with the current inflation," explains Poulos.
According to a recent Experian study, Georgia currently ranks in the top 10 states for residents with the highest amount of debt averaging more than $6,000 a year.
Poulos said he doesn't expect that to improve.
“More and more people are going to incur debt because they can't afford the daily basic needs that they need with the current inflation environment," he said.