You see that thing up there? How many of them do you suppose you have in your wallet?
If you've had yours for several years, you probably got them when the Prime Rate was no less than 4%, but actually probably a bit more.
The average interest rate you agreed to pay for use of your credit cards approached 19%.
So the bank issuing the card had a 60 basis point spread. For every dollar you charged, to pay it back at the end of a year cost you $1.19. The bank made 15 cents of that.
But since the Recession of 2008, banks have paid less than 1% for money they borrow from the Fed. Were your credit card rates lowered to, say, 16%?
By retaining this enormous "spread gift," the credit card companies have been able to take greater risks, issuing cards and for maximum borrowing amounts that they wouldn't have considered prior to the Recession of 2008.
According to the U.S. Census Bureau and the Federal Reserve, the American households owe on average a staggering $16,425 in credit card debt, and that amount has risen 10 percent since 2013.
Collectively, we owe nearly $1 trillion in credit card debt, on which we pay an average interest rate of 18.76 percent, or about $1,292 per household each year.
That the Fed didn't require cerdit card companies to reduce their interest rates so that they remained in parity to the spread they had before is the Elephant in the Room.
It has a great deal to do with the reason there is no mention of inflation, but there really is. And at some point, as Fed rates rise, the pressure will be on for the piper to be paid.
BILL CHERRY, REALTOR