Federal Reserve to raise interest rates

A major decision by the Federal Reserve comes as the Christmas shopping season is about to enter its final week. A raise in interest rates could have big effects on your wallet - especially if you owe a certain kind of debt.

Christmas shopping sprees are not expected to be hurt by the decision to increase interest rates. But the red bows of the season - could also be considered red flags according to Matt Schulz with creditcards.com.

"This was definitely a subtle nudge it is something we've been expecting for a long time. And honestly it’s not something that is going to be hugely impactful, for consumers in the short term, but the important thing to remember this is the beginning of a marathon rather than a sprint,” said Schulz.

Schulz expects the Federal Reserve's decision to increase interest rates by a quarter percent will initially cause pain in the credit card sector.

"It’s important to not have your head in the sand, though,” said Schulz.

For the typical card holder - with a credit card balance of $7,770 -- the rate hike will add an extra $80 a year in interest. Someone with a larger balance - like $50,000 -- will pay an additional $500.

The Fed is going to wait and see how the economy reacts to this first step.
If there is no push back, several more increases will take place in 2016. By the end of the New Year, interest rates could be at or above 1%. For those not paying attention it could made for a very uncomfortable 2017.

Leah Hoehn hopes to avoid a New Year’s financial hangover. She recently paid off her credit card -- and is trying to be a little more card savvy.

"Absolutely, yes, I've really hurt myself this year, so I will definitely be making some changes next year."

Other than cutting up your cards- there are a few rate hike strategies that can help beat down your card debt. They include;
-switching to fixed rate cards
-transferring balances to cards offering zero interest rates for a limited time period.
-a term loan w/ structured payment plan.

Those ideas, according to Schulz, also come with a warning.

"You really can kind of create a trap for yourself, especially if it’s somebody who misses payments from time to time or doesn't necessarily read the fine print with some of these offers. because of these cards will have deadlines, 30-60-90 days  to move that balance or you could end up losing that deal all together,” said Schulz.

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