June 12 — It is widely expected that another Fed rate hike will be announced this month, and with credit card balances higher than they’ve ever been before, changes in interest rates can affect consumers who, it turns out, are not that fond of the idea.
New research from WalletHub shows that while only 14 percent of Americans are in favor abolishing the Federal Reserve System altogether, an overwhelming two-thirds believe the system needs some work. Despite the fact that 44 percent of American consumers don’t know when the Fed last raised its rates, more than half believe that interest rate hikes are bad for their wallets, overall.
Over a third believe rate hikes are bad for the economy, and less than a third consider increases good for the economy. In keeping with the fact that just under half the population is unaware of the streak of recent rate increases, 34 percent don’t know if increases are good or bad for the economy.
Americans do see rate hikes as being tied to their credit scores, with 42 percent saying the Fed should consider consumers’ credit scores when making rate-hike decisions. Just under a quarter of respondents to WalletHub’s survey (22 percent) believe that rate hikes hurt their credit scores, but only 7 percent feel they help credit scores. Moreover, 60 percent of Americans believe their credit card rates are already too high, making them even less receptive to a rate increase.
Misconceptions about what the Fed does and doesn’t control or impact, as well as credit scores in general, however, could be fueling some of this ire. Sixteen percent of those surveyed believe the Federal Reserve is directly in charge of credit scores, and almost all Americans (91 percent) believe they have between 1-3 credit scores, whereas, according to WalletHub, there are actually 1,000+. Additionally, while half of all American consumers believe mortgages become more expensive after a rate hike, only 10 percent of people have a variable-rate mortgage.
If/when the next rate hike does occur, bankers should prepare to answer questions from ill-informed consumers regarding which of their financial interests this will and will not affect.