Holders of credit card debt are the most at-risk and in danger when the fed raises it’s benchmark interest rate. With most credit cards being variable rate, debt carrying consumers are advised to pay-off credit card balances in full each month to avoid high interest rate charges or to consolidate to a zero or lower interest rate account, before rates rise further. On the flip-side, many savers and even investors are looking forward to higher interest rates because they will see bigger returns on cash savings in their accounts.
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hey everybody my name is Jason and this is Babu and Bear bust okay today we're gonna talk about who's gonna be most in danger of rising interest rates and also on the flip side who's going to be rewarded most heavily for interest rates rising now before we get to that I just want to do a quick shout-out to all my subscribers thank you very much we're over the 17,000 mark and channel it is continuing to grow so I appreciate it and if you're watching it if you haven't done it already please go down and click subscribe to the home screen there on YouTube and don't forget to click the notification button because I've been getting getting reports from some people that they haven't been getting notified of new videos that we post and also some people say they have set up notifications for this channel but still haven't been getting notified so or notifications have been getting unselected for some reason right also if you look down in description of this video you're gonna see a link to our home page there you can find a link to our bitch shoot page and you can watch their ad free so no commercials if you don't like sitting through the commercials I'll link to our Twitter page and go over there and follow us and you can also if you want to support us go here and you can find a way to support the channel a few different ways in there and even if something as little as buying me a cup of coffee via PayPal in there would be greatly appreciated and it would motivate me to do more videos on the channel so I hope you will consider that okay very important topic today in my opinion being that we're in a rising interest rate environment I think it's very important to put out there the people that are in most danger of rising interest rates alright now I think it's important to show off to show up front here how rates have gotten lower and lower and lower with each recession in this last recession since the financial crisis you hate to see the shaded area right here they had to keep rates near zero throughout the entire Obama administration and they didn't start raising them until Trump got elected and they're actually doing so very gradually okay but if you just look back at history we're absolutely going to be in another recession shortly in my opinion less than six months because every time they've raised rates in the past there's been a recession and with people and maximum debt now and actually at the highest debt levels of all time including the highest credit card debt now is a crucial time to try to pay off that debt and we're gonna talk about why but even though the Fed they did skip the rate hike today November 8th as I'm recording this they are still pushing the narrative that the economy's strong and therefore they need to continue to raise rates and that way they can really sack it to all the people that took on all this debt since the quote-unquote recovery after the financial crisis okay so you have to ask yourself if the economy was really that strong why would they skip a very small tiny rate hike only one quarter of 1% has been the increments that they've been using for these rate hikes and now supposedly the economy strong okay the job markets great unemployment that near 50-year lows but they're still not able to raise that interest rate one-quarter of 1% you got to ask yourself why that is all right could it be that they know they're gonna prick the bubble and everything is gonna come crashing down and now they've got the president out there pointing the finger at them at the Fed at the central banks and their policies and I don't think they know what to do in this case I don't think they know what to do with Trump all right and there's a lot of different theories out there and what's happening behind the scenes that Trump has taken over the Fed but I find that unlikely the feds been in power for over a hundred years they're independent they're unaudited bull they operate in secret they're outside the government they're not a government entity at all they're actually private and basically they're they're they're their own corporation okay so first of all let's look at how bad the debt is this time okay and this doesn't even include mortgage debt so it's actually worse than this but this is non housing consumer debt and we see before the financial crisis had actually peaked here at about little over two-and-a-half trillion now as of just recently it's reported here at the end of the third quarter which is July August and September 2018 we're up to nearly four trillion dollars so we're nearly fifty percent higher than we were at the peak of the financial crisis 2008 era okay so non mortgage debt rolls up all other types of debt including credit card debt K which includes cash advances and balance transfers done on credit cards okay you've got auto loan debt worse than it was in 2008 okay you've got student debt what way worse than it was in 2008 basically everybody is way worse off now than we were during the previous financial crisis okay so it doesn't matter though that people have these enormous amounts of debt now actually the highest debt levels ever of all time okay it doesn't matter to the Fed that's their job is to raise rates when people are in max debt okay of course they're not gonna come out and say that they're gonna look at other things that give them a legitimate reason or what will look like a legitimate reason for them to raise rates they're gonna point to the unemployment number oh look it's 3.7 percent it's great time to raise rates okay well if the economy was that great why just do a quarter of 1% and why skip a rate hike at all why not raise rates every meeting instead of a quarter of one percent raise it by one percent two percent of three percent right it's he the greatest economy of all time why not do that so if you've been watching this channel I think you know why and let's look at the people that are in most danger now with the rising rate environment that we're in ok here's why most credit cards charge a variable interest rate tied to the prime rate okay so the primary it's about three percentage points above the federal funds rate that we just saw the chart on ok so when the federal funds rate changes the prime rate also changes and therefore credit card rates are going to follow ok now also home equity lines of credit are also variable rate loans but typically they're much lower interest rates versus credit cards okay now recently since we've had a few rate hikes in the past year or two it's being recorded that the average APR on a credit card is now 17% okay so these banks are getting ultra cheap money ultra cheap money out of the central banks and out of savers and people that put their money in the banks deposits and savings accounts and checking accounts and CDs well they'll pay out a measly 1 or 2 percent if you're lucky APR is tiny so imagine putting ten thousand dollars in a bank and getting a two percent annual yield so you're bringing back about two hundred dollars a year on your ten thousand dollar deposit after one year it's ridiculous that it's that low right so it punishes savers and it encourages people to not put the money in the bank to go out and just speculate and that's another force that's causing rising prices nobody wants to just sit in cash when rates are so low okay but with rates rising if you have an adjustable rate credit card balance which most of them are you might want to really look at consolidating it into a zero percent and a lot of companies now are offering 0% for a year even 18 months and I've even seen them up to two years usually there's a transaction fee so if you can get a zero or one percent balance transfer offer without a transaction fee that's the best but sometimes you have to pay right around the 3% transaction fee which is most common okay also like we've been reporting here a lot of people are using their home equity to pay off credit card debt that way they can get it into a lower interest rate balance and make the monthly payment on that okay so a little more over now on the average credit card interest rate which is now 17 point one percent according to creditcards.com that's up from sixteen point one five percent exactly one year ago and up from fifteen point twenty two percent two years ago okay so even a small balance let's take 1,000 dollars a year at seventeen percent interest interest rate you're paying one hundred and seventy dollars worth of interest each year based on that average balance of $1,000 in case so getting that high interest rate into a zero percent or promote a low promotional rate is very important and you might want to do that while you still can because a lot of times when rates start going higher those zero credit card balance transfer offers become less common okay also what you can do and this is based out of a study from your a survey from credit cards calm is you can ask your credit card provider for a lower rate so even if you don't qualify for a low or 0% balance transfer offer a lot of times they will look for promotional rates and in different rates that you can qualify for all right and based out of this study from creditcards.com 56% of the people that called and asked their credit card company for a lower rate receive the lower rate okay also 84% had a late payment fee waived just upon asking we're up on request so if you forget to make your payment on time or something happens just reach out and try to give them or try to have them waive one of those fees I actually work for a bank myself and I know for a fact from people that I've spoke with in our credit card Department that they do waive fees in some cases customers will get one fee per year waived but catches customers to ask okay and it's reported that very small percentage percentage of people actually call their credit card company and ask for those better rates and to get their fees waived because most people just aren't aware of it okay now how bad is the credit card debt right now well we know it's higher we showed you the charts along with just about every other type of debt all right but CNBC is reporting that 43% of Americans who've been carrying a credit card balance for two years that means they're not paying their card off for a year and even two years which means they're paying interest every month on their balance because if you don't pay it off then you get nailed with that interest charge and for people that do carry credit card debt the average is almost $17,000 worth of credit card debt and of those people with that debt that credit card debt the average page pays one thousand two hundred ninety two dollars a year interest so it's just such a waste $1,000 worth of your hard-earned money go into some multi-billion dollar corporation with a CEO is making in many cases a hundred times more pay than the front level line employees so I try to pay my credit cards off every month pay him off in full if you can but sometimes things come up it's not always possible expenses medical expenses are high inflation z' causing the price of many things that go up everything from gasoline to groceries okay and I've got a little bit of Suze Orman type of advice I'm not a big fan of Susan women but I think she's right on this you should pay down the higher balances first so if you're gonna pay off debt save your mortgage for last that's generally pretty low interest rate okay car loans can be up there subprime especially eight to ten even up as high as fifteen eighteen twenty percent in some cases so if the car loans your highest APR pay that off first if you can okay and also it's been reported here at a creditcards.com that many cards have annual fees according to this study about twenty six percent of cards have annual fees okay most cars have cards have some sort of late payment fee about ninety eight percent of them okay most of them have that balance transfer fee about seventy nine percent of them so there are cars out there with no balance transfer fee okay foreign transaction fees about fifty two percent cash advance fees about ninety seven percent of them do over the limit fee very small percentage of them do six percent okay return payment fees for bounced checks and things like that for payments okay so real quick and we'll try to wrap this one up who's gonna benefit the most from rising rates well that would be people who are free of debt people that have savings because now your savings account or your CDs or even some checking accounts are gonna start seeing a bigger return right just based on the rising APR and get a bigger yield out of that and investors according to CNBC here are welcoming the rising interest rates so now they can actually make something on their money without always having to be jumping into a trade or always investing in something especially now in this high-risk time when markets seem to be peaking in many areas okay and I'd like to go back to this Fed fund start again here look back in the 80s there when interest rates were approaching 20% so if you had a hundred thousand dollars in the bank you could sit there and collect about eighteen thousand dollars yield each year just by parking your money in the bank in a in a interest earning savings account or even a CD all right and some people look at higher interest rates backwards they say well if rates rise to 20 percent then no one can afford anything everybody's gonna be homeless well no that's not the way it works especially with housing when interest rates are higher that makes the monthly payment higher that means people cannot bid as high of a price for the home and that's one of the things that brings housing prices down when there's higher interest rates okay because lower interest rates causes false demand and causes the prices to get bit up more with that demand well higher interest rates does the opposite it causes less demand and therefore sellers have to lower their prices and if it was up to me I would raise interest rates to 25-30 percent I would love to be able to park money in the bank and actually get something for it but we all know they devalue to our currency okay the banks they get fed ultra cheap money out of the central banks and that further dampens the banks need to actually give us a good return on our savings all right everybody thanks for watching hope to see you down in comments let me know what to think on this or what I might have missed there's always good information that you guys put down there that I miss Hayne hope to see you next time bye everybody you