In this column, we have discussed the Federal Reserve’s recent increases in interest rates, and how they result in interest rate increases for floating rate debt instruments, like most credit cards.
After its most recent hike, in September, the Fed projected three rate increases for 2019. As you know, the Fed has already raised rates three times this year, and, according to cnbc.com, Wall Street expects another increase in December. However, some recent comments by the Fed Chairman have raised a question as to whether we will really see the projected three increases in 2019.
That made me think that I should monetize the reality of these interest rate hikes on those Americans who carry credit card debt, so I looked at my past credit card statements. What I found was that in December of 2016 my interest rate for purchases on my one credit card, that I pay off in full on time every month, was 14.49 percent. Now, two years later, in December of 2018, because of the interest rate increases, my rate is 16.24 percent, a 1.75 percent increase.
So let’s monetize it. If you are in a household that is carrying the $15,000 average credit card balance for those American households that carry a balance, that means that you are paying at least an additional $262.50 in interest every year. Now that may not seem like a lot of money if you are paying the at least 20 percent interest that most people carrying that balance are paying. After all, you are already paying at least $3,000 in interest every year, which means that you are paying more for everything you do and buy. So, you might say, what’s the difference if you pay $3,262.50? For me, it is $262.50 that I could do other things with, but so is the $3,000.
On a different subject, I have to admit that I really missed this one, and I’m a little embarrassed. It has only been in the last few weeks that I have realized that you can get a refill from the cappuccino machine in most gas stations, with your own mug, for a lot cheaper than purchasing the same amount with one of their cups. It may be that more and more stations are advertising this in ways that are different, at least in my mind, than they did in the past. I saw those ads in the past, but I thought that you had to buy a special mug from the station, and then you could get one or more refills for cheaper. What a dummy for not asking! Now I bring in my Marine Corps tumbler, and get a refill for between $.99 to $1.19, and save as much as 50 cents.
On yet another subject, what about those mail-in rebates at the liquor store? Do they make sense? The answer for me is, sometimes. So I will admit that I am not a frequent wine drinker, but I do buy an inexpensive Chilean Merlot, not because it is inexpensive, but because I actually like it. It is $5 per bottle. The last time I was in the store, I purchased 4 bottles, a total of $20 before taxes. They had a promotion — a $3 mail-in rebate for every two bottles purchased. That amounts to a 27.5 percent discount — $6, less a 50 cent stamp. That definitely works for me, so perhaps you might want to do the math when you are stocking up for the holiday season.
On an additional subject, here is one that really got my attention recently. I was at Pittsford Mendon High School doing financial literacy. The class following the one I spoke for was Cybersecurity. Now I know that RIT and Syracuse University have excellent programs in this area, and that it is a specialty that is in high demand. In fact, cybersecurity professionals report an average salary of $116,000, or approximately $55.77 per hour, according to the Bureau of Labor Statistics. In addition, according to securityintelligence.com, there is a 25 percent gap between demands for cyber talent and existing supply, and a Cybersecurity Ventures report predicted a shortfall of 3.5 million Cybersecurity professionals by 2021. It is pretty impressive that a high school would offer this.
On a final subject, I was recently speaking for a Career and Financial Management course. Afterwards the teacher told me that her identity had recently been stolen, as so often, by someone she knew, who had opened up two credit card accounts in her name. We have discussed this in the past in this column, but this was her interesting piece of advice, beyond getting a free copy of your credit report annually from each of the three credit reporting agencies (annualcreditreport.com.). She discovered the theft when she actually took the time to open and read a letter from a credit card company, which she assumed was just another one of those solicitations that she usually just tosses. It turns out that it was a request for additional information regarding her recent request to open an account, which of course she had never made. So, take a few moments in the future to look at those solicitations before tossing them.
In the next column we will look at those annual holiday shopping tips.
John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at http://www.mpnnow.com/search?text=Ninfo or at http://www.monroecopost.com/search?text=Ninfo.