Credit card APRs have an 'economically meaningful' impact on consumer spending, Boston Fed finds

The Boston Fed's research indicates that higher credit card annual percentage rates (APRs) significantly dampen consumer spending, particularly among liquidity-constrained households. This operates through the cost-of-credit channel, where elevated borrowing costs reduce discretionary outlays as consumers face tighter monthly budget constraints. Retail sectors reliant on installment purchases or big-ticket consumer durables are most exposed, as spending sensitivity to financing costs is amplified in these categories. With the Fed maintaining a higher-for-longer rate stance, traders will watch the upcoming Personal Consumption Expenditures (PCE) report for signs of slowing goods consumption, especially in credit-sensitive segments like electronics and autos.

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