Families, Deep in Debt, Facing Pain of Growing Interest Rates
By LOUIS UCHITELLE

Published: June 28, 2004

LANCASTER, Pa., June 25 — With the Federal Reserve about to raise interest rates for the first time in four years, Joyce Diffenderfer is beginning to wonder how she and her husband, Curtis, will deflect the growing cost of their $16,000 in credit card debt.

Not that her concern is a pressing issue yet; it is more like a fire drill in anticipation of a fire that she is still not convinced will occur. The Diffenderfers figure that a modest rate increase would initially add only $35 to their monthly card payments, which now total more than $600. Still, they have run out of ways to sidestep the cost of borrowing, and if the rates keep rising, as the Fed's leaders suggest they will, then the only alternative, Mrs. Diffenderfer said, will be to seriously cut family spending.

The Diffenderfers are among the millions of American families who rode the recent wave of low interest rates to home ownership and the rapid accumulation of debt, and now they must cope as rates begin to swing upward. The process is almost certain to begin at a meeting of the Fed's policy makers on Tuesday and Wednesday. They are widely expected to raise rates a quarter of a percentage point and follow that with similar increases periodically over the next 18 months.