What Does the Fed’s Rate Hike Mean for You?

Caution - Higher Interest Rates AheadEarlier this month, the Federal Reserve raised interest rates again by a quarter of a percent. This is the third consecutive quarterly increase and many economists expect another rate hike this year.

So, what does this mean for you? Here are some steps you can take to protect yourself from rising rates:

Lock in Rates While They Are Still Low

  • Do you have an adjustable-rate mortgage? If so, consider refinancing to a fixed-rate while interest rates are still close to historic lows.

Watch Your Credit Cards

  • Credit card companies are likely to raise rates along with the Fed since most credit cards today have a variable rate, which means there’s a direct connection to the Fed’s benchmark rate. This is likely to to take place over one to two billing cycles.
  • The Fed’s quarter-percentage-point rate hike means you’ll pay an extra $2.50 a year for every $1,000 of debt. On a larger scale, for the 157 million Americans who carry a balance on their credit cards, this will mean nearly 1.6 billion in extra finance charges! Consider a zero interest balance transfer offer or better yet, take aggressive steps to pay down your credit card debt.

Student and Auto Loans May Have Higher Rates

  • If you or a member of your family has student loans, pay close attention to the rates on variable private loans.
  • Thinking of purchasing a new or used car? Shop around for the best rates as many auto lenders will raise rates as well.

Pay with Cash

  • One item not affected by the Fed’s rate hike? Cash. Consider making more purchases with cash and avoid the rate hike altogether!

If you have other questions about what the Fed’s rate hike may mean for you, please reach out to me. I would love to help!

(Source: CNBC, “Fed Hike Will Cost Consumers 1.6 Billion in Credit Card Interest,” 03/15/17)