What You Need to Know About Raising Interest Rates
The Federal Reserve is expected to hike interest rates by 25 basis points (0.25 percent) this week, which could put you on the hook to increase your credit card bill if you keep a balance.
Variable credit card rates (which apply to most cards) are pegged to the Fed ‘s base rate , which means they will rise when the Fed raises rates. This is especially important because Americans have record levels of credit card debt. You need more than ever to focus on paying that amount before you get hit even harder by the rising rates. “The five Fed rate hikes since December 2015 have cost credit card users an additional $ 6.8 billion, ” WalletHub said . If the rate hike does happen this week, you could get an additional $ 1.6 billion, which will only increase as economists expect at least three rate hikes this year.
If you consistently make payments on time, call your credit card company and ask for a lower rate. As I wrote here before, it’s often as easy as just waiting in a lock and asking – no negotiation required. If you have good credit, you can also qualify for balance transfer or consolidation (check fees). If you’ve created your emergency fund, consider putting the tax refund on your balance sheet.
According to Bankrate , the average 30-year fixed mortgage rate has increased from 4.15 percent to 4.54 percent since Jan. 1. Greg McBride, chief financial analyst at Bankrate, expects volatility to come, which could ease at some point in the year, which “could potentially help.” home buyers and refinancing organizations. ” This will not affect people who have already taken out the loan (unless you have an adjustable interest rate mortgage or home equity line of credit), but if you are looking to buy a new home, this is something to keep in mind. If you have variable rate private student loans, you may also be on the hook for higher interest payments (federal loans are fixed so you won’t get hurt).
The good news is that savings accounts and CDs may see a slight increase in interest paid, although WalletHub notes that this is certainly a delay. “Banks seem to be quickly setting higher rates for consumers on loans, but do not share the love of deposits.” Who would have thought! But you could improve your position by shopping and switching to online banking .