The Federal Reserve recently announced – in order to fight inflation – several rate hikes will likely be coming, the first of which already happened last month with the U.S Prime Rate increase of 0.25%. Here’s what potential hikes might mean for you.
Prepare for more
When the Fed increases the federal funds rate, it has a trickledown effect. Eventually, you’ll have to pay more to borrow, while not seeing better rates on your savings accounts. The first hike won’t do much, but the cumulative hikes can alter the economy and your budget.
Mortgages on the rise
You can expect to pay more for a mortgage. Let’s say the rate jumps to 4%. As CNBC notes, with a $300,000 mortgage at 3.75%, you were paying $1,389 a month. At 4%, you’ll be paying $1,432 per month. That’s a difference of $516 a year.
Credit card woes
The current average credit card APR is about 16%, but that’s going to change. Most credit cards have a variable interest rate, so expect your APR to increase. While a small increase probably won’t make a huge difference, several small increases can have a big impact, especially if you’re carrying debt. Now would be a good time to try to pay down your debt and maybe even try a balance transfer card if need be.