This is how a higher Fed rate could affect your finances

Credit card rates will likely rise. You'll pay more for an auto loan. The unusually large three-quarter point hike, Wednesday, June 15, 2022 in the Fed's benchmark short-term rate is going to have a lot of impacts on Americans' finances. The hope is that by making borrowing more expensive, the Fed will succeed in cooling demand for homes, cars and other goods and services and slow inflation. – Record-low mortgages are long gone. Credit card rates will likely rise.

How will it affect your finances? These are some of the most common questions being asked about the impacts of the rate hike.Rates on home loans have soared in the past few months, mostly in anticipation of the Fed’s moves, and will probably keep rising. Rates for buyers with lower credit ratings are most likely to rise as a result of the Fed’s hikes. Because used vehicle prices, on average, are rising, monthly payments will rise too.For users of credit cards, home equity lines of credit and other variable-interest debt, rates would rise by roughly the same amount as the Fed hike, usually within one or two billing cycles. That’s because those rates are based in part on banks’ prime rate, which moves in tandem with the Fed.

This is particularly true for large banks now. They’ve been flooded with savings as a result of government financial aid and reduced spending by many wealthier Americans during the pandemic. They won’t need to raise savings rates to attract more deposits or CD buyers.But online banks and others with high-yield savings accounts could be an exception. These accounts are known for aggressively competing for depositors. The only catch is that they typically require significant deposits.

Source: Loan Digest (loandigest.net)

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