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Offbeat Here's what the Fed rate hike actually means for you

23:06  13 june  2018
23:06  13 june  2018 Source:   cnbc.com

Why your budget will feel the Fed's next rate hike

  Why your budget will feel the Fed's next rate hike That increase is likely coming this week, and it means a slew of borrowing costs will become more expensiveThe Fed's monetary policymakers are likely to add another quarter-point to the central bank's key interest rate, putting it at 1.75 percent to 2 percent, the highest since 2008, economists said. This would be the second of as many as four interest rate hikes this year. The Fed last raised its benchmark rate a quarter-point in March, moving it into the range of 1.5 percent to 1.75 percent.

But what does the Federal Reserve’ s decision to raise interest rates actually mean for your wallet? One small interest rate hike of one-quarter of a percentage point is unlikely to have much impact on your budget, but that does not mean you should ignore the Fed ’ s first rate Here is what to expect

But what does the Federal Reserve' s decision to raise interest rates actually mean for your wallet? One small interest rate hike of one-quarter of a per centage point is unlikely to have much impact on your budget, but that does not mean you should ignore the Fed ' s first rate Here is what to expect

Video by CNBC

With the Federal Reserve's latest quarter-point interest rate increase, the seventh such hike in two years, some consumers may need a life jacket.

"Over time, that cumulative effect is growing," said Greg McBride, the chief financial analyst at Bankrate.com.

For the average American, recent signs of rising inflation, which pushed the central bank into hiking rates beginning in 2015, aren't necessarily bad. They're generally considered an indication that the economy is doing well, and pave the way for raises and a better return on your savings.

Fed rate hike will add $2.2 billion in credit card interest charges

  Fed rate hike will add $2.2 billion in credit card interest charges The U.S. central bank is expected to hike its key interest rate another quarter of a percentage point Wednesday. And that means higher interest rates on credit cards.That also means cardholders soon will be forking over even more money in interest payments annually, an estimated $2.2 billion alone for what’s expected to be the Federal Reserve’s second rate hike of the year, according to the June Credit Card Debt Report from CompareCards. And if the Fed raises rates two more times this year, it will boost interest paid on credit cards to roughly $10 billion in 2019, the report said.

Here are a few reasons why. For your existing loans, only those with variable rates would be affected. This means if you have loans or lines of credit with locked-in interest rates , like a But here ’ s the rub: Your credit score might actually be the bigger cause of that headache than a Fed rate hike .

But what does the Federal Reserve' s decision to raise interest rates actually mean for your wallet? One small interest rate hike of one-quarter of a percentage point is unlikely to have much impact on your budget, but that does not mean you should ignore the Fed ' s first rate Here is what to expect

However, in daily life, higher interest rates mean that you'll have to pay up to access credit. That includes how much you owe in interest on credit cards or a home equity line of credit.

If you're concerned about what an additional increase in the Fed's benchmark rate will mean for your own bank account, mortgage or credit card, as well as student debt, home equity loan and car payment, here's a breakdown of what's in store — and what you should do about it.

Credit cards

For starters, credit card rates are already at a record high of 17 percent on average, according to Bankrate.

Most credit cards have a variable rate, which means there's a direct connection to the Fed's benchmark rate, and as interest rates rise, card holders will continue to get squeezed.

After 9 years of economic recovery, Fed's anxieties finally fade

  After 9 years of economic recovery, Fed's anxieties finally fade The Federal Reserve is guiding a U.S. economy that is as close to ideal as it could have dreamed a decade ago, when the darkest days of the recession forced it to take big risks to protect workers, banks and economies around the world from further devastation. After nine years of steady if uneven recovery, the United States is now growing at a pace topping 4 percent, unemployment is as low as it's been this century, and inflation has safely edged up toward an official target.While a few items remain on the U.S.

The Federal Reserve raised its key interest rate by 0.25% Wednesday. It was the first rate hike in nearly a decade. Rates are expected to go up at a slow, gradual pace. Here ' s what you need to know about how the Fed 's action will affect you .

The Fed just raised rates ! What does that mean for my mortgage? Then again, the markets really priced this rate hike in a few months ago, so actually you missed the boat a while back.

The typical American has a credit card balance of $6,375, up nearly 3 percent from last year, according to Experian's annual study on the state of credit and debt in America. Total credit card debt has reached its highest point ever, surpassing $1 trillion in 2017, according to a separate report by the Federal Reserve.

Tacking on a 25-basis-point increase will cost credit card users roughly $1.6 billion in extra finance charges in 2018, according to a WalletHub analysis. Factoring in the six previous rate hikes, credit card users will pay about $9.8 billion more in 2018 than they would have otherwise, WalletHub said.

What you can do about it: Shop around for a better rate or snag a zero-interest balance transfer offer to insulate yourself from further rate hikes. Then, begin to aggressively pay down your balance.

"Make hay while the sun shines," McBride said.

Mortgages

The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which generally are pegged to yields on U.S. Treasury notes, so there's already been a spike since since the Fed started raising rates.

Powell Solves Some Fed Policy Mysteries, Plot Thickens on Others

  Powell Solves Some Fed Policy Mysteries, Plot Thickens on Others Jerome Powell gave Federal Reserve-watchers some meaningful answers on Wednesday. He also left them scratching their heads over ever-bigger questions. The Federal Open Market Committee closed out its June meeting by raising interest rates and suggesting it’ll hike twice more this year, and the Fed chairman announced that he’ll soon start giving press conferences every -- rather than every other -- policy meeting.Powell Lauds Economy as Fed Nudges Up Interest-Rate Hike PathYet if one theme ruled the day, it was an optimistic uncertainty.

The Federal Reserve just voted to hike interest rates . Here is how Wednesday' s Fed decision affects job hunters, savers, borrowers and the economy. Many economists were big fans of Yellen, rating her highly, and had actually wanted to see her remain in the job by wide margins.

GWEN IFILL: For a closer look at today’ s rate hike , both in terms of how the Fed makes its decisions and what this move might mean for your average household budget, we turn to David Wessel When rates were low here , a lot of money went to emerging markets. It has started to come back.

The average 30-year fixed-rate is now about 4.7 percent, up from 4.09 percent in 2015. That has cost the average homebuyer roughly $42,000, WalletHub found.

Many homeowners with adjustable-rate mortgages or home equity lines of credit, which are pegged to the prime rate, will also be affected.

What you can do about it: Those with an ARM can still refinance into a fixed rate that's lower than what your ARM will adjust to later this year, McBride said, "but you have to act quickly."

If you have a HELOC, ask your lender to freeze the interest rate on your outstanding balance or consider refinancing into a fixed-rate home equity loan, although that puts a cap on how much money you can access, McBride added.

Auto loans

For those planning on purchasing a new car in the next few months, today's change likely will not have any big material effect on what you pay. A quarter-point difference on a $25,000 loan is $3 a month, according to McBride.

"Nobody is going to have to downsize from the SUV to the compact because of rates going up," he said.

Currently, the average five-year new car loan rate is 4.71 percent, up from 4.34 percent when the Fed started boosting rates, while the average four-year used car loan rate is 5.4 percent, up from 5.26 over the same time period, according to Bankrate.

Fed rate hike: Are you a winner or a loser?

  Fed rate hike: Are you a winner or a loser? See if the latest interest rate hike hurts or helps your finances.The Federal Reserve, for the second time since Jerome Powell took the helm, hiked short-term interest rates, and may do so two more times this year.

Here are different areas that will be affected by this hike , have a look and see how it will affect you and your family. You may also like Related Topics: fed , federal reserve, interest rates .

The Fed ' s decision to edge off of a crisis-level rate policy was long anticipated and experts say this first rate hike in nearly a decade might not have much of an impact overall. But if you 're concerned about what this means for your own finances, here is a breakdown and what you can expect.

What you can do about it: If you are car shopping, start by checking that your credit is in good shape, negotiating the price of your vehicle and shopping around to secure the best rate on your financing.

"There are plenty of low rates still available, particularly if you have good credit," McBride said.

Savings

Stashing some cash in a savings account has not yielded very much, aside from peace of mind, until recently.

While the average interest rate on a savings account is still only 0.09 percent, some top-yielding savings accounts are now as high as 2 percent, up from 1.1 in 2015, according to Bankrate.

With a savings rate, or annual percentage yield, of 0.09 percent, a $10,000 deposit earns just $9 after one year. At 2 percent, that same deposit would earn $200.

What you can do about it: Look for those significantly higher savings rates by shopping around or switching to an online bank. (Online banks are able to offer higher-yielding accounts because they come with less overhead expenses than traditional bank accounts.)

"The Federal Reserve is trying to get inflation to 2 percent — don't ignore that," McBride said. "If you're not keeping pace with inflation, you are losing money."

Student loans

While most student borrowers rely on federal student loans, which are fixed, more than 1.4 million students a year use private student loans to bridge the gap between the cost of college and their financial aid and savings.

Private loans may be fixed or have a variable rate tied to the Libor, prime or T-bill rates, which means that as the Fed raises rates, borrowers will likely pay more in interest, although how much more will vary by the benchmark.

What you can do about it: If you have a mix of federal and private loans, consider prioritizing paying off your private loans first.

Furthermore, watch out for other high-interest debt that could come back to bite you, such as that credit card balance, said Andrew Josuweit, CEO and president of Student Loan Hero, a student-loan management site.

Already cash-strapped student loan borrowers could get hit from all sides, he said.


Fed hikes push saving account rates to 5-year highs .
Finally, some noticeable rise is filtering into the wallets of consumers, and the best rates are at internet banksThis isn't good news for everyone, especially borrowers, who will have to contend with rising rates on everything from credit cards to auto loans. But it bodes very well for savers.

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