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On Tuesday and Wednesday, the Federal Reserve, the U.S. central bank that determines interest rates, plans to meet in Washington. Unless something goes off the rails, chances are the Fed will approve another quarter-point hike in interest rates. You may not think that affects you, but chances are it will. We spoke with a couple of financial advisers to find out what the Fed’s new benchmark rate could mean for your money.

Auto Loans 

Though lenders have begun offering variable-rate loans, most car buyers take out fixed-rate loans. Since the loan is fixed, the Fed’s interest hike probably won’t have a direct impact on your loan, said Robert Dowling, a financial planner with Modera Wealth Management in Westwood, New Jersey. However, if you’re in the market for a new set of wheels, prepare to face higher interest rates for the new loan.

Credit Cards

Credit cards, which typically come with variable interest rates, will definitely be affected by the Fed’s rate hike, said Dowling. If you maintain a balance, as many consumers do, expect to see your monthly payments go up — and your balance balloon if you aren’t careful.

If you can’t afford a higher monthly payment or feel compelled to pay off your debt, now’s the time. Ridding yourself of debt will free up your budget and help you improve your credit score. Debt is one of the key factors lenders use to determine whether to extend credit. You can learn more about the high price of debt and its affect on your credit score here. (Not sure where your credit stands? View two of your credit scores for free on Credit.com.)


With interest rates expected to rise, prepare for your monthly mortgage payment to rise along with them if your loan has a variable rate, said Jude Boudreaux, a financial planner based in New Orleans. “The higher the interest rate and more variable the debt, the more of an issue [the Fed rate hike] certainly is.”

Higher rates also put pressure on the sale of homes, though you shouldn’t rush to buy one if you aren’t financially ready. “People never go to the bank and say, ‘I want to spend $300,000 on a house,'” said Boudreaux. “They go to a lender and say, ‘Here’s my income and my debts, what can I afford?’ So when interest rates rise, what they can afford is less.” You can see how much home you can reasonably buy here.

Savings Accounts & Certificates of Deposit

At times, major banks quickly respond to Fed rate hikes by paying higher interest on savings accounts. That isn’t always the case, but it doesn’t hurt to shop around if you want better rates. According to experts, online banks, community banks and credit unions may raise their rates faster as they attempt to lure customers away from major banks.


“The Fed has made it clear that they would like to raise rates this year, so in general, what that means for us is if we have debt that we can lock in at lower interest rates, great,” said Boudreaux. If refinancing your home is on the agenda, “take a hard look at those numbers.”

Likewise, if you’re burdened by student loan debt and looking to move from a federal to private lender, “that would be a high priority too,” said Boudreaux, who’s seen interest rates soar in response to the Fed. Doing what you can now to offset higher costs in the future could be a boon for your savings.

Keep your eye out Wednesday to see what happens next.

Image: gruizza

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