The U.S. Federal Reserve is expected to raise its fed funds rate this year. Whether that will be as early as this month or later is still unclear. But one thing that’s certain is that the second increase in a decade will affect the cost of consumer credit, but will the Fed’s raised interest rate affect our wallets if and when they decide to raise the interest rate.
One single-quarter point move isn’t something you’re necessarily going to notice, but you may want to shop around to get better deals. Mortgages, credit cards, bank loans, and even interest on CDs and savings will begin to see changes which could give you a better chance to save.
So here is some ways to check out where the interest will raise and what you could do to help yourself prevent losses and possibly begin to make a little money.
The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which are pegged to yield on U.S. Treasury notes, so there’s likely to be some creep from current levels even before the Fed officially makes a move.
With interest rates rising, adjustable rate mortgages could be heading higher too — so don’t be surprised to see some payment increases down the road.
If you have an adjustable loan your interest will go up so will your payments so budget. It would be wise to refinance, because the interest is going to keep on rising, so get a fixed rate loan.
Currently, mortgage rates are near the lowest levels ever with the average 30-year fixed rate near 3.6 percent — only about an eighth of a percentage point above the record low.
For those planning on purchasing a new car in the next few months, one interest rate increase will not have any material effect on borrowing costs. A quarter percentage point difference on a $25,000 loan is $3 a month, according to Bankrate’s McBride. You won’t have to downsize to a compact car because the rates are going up, at least not yet. What will affect what kind of car you can afford is shopping around to secure the best rate on your financing, checking that your credit is in good shape and negotiating the price of your vehicle. Don’t ever think you have to buy the car for what it is priced, learn to say no and have a price in mind. Stick to that price. Walk away and check other car lots.
Most credit cards on the market these days have a variable rate, which means there’s a direct connection to the benchmark rate. A quarter percentage point rate hike means your credit card rate will go up by a quarter of a percentage point within a few billing cycles. At the rate credit cards are now it is not wise to carry a balance. Several cards offer 0% balance transfer such as Citi, Barclays, Discover, and Capitalone. Using the 0% balance transfer can get rid of your high debt by not paying those high interest fees. You want to get them as soon as possible, because if the Feds keep raising the interest we won’t have those 0% balance transfers.
Thank goodness that the Federal student loans are fixed, the interest won’t go up, but if you have a private loan, that is different, if it is a variable rate. If the interest goes up your payments will go up. So student loans that are on private loans that don’t have fixed rates will begin to climb as the Fed’s raise the interest.
Now here is where we all can finally make some money although this takes the slowest change. When a bank can make more money the change happens immediately, but when they have to pay out it take a little more time. Right now they only pay out about 0.08 percent on savings some are less and very few are more. It is for us to shop around and find a bank with the highest savings interest. If enough people would take their money from the banks with lower interest rates and move them to a bank paying higher interest, maybe the banks would wake up and decide to raise the interest instead of losing their customers. I found a bank that pays 1.61% on interest but they will only pay up to $15,000 anything over that they pay 0.05%.
So will the Fed’s raised interest rate affect our wallet when they finally decide to raise it. I guess we will just wait and see, but if some of us have adjustable or variable rates, we should start preparing for the raise and refinance before the interest gets too high. Those of you who are thinking of buying a home it would be very wise to get out there and get to looking, because who knows what the mortgage rates are going to be.