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With the Federal Reserve's latest quarter-point interest rate increase (and still more likely to come), few consumers are left unscathed. The decision affects rates on all kinds of borrowing, from home mortgages to credit cards.
Despite pressure from President Donald Trump and members of his administration, the Fed made its ninth hike in three years and pushed the federal funds rate target to a new range of 2.25 to 2.5 percent (its highest level in a decade). That rate is closely tied to consumer debt, particularly credit cards, home equity lines of credit and other adjustable-rate loans.
"Borrowers are starting to feel it, savers are starting to benefit from it, and investors are getting queasy," said Greg McBride, 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 pay raises and a better return on your savings.
On the upside, stashing some cash in a savings account is finally paying off. In fact, a majority of investors say reaping the benefits of a higher yield on their savings is the best thing about rising rates, even as borrowing costs go up.
While the average interest rate on a savings account is still only 0.2 percent, some top-yielding savings accounts are now as high as 2.4 percent, up from 1.1 percent in 2015, according to Bankrate. (You can earn even more with CDs, or certificates of deposit.)
With a savings rate, or annual percentage yield, of 0.2 percent, a $10,000 deposit earns just $20 after one year. At 2.4 percent, that same deposit would earn $240.
What you can do about it: Look for those significantly higher savings rates by switching to an online bank. (Online banks are able to offer higher-yielding accounts because they come with fewer overhead expenses than traditional bank accounts.)
"If you are getting less than 2 percent, you are making a mistake," said Nick Clements, co-founder of MagnifyMoney.com.
"This is the first time in more than a decade where savers can actually out-earn inflation," McBride added. "You are leaving money on the table by letting money sit in a low-yielding account."
The best online banks also offer perks such as no minimum balance and free ATM access, according to Clements. You can even link an online savings account to the checking account at your current bank to access that cash when you need it.
However, in daily life, higher interest rates mean that you'll have to pay up to access credit.
Wednesday's rate hike will be felt immediately in the prime rate, which is the rate that banks extend to their most credit-worthy customers — typically 3 percentage points higher than the federal funds rate.
"By Thursday banks will have adjusted their prime rates higher," McBride said.
This is the rate that is often used for many types of consumer loans, particularly credit cards.
If you're concerned about what an additional increase in the Fed's benchmark rate will mean for your borrowing costs, including your mortgage, home equity loan, credit card, student loan tab and car payment, here's a breakdown of what's ahead — and what you should do about it now.
For starters, credit card rates are already at a record high of 17.6 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. As the federal funds rate rises, the prime rate does as well, and credit card rates follow suit. Cardholders will see the impact within a billing cycle or two.
The average American household is already carrying $6,929 in credit card debt month to month and paying a $1,141 annually in interest, according to NerdWallet.
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 separate WalletHub analysis. Factoring in the previous rate hikes, credit card users will pay about $11.26 billion more in 2018 than they would have otherwise, WalletHub said.
What you can do about it: "The best way to protect yourself from rising rates is to make interest rates a moot point by paying off your balance — that should be your goal," said Matt Schulz, the chief industry analyst at CompareCards.
Shop around for a better rate or snag a zero-interest balance transfer offer. "That's a great way to give yourself a window of opportunity to aggressively pay down your balance," Schulz advised. Just be sure to check the fees and terms, he cautioned, because those offers aren't as generous as they used to be.
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 the Fed started raising rates.
The average 30-year fixed rate is now about 4.83 percent, up from 4.09 percent in 2015. That has cost the average homebuyer roughly $42,000, WalletHub found.
Between increasing home prices and higher mortgage rates, homes are about 10 percent less affordable this year than they were last year, according to Tendayi Kapfidze, the chief economist at LendingTree. "Next year, we could see another 10 percent to 15 percent decrease in affordability," he said.
Many homeowners with adjustable-rate mortgages or home equity lines of credit, which are pegged to the prime rate, will also be affected. While some ARMs reset annually, a HELOC could adjust within 60 days.
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 soon, Kapfidze said. "If you have the chance to lock in a fixed payment and remove the risk of higher rates, take that opportunity."
"If the federal funds rate continues to go up, there's no guarantee these rates will be available to you down the line," Kapfidze added.
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. Alternatively, switch to another lender offering a lower rate and then pay down the loan as quickly as possible.
For those planning on purchasing a new car in the next few months, Wednesday'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.
Currently, the average five-year new car loan rate is 4.93 percent, up from 4.34 percent when the Fed started boosting rates, while the average four-year used car loan rate is 5.72 percent, up from 5.26 percent over the same time period, according to Bankrate.
However, tack on rising auto prices and longer loans to climbing interest rates and car buyers may end up with sticker shock. A buyer who finances their purchase could pay about $6,500 more than they would have five years ago, according to research from Edmunds.com.
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.
Very low rates are often still available, especially through manufacturers who subsidize financing deals on new car models.
Try for 36-month financing, instead of the more common 60-month payment period, to secure more favorable terms, according to Erin Klepaski, the executive director of strategic alliances at Ally Financial.
"Usually there's some rate relief if you go shorter term or put more money down," she said.
Alternatively, consider a pre-owned car, which is less expensive to buy at the outset and lowers depreciation costs substantially over time.
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.
(A college education is now the second-largest expense an individual is likely to incur in a lifetime — right after purchasing a home. The average graduate leaves school $30,000 in the red, up from $10,000 in the early 1990s.)
What you can do about it: If you have a mix of federal and private loans, consider prioritizing paying off your private loans first or refinance your private loans to lock in a lower fixed rate, if possible.
"But in general, a rising rate environment could mean less attractive refinancing options," said Clements.
Meanwhile, some schools are trying to reel in the mounting debt problem by instituting a no-loans policy and a growing number of states are adopting free-tuition programs to boost the number of students attending college. Even employers are increasingly offering student debt assistance to ease the burden on borrowers.