Will another Fed rate hike help or hurt? How can you be affected?

After a pause last month, experts predict the Federal Reserve will likely raise rates by a quarter point at the end of its meeting next week.

Fed officials have vowed not to be complacent about the rising cost of living, repeatedly expressing concern about the impact on American families.

Although inflation has begun to cool, it is still well above the Fed’s 2% target.

From March 2022, the central bank has raised its benchmark rate 10 times to a target range of 5%-5.25%, the tightest pace since the early 1980s.

Most Americans say rising interest rates have hurt their finances in the past year: 77 percent said they were directly affected by the Fed’s actions, according to a report. WalletHub. About 61 percent said they had suffered a financial loss at the time, a separate report said Allianz Life found, while only 38 percent said they had benefited from higher interest rates.

“Rising interest rates can sometimes feel like a double-edged sword,” said Kelly LaWagne, vice president of consumer insights at Allianz Life. “While savings accounts are earning higher interest, borrowing for large purchases like a home is also more expensive, and many Americans fear that rising interest rates are causing a recession.”

Any move by the Fed to raise rates would equate to an increase in the prime rate, which would raise the cost of financing for many types of consumer loans.

Short-term borrowing rates are the first to rise. Already, “the cost of variable-rate debt has increased substantially,” said Columbia Business School economics professor Brett House. And yet, “people keep using.”

However, “we’re getting closer and closer to the point that those extra savings are going to run out and those rate hikes could have an impact very quickly,” House added.

Here’s a breakdown of five ways another rate hike could affect you, in terms of how it could affect your credit cards, car loans, mortgages, student loans and savings accounts.

1. Credit cards

Since the most Credit card rates are variable, directly tied to the Fed’s benchmark. As the federal funds rate rises, so does the prime rate, and credit card rates follow suit.

The average credit card rate is now more than 20 percent — the highest it’s ever been — while balances are high and nearly half of credit card holders carry month-to-month credit card debt, according to a Bankrate Report.

If the Fed announces a 25-basis-point hike next week as expected, consumers with credit card debt will spend an extra $1.72 billion on interest alone this year, according to a WalletHub analysis. Because of past rate hikes, credit card users will end up paying nearly $36 billion in interest over the next 12 months, WalletHub found.

2. Adjustable rate mortgages

Adjustable rate mortgages and home equity lines of credit are also subject to prime rates. According to Bankrate, the average HELOC rate is now up to 8.58%, the highest in 22 years.

Because 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, homeowners won’t be immediately affected by rate hikes. However, anyone shopping for a new home has lost considerable purchasing power, due in part to inflation and the Fed’s policy actions.

According to Freddie Mac, the average rate for a 30-year, fixed-rate mortgage is currently 6.78 percent.

Because the coming rate hike is largely baked into mortgage rates, homebuyers are going to pay about $11,160 more over the life of the loan, assuming a 30-year fixed rate, according to a VaultHub analysis.

3. Car loan

Although auto loans are fixed, payments are getting higher because interest rates on new loans are rising as well as the prices of all cars.

For those planning to buy a new car in the next few months, the Fed’s move could further increase the average interest rate on new car loans. According to Edmonds, the average rate on a five-year new car loan is already 7.2 percent, the highest in 15 years.

Paying an annual rate of 7.2% instead of last year’s 5.2% could cost consumers $2,273 more in interest over the course of a $40,000, 72-month car loan, according to Edmunds data.

“The double whammy of persistently high vehicle prices and horrendous borrowing costs presents significant challenges for buyers in today’s car market,” said Evan Drury, Director of Insights at Edmonds.

4. Student loans

Federal student loan rates are also fixed, so most borrowers are not immediately affected by the Fed’s move. But as of July, undergraduate students who take out new direct federal student loans will pay an interest rate of 5.50%, up from 4.99% in the 2022-23 academic year.

Currently, anyone with an existing federal student loan will benefit from a 0% rate until student loan payments resume in October.

Private student loans have variable rates that are tied to Libor, prime or Treasury bill rates — and that means as the Fed raises rates, those borrowers will also pay more in interest. But how much will vary with the benchmark.

5. Savings Accounts

Although the Fed has no direct influence on deposit rates, yields are related to changes in the target federal funds rate. gave Savings account rates at some major retail bankswhich were rock bottom during most of the Covid pandemic, currently average up to 0.42%.

Thanks, in part, to lower overhead costs, the highest-yielding online savings account rates are now above 5%, the highest since the 2008 financial crisis, according to Bankrate, with some short-term certificates even higher.

However, if this is the Fed’s last hike for a while, “you could see yields start to come down,” according to Greg McBride, chief financial analyst at Bankrate. “Now is a good time to call it quits.”

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