The Federal Reserve’s decision to raise interest rates is going to have a broad impact on your finances. Your debt payments will likely go up, especially on variable-rate debts like credit cards. And it may be harder to qualify for new loans, as lenders may require higher income and credit scores.
The Fed is raising rates in an effort to slow consumer inflation, which is running high and could lead to a recession. The Fed’s goal is to raise rates enough to make it more expensive to borrow, which will reduce spending on cars and homes and tame rising prices.
For many households, however, the rise in borrowing costs will be painful. A bigger monthly bill means less money for household expenses and could force some families to resort to paying only the minimum amount on their debt, which can hurt credit scores over time and lead to late or missed payments — all factors that are used to calculate your score.
The good news is that savings accounts and CDs usually earn more when rates go up, so savers may benefit from a rate hike. It’s also possible that your employer or credit card company may give you a bonus for meeting certain payment milestones, such as on-time payments or reducing debt balances.