3 Ways Rising Interest Rates Might Impact Your Wallet

Photo by liza54500 / Shutterstock.com

The Federal Reserve is expected to raise its target federal funds rate up to three times this year. In some cases, that can hit you right where it hurts most — in the wallet. But you can also benefit from a rate hike.

Currently, the rate sits in a range between 0.5 and 0.75 percent, after the Fed’s most recent hike on Dec. 14. The notion of three follow-up rate hikes in 2017 is simply a projection that could change at any time.

However, it’s clear that higher rates are coming, either sooner or later. Here are three ways a rate hike can affect your costs — and some suggestions for making the best of your situation.

Your mortgage costs might increase

If you are looking for a mortgage — or even if you already have one — your monthly expenses might be higher if the Federal Reserve hikes rates.

As we’ve explained before, mortgage rates do not move in lockstep with the federal funds rate:

If you are shopping for a fixed-rate mortgage, don’t expect drastic changes. Fixed-rate mortgages are not directly tied to the federal funds rate.

However, although there is no direct relationship, fixed-rate mortgages are likely to move higher over time as the federal funds rate increases.

If you already have an adjustable-rate mortgage that adjusts periodically, expect your monthly mortgage obligation to increase if the Fed continues to hike rates.

The bottom line: Mortgage rates remain near historic lows, and probably have nowhere to go but higher over the long term. So, the time to lock in to a good rate is likely right now.

You can search for the best mortgage rate in our Solutions Center.

For more advice, check out “9 Tips to Save Tens of Thousands on Your Mortgage.”

Rates on credit cards and HELOCs will adjust higher

If you have a credit card or home equity line of credit, your borrowing costs could rise each time the Federal Reserve hikes the federal funds rate.

That’s because the rates tied to these borrowing tools are variable and go up and down along with interest rate trends as a whole.

In recent years, you’ve probably gotten used to borrowing very inexpensively. But it appears those days are coming to an end.

The bottom line: Now is a great time to search for a better credit card rate. You can use our Solutions Center to find the perfect plastic.

If you’re already in credit card debt — and looking for a way to get out — we can point you toward a professional who will help you restore your credit. You can also look for an expert who will get collectors off your back.

And to steer clear of trouble in the future, check out “How to Avoid 5 Sneaky Credit Card Company Tricks.”

You might make more money on savings

So far, we’ve looked at the negative effects of an interest rate hike. But it’s not all gloom and doom. When the Fed hikes rates, the rates on savings accounts and CDs are likely to move higher as well. That means you’ll make more money on your savings.

The bottom line: It’s worth comparing rates on savings accounts and CDs in the weeks and months after a Federal Reserve rate hike. You can search for a better-paying option in our Solutions Center.

For more tips on growing your savings, check out:

How are you preparing for potential hikes in the federal funds rate? Sound off below or on Facebook.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
2 Costly Rewards Credit Card Mistakes — and How to Fix Them
2 Costly Rewards Credit Card Mistakes — and How to Fix Them

If you commit either of these credit card sins, you are likely losing money every time you use a card. Here’s how to easily right this wrong.

7 Other Retailers With Free Prescription Delivery
7 Other Retailers With Free Prescription Delivery

Amazon’s new pharmacy is hardly the first to offer free shipping.

How to Avoid Being Surprised by 7 Nasty Expenses
How to Avoid Being Surprised by 7 Nasty Expenses

Major expenses are difficult to predict, but there are ways to make sure you’re protected.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

8 Types of Companies That Check Your Credit Report
8 Types of Companies That Check Your Credit Report

Federal law lets these entities peek at your credit — regardless of whether you’re borrowing money.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

The 16 Cars Most Likely to Last 200,000 Miles
The 16 Cars Most Likely to Last 200,000 Miles

One automaker takes half the spots on a list of the longest-lasting vehicles.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

Will Stimulus Checks Increase Your Social Security Taxes?
Will Stimulus Checks Increase Your Social Security Taxes?

Could all those “free” checks prove costly down the road?

11 Products Now in Short Supply Due to the Pandemic
11 Products Now in Short Supply Due to the Pandemic

Many goods we take for granted have become tough to find in 2021.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

9 Deep Discounts Available on Amazon This Friday
9 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.