The Federal Reserve on Wednesday hiked its key interest rate by another 0.75%, a move expected to drive up rates for credit cards, home equity lines of credit, and other variable-rate loans.
This is the fourth straight large interest rate hike of an increase of 0.75 of a percentage point.
In a press conference following the release of the central bank's statement, Fed Chairman Jerome Powell said Americans can expect more rate increases, though perhaps not of the same magnitude as the most recent ones.
“These higher rates are here to stay at least for the foreseeable future,” said Ted Rossman, a senior industry analyst with Bankrate.
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The average credit card interest rate of 18.77% is the highest it's been in 30 years, Rossman said.
“Transunion says the average credit card balance is $5,270," he said. "If you are making the minimum payment at the current average, you are going to be in debt for more than 16 years, and you are going to be paying more than $6,800 just in interest."
One alternative for consumers with high-interest credit card debt is to transfer their balance onto a zero-percent balance transfer card, Rossman said. This could give time for cardholders to pay down their existing credit card debt.
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Rising interest rates will not impact you if you have a fixed-rate mortgage, but if you are looking to purchase a home, you could be impacted. Mortgage rates do tend to rise in advance of rate hikes and already rates have soared to more than 7%.
If you have a home equity line of credit, an increase could hit your monthly payment as soon as next month.
For example, if you have a $50,000 home equity line of credit, you could be paying on average $156 more per month compared to earlier this year, Rossman said.
“One thing you could do is try to convert into a fixed-rate home equity loan,” he said. “You might even be able to accomplish that somewhat informally, by just asking your current lender, and asking your current lender if they can fix your balance and rate at this point.”
The Federal Reserve is expected to continue to raise interest rates into early next year.
