What Federal Reserve’s Rate Hike Means for Credit Cards, Mortgages and Auto Loans

The markets expect the Federal Reserve to hike short-term interest rates for the first time in nearly a decade on Wednesday. That means higher interest rates on mortgages, credit cards and auto loans. ‘I think it’s more likely than not that the Fed will hike rates this coming week,’ said certified financial planner Michael Conway, CEO of Conway Wealth Group. ‘Consumers need to realize that [credit card rates won’t rise] immediately.’ The interest rate in focus is the federal funds rate, which banks charge when lending to other banks. The markets are pricing in a 79 percent chance that the Fed will lift these rates higher on Wednesday, off of crisis-era levels. The fed funds rate has stood at near-zero since December 2008 and Wednesday’s increase could be as little as 25 basis points. ‘The fed funds rate is tied to what the prime rate does and that’s about three percentage points above the fed funds rate and that links to credit cards,’ Conway said. Anyone carrying debt will eventually notice higher interest charges, making it even tougher to become debt-free. While Conway said those in debt don’t need to panic and start paying off their debt immediately, they should consider ways to pay down those balances within the next six to ten months. Conway speaks with Scott Gamm in New York.