federal reserve

New normal? Interest rates going up again after the Fed rate hike. Here's what to do.

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You may have forgotten that interest rates really can increase. After nearly a decade of zero to no rate increases, the Federal funds rate has gone up three times since December 2015. And more may be on the way. Here's what you gotta know:

When will the fed rate hike affect me?


Mortgage rates already went up even before the Federal Reserve acted. And the central bank might raise rates twice more this year. That means mortgage rates are likely to keep rising gradually through 2017.

If you're ready to shop for a mortgage, the first step is to use a mortgage calculator to figure out how much you can afford to borrow.

Home equity

The interest rate on your home equity line of credit, or HELOC, is tied to the prime rate, which goes up immediately after a Fed hike. You can expect to see a higher interest rate on the HELOC within 30 days, or by the second billing statement after the Fed's action.

HELOCs fell out of favor in the housing collapse. Now that most homes have regained equity, lots of homeowners are getting HELOCs to pay for home improvements or to use in financial emergencies.

Looking for a fixed-rate home equity loan? They will track higher as the Fed increases rates, but at a much slower pace than short-term interest rates.

Credit cards

You could see a rate increase on your credit cards as early as your next statement. This is a good time to pay down your balances or move debt to a low-interest balance transfer card.

Your credit card agreement should spell out when your issuer will raise interest rates after a Fed rate hike. Many issuers change cardholders' APRs on the first day of the first billing period after a change to the prime rate, which is the index on which credit card rates are based.

Auto loans

Interest rates are moving up, but don't despair. Auto loan rates are low, and you can get a good rate on a car loan by shopping around.

Credit union auto loan rates have generally lagged moves by the Fed, says Mike Schenk, vice president of economics and statistics at the Credit Union National Association.

Check out Bankrate's auto loan calculator to see how fluctuating rates can affect your monthly payment.

CDs and money market accounts

Sick of living through historically low interest rates on deposits? It's hard to predict just how banks will react to this Fed rate hike. To maintain profits, banks might keep rates low on certificates of deposit and savings accounts.

Consider a savings account that pays 1.25 percent APY on a minimum deposit of $10,000. Another option is to shop the best high-yield CDs.


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