How Fed’s Rate Hike Impacts Credit Cards, Mortgages and Savings: Expert View
Understanding the Federal Reserve’s First Interest Rate Hike
George Kamel, host of “The Ramsey Show”, discusses how the recent Federal Reserve’s interest rate hike impacts consumers, particularly those with variable-rate debts such as credit cards and home equity lines of credit.
Effects of the Interest Rate Hike on Borrowing Costs
The Fed’s decision to raise its benchmark federal funds rate by 25 basis points has implications for consumers. Kamel explains that borrowing costs are set to rise, making the cost of credit cards and new mortgages slightly more expensive.
Kamel points out that the Fed’s decision largely affects variable-rate debts such as credit cards, home equity lines of credit (HELOCs), and adjustable-rate mortgages when they reset. Fixed-rate mortgages, auto loans, and other fixed-rate debts are not directly affected.Managing Credit Card Debt
For consumers with ongoing credit card debts, Kamel advises prioritizing payment of high-interest debt. He emphasizes stopping the use of credit cards and focusing on clearing the balance.
Implications for Homebuyers and Savers
Kamel notes that while the federal funds rate directly influences homebuyers‘ borrowing costs, the impact is not significant. However, he mentions that savings accounts may benefit as banks could increase yields, allowing consumers to earn more on emergency funds and down payments.
A Proactive Approach to Debt and Savings
In conclusion, Kamel encourages consumers to focus on managing variable-rate debt and building savings, rather than being overly concerned about the Fed’s decisions.Article contribution by FOX Business’ Eric Revell.
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