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5 ways higher interest rates might affect you

When the Federal Reserve raises its target interest rate, the change affects consumers, too. The Federal rate helps determine the interest that you pay for loans and earn on savings, so it matters for just about everyone. Here’s what might change when rates rise.

If you have a fixed-rate mortgage, you don’t need to worry about the change. But if you have an adjustable rate mortgage, your rate will likely increase and you’ll pay more as a result. Check with your lender to find out how much your payment will increase, and if it benefits you to refinance into a fixed-rate loan. If you’re shopping for a mortgage, you may notice that rates are higher than they were a few weeks earlier.

Low rates were great for car buyers, but a rate increase makes financing a car more expensive. Lease rates are likely to rise too.

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The annual percentage rate (APR) on most credit cards is variable. That means an increase in the target rate will likely drive up the interest you pay on your account balance, so it may take you longer to pay off your debt.

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The good news is interest rates on federal student loans are fixed, so those loans remain locked into their current rates. If you have private loans, however, your payments could increase. Check with your lender.

A target rate increase isn’t all bad news: One positive effect may be higher interest rates for CDs, money market and basic savings accounts. Although higher rates are good news for savers, don’t expect an immediate, dramatic change; rates tend to move gradually.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

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