Fed raises interest rates, what will be more expensive

To reduce persistently high inflation, the Federal Reserve announced a third consecutive “jumbo” interest hike of 0.75% Wednesday, further increasing the cost of debt for credit cards, vehicle financing and other loans.

The fifth-straight increase to the federal funds rate brings it to a range of 3% to 3.25%, the highest it’s been since 2008. Typically, rate increases come in 0.25% increments, but the Fed has been using supersized hikes to curb the rate of inflation, which is currently up 8.3% year over year — well above its benchmark target of 2%.

By increasing its key interest rate, the central bank discourages spending, which can reduce inflation for the prices for goods and services. However, the downside to each rate hike is increased monthly debt costs for Americans. 

Here are four things that will likely get more expensive.

Fed rate hikes affect your credit card’s annual percentage rate (APR), which determines how much interest you pay for any outstanding debt not paid off by the end of the month. 

When the rate hikes began in early 2022, average APRs were close to 16% and have since climbed to just over 18%. With today’s increase, the average credit card APR could reach closer to 19%, according to financial services site Bankrate.com. 

At the start of 2022, the average interest rate on a 60-month new car loan was 3.85%. But with today’s increase, the interest rate could nudge up closer to 5.5% to 5.75%, says Bankrate’s chief financial analyst Greg McBride. That works out to about an extra $31 per month in auto financing payments, for a $35,000 new car.

Mortgage rates tend to rise with rate hikes, but they are more directly influenced by the bond market. Since early 2022, mortgage rates have climbed from 3% to over 6%, increasing the monthly costs on a 30-year fixed-rate $400,000 mortgage with a 20% down payment by a whopping $569.