Interest rates may sound boring, but they have a significant impact on Americans and their families. Higher rates may influence whether people can buy, borrow or save money in future years — not to mention, it could impact the economy.
The Federal Reserve will meet Tuesday and Wednesday to discuss the possibility of raising interest rates. The Fed will likely raise rates after Chairman Jerome Powell told Congress recently that he supports the move. They're expected to hike rates between 0.25% and 0.50% at first, with similar hikes anticipated throughout the rest of the year.
Raising the interest rates impacts a person's credit card balance, and their ability to get a loan or a mortgage. It even has an impact on savings accounts.
The Fed's hike is expected to raise credit card interest rates from about 16% to 17%. Should that happen, monthly minimum payments will go up, and if that's all a person pays, the debt will be $300-$400 more in the end. That's a big impact when the average credit card debt in the U.S. is around $5,500.
When it comes to car loans, the rate hike will likely raise a monthly payment on a $25,000 loan about $5 to $15.
In terms of homes, a $400,000 mortgage would be around $200 more each month and at least $70,000 more over 30 years. That may impact someone's decision to buy and could cool off a red-hot housing market.
There are some benefits to a higher interest rate. The Fed is taking action to bring down the rate of inflation. The thinking is if it costs a bit more to borrow, people won't buy as much, forcing prices to stabilize.
In addition, people will earn more interest from their savings accounts.