Here are the best moves for your money after big Fed rate hikes

1. Credit Cards

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Since most credit cards have a variable rate, as opposed to a fixed rate, there is a direct connection to the Federal Reserve standard. As the fed funds rate goes up, so does the base rate, and the annual percentage rate can go up in just a billing cycle or two.

Credit card rates currently average just over 17%, well above nearly every other consumer loan, and could climb to 19% by the end of the year — an all-time high, according to Ted Rossman, senior industry analyst at CreditCards. com.

“There’s a lot we can’t control, like high inflation and high interest rates, but there are steps you can take to reduce your debt burden and the interest rate you pay,” he said.

Pro tip: The best thing to do is pay off the debt before the larger interest payments push you down.

If you carry a balance, switch to a 0% credit card, Rossman advised. “You can still get up to 21 months without interest on some balance transfers,” he said, “such as Wells Fargo Reflect, Citi Simplicity or Citi Diamond Preferred.”

“They all have a transfer fee, but I think it’s all worth it,” Rossman said. “The ability to avoid attention for about two years is enormous.”

Otherwise, consolidate and pay off the higher interest credit cards with a home equity loan or a lower interest personal loan.

“If you have good credit, you might be able to get 6% over five years,” Rossman noted.

Another option is to take out a loan from your 401(k), although this could put your retirement savings at risk. However, it may be worth it for some if they have a high credit card balance and rates continue to rise.

2. Mortgage rates

Mortgage rates are flat and tied to Treasury yields and the economy, so they’ve actually fallen off recent highs, in large part due to the potential for an economic slowdown caused by the Fed.

However, adjustable rate mortgages and real estate equity lines of credit are tied to the base rate and those rates are on the rise.

“ARMs and HELOCs are going to get more expensive,” said Jacob Channel, chief economist at LendingTree.

“Borrowers should not only make sure they can handle their potentially increasing payments over time before they acquire an ARM or HELOC, but they should also make sure to shop for a lender in order to get the lowest possible rate,” he added. .

Pro tip: If you’re concerned about your payments going up, you might want to consider a fixed rate mortgage or a home purchase loan, rather than ARM or HELOC, the channel advised.

“While fixed rate loans usually have higher introductory rates than their adjustable rate counterparts, the stability they offer can be worth the additional upfront cost,” he said. “Furthermore, once you get a fixed-rate loan, you don’t have to worry about the interest rate going up over time.”

3. Auto Loans

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Most auto loans have fixed interest rates, Rossman said, so existing borrowers should not be affected by higher interest rates.

He added that auto loans tend to track 5-year Treasury rates, which are more influenced by investor expectations than by interest rate hikes by the Federal Reserve.

“With recession fears looming, there is a good chance that most of the increase in car loan rates is behind us,” Rossman said.

Pro tip: Even if car loan rates are not at record levels, there is no doubt that inflation has severely affected car prices. Experts say now may not be the best time to buy a new car, while some may want to consider buying a used car to save costs.

When it comes to auto loans, “the best thing consumers can do to save money is get their own financing before they ever get ahead in the car business,” said Erin Witt, director of consumer protection for the American Consumer Federation.

Witt said that car dealers sometimes, in order to increase their profits, raise their interest rate higher than what the lender has agreed to accept.

“Arranging your financing can save you money by removing the secret profit margin from the equation,” she said.

4. Student loans

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Mark Kantrowitz, a higher education expert, said borrowers with existing fixed-rate federal student loans will not face an increase in interest rates.

However, interest rates on federal student loans obtained next year will be higher, at a rate of at least 5.75%, according to Kantrowitz.

Meanwhile, those with private variable rate student loans will see their rates increase due to the Fed’s moves.

Pro tip: Kantrowitz said that borrowers who have private variable rate student loans can refinance it in the form of a private fixed rate student loan.

“The interest rate will be higher than the interest rate on the variable loan, but it will not increase like the interest rate on the variable loan,” he said. “Given that interest rate increases have had no effect on inflation, the Fed is likely to implement many of them.”

In general, students and families should try to borrow less as education loan rates rise, Kantrowitz says.

“Focus on free money first, like scholarships and grants,” he said, recommending families fill out the Free Application for Federal Student Aid, known as the FAFSA, and search for scholarships on websites like Fastweb.com and College Board’s Big Future.

And some good news: While borrowing will become more expensive, those higher interest rates will reward savers. The prices of online savings accounts, money market accounts, and certificates of deposit are all about to rise.

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