In May, the Federal Reserve Bank once again raised interest rates half a point to 6.5 percent, the sixth hike since June 1999. What does that mean for you? Well, Bankrate.com figured it this way: if you borrowed money today to buy a house or a car and carried a high interest credit card, it cost you $36,941.96 more than it would have last year. Ouch.
When the Fed increases rates, those rate hikes are passed on to banks, then to consumers. The Fed's move makes borrowing money harder on your wallet. But you can still come out on top.
Your Credit Cards
There was never a better time to start paying off that revolving debt than now. The average interest rate on a standard credit card is at a four-year high of 16.57 percent, according to Bankrate.com survey.
The old advice is usually the best advice. When interest rates are rising, avoid unnecessary new purchases to keep debt down, and try to pay off as much as of your current debt as possible. That means, of course, paying more than the minimum payment every month.
If you're stuck with a high rate card, do some shopping for lower rates at www.bankrate.com.
The numbers do not lie: 30-year mortgage rates rose in May to their highest level since 1995. The average mortgage cost of buying a typical house went up to 8.64 percent, up from the historic low of 6.49 percent in 1998, according to Freddie Mac.
Experts advise potential homebuyers to move forward on home purchases. Short-term rates may continue to rise, but there is often a lag time before long-term rates are affected. Rates on 15-year and 30-year fixed rate mortgages are expected to generally stay put for now. Your best move may be to lock in those rates soon, before they trend upward. But for now, definitely stay away from short-term adjustable rate mortgages, which feature changing rates, if you're considering a home purchase.
In fact, homeowners with ARMs are most at risk in the current interest rate climate. Your monthly payments may be going up, depending on the terms of your loan. (You may want to consider refinancing. See our Homebuyers Center for help making that decision.)
The Good News: Your Savings
Waiting for the silver lining? Here it is. Short-term interest rate hikes boost the money your money makes. Average yields on one-year CDs are hovering around 6 percent, with some banks -- particularly online ones -- offering rates above 7 percent.
Consider waiting before you lock your money into a CD to cash in on an even higher payout. To find high-yielding money accounts, you can search through Bankrate.com's extensive database.