Here are 5 ways the next Federal Reserve rate hike could impact you

This week, the Federal Reserve will likely raise rates by another three-quarters of a percentage point for the third consecutive time in an effort to cool down the high cost of living. 

The U.S. central bank has already raised interest rates four times this year, for a total of 2.25 percentage points. 

Fed officials have “declared inflation as ‘public enemy No. 1,'” said Mark Hamrick, senior economic analyst at Bankrate.com.

“They want to take their benchmark rate into restrictive territory and hold it there for longer awaiting what Chairman Jerome Powell has said must be ‘compelling evidence that inflation is moving down,'” he said. “We remain far from that destination.”

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The federal funds rate, which is set by the central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the rates they see every day on things such as private student loans and credit cards.

The upcoming rate hike will correspond with a rise in the prime rate and immediately send financing costs higher for many types of consumer loans.

“Anytime consumers borrow, they are dependent on interest rates,” said Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers, whether that’s for “housing, cars or appliances.”

Here’s a breakdown of some of the major ways a rate increase could impact you, in terms of how it may affect your credit card, car loan, mortgage, student debt and savings deposits.

1. Credit cards

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. As the federal funds rate rises, the prime rate does as well, and credit card rates follow suit.

Annual percentage rates are currently near 18%, on average, which is an all-time record, according to Ted Rossman, a senior industry analyst at CreditCards.com.

Further, nearly half of credit cardholders carry credit card debt from month to month, according to a Bankrate.com report.

“Credit card debt is easy to get into and hard to get out of,” Rossman said. “High inflation and rising interest rates are making it even harder.”

2. Mortgages

Adjustable-rate mortgages and home equity lines of credit are also pegged to the prime rate, but 15-year and 30-year mortgage rates are fixed and tied to Treasury yields and the economy. Still, anyone shopping for a new home has lost considerable purchasing power, in part because of inflation and the Fed’s…