ATLANTA — After Wednesday, purchasing some big-ticket items may make a bigger dent in your wallet. The U.S. Federal Reserve is expected to hike interest rates again to keep inflation in check.
“The market is expecting a quarter point hike tomorrow, which means that consumers will see interest rates go up by a quarter point," Andrew Poulos said.
Poulos, a finance and tax expert, said this could create even more of a crunch in borrowing money and raise the federal funds rate to the highest level since 2001.
“The prime rate also will go up, which makes our debt as consumers, depending on the type of debt that we have a little bit more expensive," Poulos said.
This will likely raise interest rates on buying cars and homes and using credit cards.
Economist and Emory University Goizueta Business School finance professor Tom Smith said you should first start paying off your credit card balances now.
“Try to nibble away at your credit card debt a little at a time. Look for the easiest target so maybe a credit card that you have the least amount of balance on and pay that off and get rid of it," Smith said.
Experts said the expected increase would cost you hundreds or thousands of dollars in interest if you only pay the minimum.
“Explore transferring a balance from a high interest rate credit card to a 0% or low interest rate credit card, so you can cut the amount of interest down that way every month," Poulos said.
The second significant impact is raising interest rates to purchase a vehicle.
“Car rates are also very, very high. These aren't directly attached to the federal funds rate, but are strongly correlated," Smith said.
Fortunately, the experts don't think the expected increase will significantly impact your ability to buy a car.
“If you're out shopping and you need a car, I don't think a quarter point is going to make a big significant difference in the monthly car payment," Poulos said.
A third point of impact is the effects on a mortgage. Poulos said mortgage rates are already priced in for the expected rate hike, but there is an exception.
“If you have a home equity line of credit, that is a revolving line of credit similar to credit card you can expect for your home equity line to increase by a quarter point or higher," Poulos said.
This may not be the end. Poulos said the Fed may raise rates again in the fall.