To cope with the soaring cost of living, consumers are spending more and saving less – and rising interest rates are not helping.

Next week, the Federal Reserve will likely raise rates another three-quarters of a percentage point, although some on Wall Street still believe it could go for a full one-percentage-point hike.

Fed officials have already raised benchmark short-term borrowing rates by 1.5 percentage points this year, including June’s 75 basis point increase, which was the largest increase in nearly three decades. One basis point equals 0.01%.

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Moreover, policymakers have indicated that more increases are ahead until runaway inflation begins to show clear signs of receding.

“Together with the hot month-over-month and year-over-year numbers, this signals to the Federal Reserve that it has more work to do with higher interest rates to finally reach its mandate stable prices or lower inflation, in this case,” said Mark Hamrick, senior economic analyst at

Five Ways Rising Rates Could Affect You

Any action by the Fed to raise rates will correspond to a hike in the prime rate, raising the cost of funding many types of consumer loans.

Short-term borrowing rates will be the first to jump. “Floating rate debt tends to follow the movements of the Fed in one to three reporting cycles,” said Greg McBride, Bankrate’s chief financial analyst.

Here’s a breakdown of five things the rate hike could mean for you, in terms of impact on your credit card, car loan, mortgage, student debt and savings deposits.

1. Credit cards

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Since most credit cards have a variable rate, there is a direct link to the Fed’s benchmark index. As the federal funds rate rises, so does the prime rate, and credit card rates follow.

Annual percentage rates currently average 17.13%, but could be closer to 19% by the end of the year, which would be an all-time high, according to Ted Rossman, senior industry analyst at CreditCards .com.

This means that anyone with a balance on their credit card will soon have to shell out even more just to cover interest charges:

  • If the Fed announces a 75 basis point hike next week as expected, consumers with credit card debt will spend an additional $4.8 billion in interest this year alone, according to new analysis from WalletHub. A 100 basis point increase will cost credit card users an additional $6.4 billion this year.
  • Factoring in the March, May, June and July rate hikes, credit card users will end up paying about $12.9 billion to $14.5 billion more in 2022 than they would have done if those increases hadn’t happened, WalletHub found.

2. Adjustable rate mortgages

Adjustable rate mortgages and home equity lines of credit are also indexed to the prime rate.

Since 15- and 30-year mortgage rates are fixed and tied to Treasury yields and the economy, homeowners will not be immediately affected by a rate hike. However, anyone buying a new home can expect to pay more on their next home loan – the same goes for those getting a loan to buy a car and student borrowers.

  • Since the next rate hike is largely baked into mortgage rates, homebuyers will now pay around $29,160 to $39,240 more in interest, assuming a 30-year fixed rate on a loan. average real estate of $405,200, according to WalletHub analysis.

3. Car loans

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For those planning to buy a new car in the coming months, the Fed’s decision could push the average interest rate on a new auto loan beyond 5%.

  • Paying an annual percentage rate of 5% instead of 4% would cost consumers $1,324 more in interest over the term of a $40,000 auto loan over 72 months, according to Edmunds data.

4. Student loans

The interest rate on federal student loans taken out for the 2022-23 academic year has already fallen to 4.99%, down from 3.73% last year and 2.75% in 2020-21. It won’t budge until next summer: Congress sets the federal student loan rate each May for the upcoming academic year based on the 10-year Treasury rate. This new rate comes into effect in July.

Private student loans can have a fixed rate or a variable rate linked to Libor, prime or Treasury bills – and that means that as the Fed raises rates, these borrowers will also pay more interest. How much more, however, will vary with the reference.

5. Savings accounts

On the upside, interest rates on savings accounts are on the rise after back-to-back rate hikes.

People are going to have to use that cushion as prices continue to rise, according to Nela Richardson, chief economist at payroll processor ADP.

“Now is the time for households to prepare,” she said. “And maximizing those savings, if possible, is one of the best ways to do that.”

  • Thanks in part to lower overheads, rates for the best performing online savings accounts are now between 1.75% and 2%, well above the average rate at a traditional bank.

Yet any money earning less than the rate of inflation loses purchasing power over time.

“Gaining 2% doesn’t mean much when inflation is at 9%,” McBride said.

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