How the Fed rate hike impacts your mortgage, car loan, credit card and student debt

The useful part

One of the ways the Fed does this is by increasing and lowering the cost of borrowing money. Interest rate cuts are intended to encourage more borrowing and spending by people and companies. Cheaper borrowing can lead businesses to take out loans and expand and hire.

How it works

• Conversely, interest rate increases helps contain inflation as consumers spend less when the cost of borrowing rises.
• Wednesday by a quarter-point, the first rate hike since the summer of 2023.
• The rate hike will eventually mean higher loan rates for many consumers and businesses.
• If you've been socking money away, you'll probably earn a bit more interest on your savings.
• Most credit cards have variable interest rates and those are tied to the financial institution's prime rate, which is the rate that banks charge their more creditworthy customers.

What to take from it

The prime rate is based on the Fed's benchmark rate, which is the overnight rate banks charge each other to lend money in order to meet mandated reserve levels.

Details worth keeping

Congress to maintain a stable economy and financial system. That spending, in turn, tends to accelerate growth and energize economies. Lower mortgage rates, for example, typically lift home sales.