Interest rates are at record lows, but now they’re starting to rise. The Federal Reserve—the Fed—is increasing them to combat inflation and slow the economy. These higher interest rates will impact everyone differently.
A rate hike can hurt your credit card debt or mortgage, if you have one. It can also affect your car loan or student loans. But it could also help your savings account, if you have one. That’s because when the Fed raises rates, savings accounts and other interest-bearing products correspondingly increase their interest payments. The top savings and money market account rates are now above 4 percent APY—something that wasn’t possible even a few months ago.
The Fed is likely to raise rates a few more times this year. If you have debt or plans to purchase an expensive item, such as a home, you should consider paying it off sooner rather than later, before it gets more costly. And if you have a lot of savings, you might want to look for new ways to grow it faster. The easiest way to do that is by opening a high-yield bank account or investing in short-term bonds, which can give you a higher return than a typical savings account.