The Federal Reserve announced a rate hike by 0.75%

Find out what the Federal Reserve’s interest rate hike of 0.75 percentage points means for you as a consumer and how it affects financial markets, mortgages and credit cards.


What does the new record-breaking raise mean for consumers?

Federal Reserve
There’s a new rate hike by the Federal Reserve. Source: Adobe Stock.

On June 15, the Federal Reserve raised its target federal funds rate by 75 basis points. That was the biggest increase in almost 30 years. The newest rate hike is another step in an effort to curb inflation once and for all. Jerome Powell, the Fed’s Chairman, said in a press briefing on Wednesday that the institution is aware of the adversity that inflation is causing. He made sure to reiterate how committed the Fed is to bring it back down, and that they are moving as fast as they can to do so. 

This is only the latest action in a rate-hiking cycle that has been going on for a few months now. The goal is to crush inflation without tipping the American economy into a recession. The last time the Federal Reserve raised its target federal funds rate by 0.75% was in November 1994. 

According to Chester Spatt, a professor at Carnegie Mellon University’s Tepper School of Business, the reason behind the latest hike is that consumer prices are still going up. What the Fed is doing now, is trying to fight inflation with higher rates in order to diminish demand. For consumers across the country, this aggressive method could finally stop prices from surging. However, it comes at a cost. 

How Federal Reserve rate hikes raise affects consumers

Federal Reserve
Fed’s rate hikes can affect the cost of borrowing. Source: Adobe Stock.

The fund is set by the central bank, and it’s the interest at which financial institutions borrow and lend to each other within 24 hours. Even though that is not the interest consumers pay, rising interest rates impacts the savings and borrowing rates that are part of a consumers’ daily life. According to Chester Spatt, Americans will be able to see the price of borrowing climb significantly, and quickly. 

In a scenery of rising rates and economic uncertainty, now is a crucial time for consumers to take preventive measures in order to stabilize their finances. That means paying down all outstanding debt, especially credit cards and any other kind of variable rate debt. 

The importance in paying down high-interest debt

Most credit cards on the market offer a variable interest rate depending on the customer’s creditworthiness. That rate is directly connected to the Federal Reserve benchmark. That means that short-term borrowing rates (like using a card for purchases) are heading higher. 

The current rates on credit cards are an average of 16.61%. That puts it much higher than almost every consumer loan, and it might go as high as 19% by the end of 2022. According to Ted Rossman, the senior industry analyst at CreditCards, that would be a new record. So if you’re currently carrying a balance, it’s important to try and consolidate it. You could start by paying off high-interest credit card debt by switching to a 0% APR on balance transfers card, or taking a small loan. 

But it’s important to do so while there’s still time. That is because the Federal Reserve said in its press briefing on June 15 that new rate hikes will likely happen in the next month if inflation continues. 

Balance transfer credit cards can be a lifesaver if you use them correctly. If you want to learn how they work and how they can help you, follow the link below!

card balance cards

Balance transfer credit card: what is it?

Learn what are balance transfer credit cards and how they can help you pay down your debt faster!

Trending Topics


Opening a Qtrade Investing account: learn how!

With the Qtrade Investing account you have access to all the major North American markets, being able to trade stocks, ETFs, bonds, and more.

Keep Reading

Apply for Sky Blue: quick online and in-app help

Recovering your credit can be an outsourced service, but hiring is necessary. Learn how to apply Sky Blue and earn back a good credit score.

Keep Reading

No credit check loans: are they worth it?

Unsure if a no credit check loans is the right choice for you? Get all of your questions answered in this comprehensive guide.

Keep Reading

You may also like


Get the Funds You Need with Ease: Republic Bank Loans review

Need a personal loan? Republic Bank offers unsecured loans with terms up to 180 months. Discover the benefits and drawbacks before you apply.

Keep Reading

Happy Money Personal Loan: how to apply now!

Learn how to apply for Happy Money Personal Loan! Reach your financial goals with almost no fees! Up to $40,000! Keep reading!

Keep Reading

Applying for the Coutts World Silk card: learn how!

Learn how to apply for the exclusive Coutts World Silk card to enjoy its many perks. We've got all of the information you need right here!

Keep Reading