This means something different to everyone, but almost everyone will be affected by the announced hike to the Federal interest rate. The bank’s benchmark interest rate range is going from 0 to 0.25% to the new 0.25 to 0.5%. Depending on your current financial situation and plans, you should be ready for what that means for the upcoming year.

Your Personal Savings

If you have a personal savings account, the increase should be good news. Banks and other financial institutions should be passing the increase on to you through higher interest rates on your savings, including both personal and business accounts. In truth, it is likely to take them a lot longer to get around to it. This means that you are likely to see the increase a ways into the future and likely in smaller incremental increases instead of the whole thing immediately.


If you are an investor, the news means that the next to nothing that Wall Street was enjoying is over. This means that you have to start shifting the types of stocks you will be buying for the foreseeable future. Some stocks actually perform better under a rising interest rate than in one where the interest rate is going down. These are usually practical areas where people will still have to buy goods as they cut back elsewhere. Perhaps the public will be less inclined to buy a new computer or printer, but they will continue to buy paper and ink for the printers they already have.

If You Plan to Purchase a Home

The increase is certainly bad news for those who are considering buying a home, but only marginally so. To put it in perspective, the interest rate is still under 4%, which is less than half of what it was 15 years ago. While it would have been better to move earlier, the rate is still much better than it was at the beginning of the century The bottom line is that you should not let that dissuade you from buying a house if the rest of your finances look good.


The rate hike is the worst for those who have loans or need to borrow money. Businesses will be much faster and efficient at passing the rate hike on to those who are borrowing money as opposed to those with a savings account. Those with credit cards will be the hardest hit, resulting in an average increase in your overall interest rate of $125 for five years.

For the most part the increase is not substantial and will not have a terribly noticeable change because the increase is small. It also means that the Feds believe that the economy has recovered enough to increase interest rates across the boards. Do your research before you make any decisions, but once you know exactly how the hike affects you, you should be able to proceed with your plans with only slight adjustments to final costs.

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