How rising interest rates can affect credit cards, mortgages and more

The Federal Reserve announced that consumers can expect interest rates to rise in March. After two years of low rates, what will this mean for the economy and your wallet? NBC Senior Business Correspondent Stephanie Ruhle shared three things to do today.

“These rate hikes can impact you in different ways,” Ruhle says. “If you’re considering a large loan like a mortgage or auto loan, or have private student loans, now is a good time to materialize or refinance. If rates go up, your net monthly payments could go up, too much.”

Ruhle says the same goes for credit card debt. “If you can pay it back now, you want to try to do it before rates go up.”

Ruhle says the reaction to a rate hike is volatile, as expected. “Low rates have been good for the stock market and things have had their ups and downs,” she says. “That’s why for many Americans the stock market should be for the long haul. Things like retirement or goals in at least five years, so you have time to recoup your losses if needed.”

If you’re wondering why interest rates matter to consumers, Ruhle says to think about what happened when the pandemic first hit and the Fed cut interest rates to nearly zero. This was done to help encourage spending in uncertain times. “The less it costs to borrow, the more people will spend, the more money companies can use to keep people working.”

The result was that it was much easier to get a mortgage on a house, but inflation caused price increases that hit our wallets hard.

“Interest rates and inflation are closely related,” says Ruhle. “When inflation rises, the Fed often raises interest rates to slow that spending and borrowing and tries to keep prices from rising as quickly.”

Ruhle says rate hikes have been on the horizon for some time, but the good news is that this will hopefully put a pause on the inflation we’ve seen recently.

“If all goes as planned, this should help limit some of the effects of inflation,” she says.

Another benefit is that if you have money in a savings account, as many seniors do, you may qualify for a higher interest rate.

Conclusion: Make the big purchases you plan now, take out that mortgage or loan before the increase, and pay off that lingering credit card debt now to avoid an interest hike.

For more money tips, visit About money TODAY.