This week, the Federal Reserve is expected to increase the federal funds rate. It’s a move that can affect mortgage interest rates, but it can also impact credit card and student loan rates, too.

While it’s more widely known that a rate hike can indirectly impact mortgage, student loan, and other rates, since it’s actually tied to the short-term market rate, it’ll more directly impact credit cards, experts say.

Of course, if you have debt with a fixed interest rate, you’re in good shape, but most credit cards and many student loans have variable interest rates, meaning the rate can—you guessed it—vary. Because of this, it’s a good idea to prioritize your credit card debt payoff if at all possible, says Kimberly Palmer, NerdWallet’s credit card expert.

“Credit cards generally have variable interest rates, which means consumers will soon feel the effects of a Fed hike in the form of higher interest payments,” she says. Brianna McGurran, NerdWallet’s student loan expert adds some additional advice for student borrowers:

“Because the Fed is projecting an increase in interest rates through 2018 and 2019, if borrowers have been thinking about refinancing their student loans, now is the time to do it. Borrowers should pick a fixed interest rate, so it won’t increase with future Fed hikes.”

Keep in mind, though, there are risks that come with refinancing federal loans. Namely, you can lose some of the protections that come with them. “Borrowers should understand those tradeoffs,” McGurran adds. (And we’ve written about some of them here).


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If you’re a student loan borrower or you have credit card debt, how much might this hike affect you? You can use NerdWallet’s Fed Rate Hike calculator to crunch the numbers. Last year, NerdWallet estimated that with an average credit card debt of about $15,000, a 0.25% rate hike would cost about $125 more in interest over five years. But you can use their calculator to crunch your own numbers to see how much more you’d pay over time.

The good news is, “Consumers are likely to soon see higher yields on savings accounts, so money can grow faster,” Palmer predicts. “Online banks tend to have some of the highest interest rates, and you can expect APYs to climb as the federal funds rate does.”



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