Interest rate hike means charging your purchases is going to cost you more
NEW YORK - Many consumers are going to feel a tighter squeeze after the Federal Reserve announced Wednesday it's raising interest rates.
It's the first hike since 2018, and it's meant to combat soaring inflation.
The Fed is raising its benchmark rate by a quarter percentage point. That means charging your purchases could cost you more.
CBS2's Meg Baker spoke with a financial expert about what you can do.
The housing market is red hot. Prices are spiraling higher and higher for cars, gas and everyday items. In an effort to stabilize prices, the Federal Reserve raised interest rates by a quarter percentage point and signaled it plans more hikes in the coming months.
"The economy is very strong, and against the backdrop of an extremely very tight labor market and high inflation, the committee anticipates that ongoing increases in large range for federal funds rate will be appropriate," said Federal Reserve Chairman Jerome Powell.
With that in mind, Paul Oster, president of credit repair and management firm Better Qualified in Eatontown, New Jersey, says now is the time to pay down debt. Try debt stacking for credit cards.
"Focus on the card with the highest interest rate first. Put all of the money towards that card until it's paid off in full," Oster said.
Once that is paid off, move to the next card, while making all of the minimum payments on other cards, what next?
"You might consider a balance transfer to a zero percent interest ... rate on a credit card. But you have to have a plan to pay it off at zero percent. Because if you don't, at the end of the term, you're going to get hit with all of the deferred interest," Oster said.
He says expect higher student loan rates and warns of home equity lines of credit suddenly rising.
"This is where consumers really have to be careful, because they adjust immediately. Not just once a year. If you have a variable rate of interest on your mortgage, that's going to adjust also, but that adjusts every 12 months. A home equity line of credit is going to adjust immediately after the Fed raises these rates," Oster said.
Oster suggests several ways to start saving: Put TV and music subscriptions on hold for a few months - it could save more than $100 a month.
"Don't go to convenience stores for three, six, nine months. You would be amazed at how much money you're going to start to save," Oster said.
He reminds consumers to check credit scores - it will cost or save you money every month. If your credit balances are increasing, your credit scores are going down. Save, and pay.
Meg Baker contributed to this report.