Fed interest rate hike is imminentUpdated: May 31, 2018

Although it might seem like interest rates just increased, the Federal Reserve met on Dec. 13 and voted to raise them for the third time in 2017 by a quarter of a percentage point, bringing short-term interest to a range of 1.25% to 1.5%. The minutes from September’s Federal Open Market Committee meeting indicated that an interest rate hike in December was likely, and the committee’s two-day meeting at the end of October more or less confirmed its imminence.

Though there have been some concerns regarding the slow rise of inflation — originally projected to rise 2% — other factors such as robust consumer spending and a strong labor market (including a decline in unemployment) have contributed to a positive economic projection for the end of the year, which held steady through November into December’s meeting. The Fed has raised the benchmark federal-funds rate four times since 2015, and it expects to raise them three more times in 2018, then two more times each in 2019 and 2020. Strong economic growth and a positive outlook both contributed to the Fed’s decision to remain on this current trajectory.

You might be wondering exactly what this might have to do with you and your finances. As we noted back in June when the Fed decided to increase the short-term interest rate by 0.25%, rate hikes impact consumers in a few different ways — especially when it comes to your credit cards and your savings accounts. Keep reading to learn more about the upcoming rate hike, how it could impact savers and credit card owners and what you can do if you’re worried you might soon have more interest than you can afford on your hands.

How will the rate hike impact you?

It’s important to note that the rise in the federal interest rate doesn’t change interest rates directly — instead, it changes the rate at which banks lend to one another, known as the federal funds rate. Here’s how the impending rate hike will impact you down the road:

If you’re a saver …

Increased interest rates mean good things for savings account owners. Both CDs and traditional savings accounts stand to earn far more generous returns when the federal interest rates increase. This is because banks are more likely to increase the interest rates for savings accounts and CDs when the federal funds rate is high, as it can help bring them more business and offset the increased cost in doing business overall. If you are already using one or more savings accounts to grow your money, then this is great news; if you aren’t currently taking advantage of the long-term benefits offered by a savings account, now might be the best time to get started so you’ll be well on your way when that rate hike eventually happens. An online savings account can yield better returns than an account with a traditional brick-and-mortar bank, and you can learn about why by reading our guide to choosing between the two.

If you’ve got credit card debt …

Unfortunately, credit card interest rates are usually among the first to be impacted whenever there’s a Fed rate hike. This means if you’re currently carrying a balance on one or more of your credit cards, you could soon be paying more interest month-to-month than you already are. The best option for anyone carrying debt right now is to do their best to downsize it — or get rid of it completely — as soon as possible.

What can concerned credit card owners do?

Sometimes, people get in over their heads when it comes to credit card debt. Fortunately, you can avoid paying more interest by moving your balance(s) from your existing credit card(s) to a new one with a 0% intro APR period on balance transfers. Doing so gives you a cushion of time — nearly two years with some credit cards! — to focus on paying down what you owe without the worry of accruing more interest on top of your existing debt. Although you might have to pay a balance transfer fee at the outset, usually between 3% to 5% of the total amount you’re transferring, that one-time fee will almost undoubtedly be a pittance compared to the money you’ll save with a long 0% intro APR on your transferred balance. Keep in mind that there are also some cards with a $0 intro balance transfer fee, like the The Amex EveryDay Card from American Express (a NextAdvisor advertiser), detailed below.

Avoid paying interest with these credit cards

Not sure where to start? Here are some of the best options for balance transfer credit cards right now:

The Amex EveryDay Credit Card from American Express

Fed interest rate hike is imminent You can forget about balance transfer fees with the The Amex EveryDay Credit Card from American Express, as you won’t have to pay a balance transfer fee for transfers initiated within the first 60 days of account opening. Additionally, you’ll get a 15-month 0% intro APR on balance transfers, so you’ll be able to avoid fees and interest with this card. There’s also a 15-month 0% intro APR on purchases, which is a nice perk, and you can earn rewards points at a rate of 2x per $1 spent at grocery stores (on up to $6,000/year) and 1x per $1 spent everywhere else. Other perks of this card include $0 annual fee and an intro bonus of 10,000 rewards points when you spend $1,000 on purchases in the first 3 months. You must have good to excellent credit (typically considered scores over 700) to be approved for this card.

Citi Diamond Preferred Card – 21 Month Balance Transfer Offer

Fed interest rate hike is imminentThe Citi Diamond Preferred Card – 21 Month Balance Transfer Offer (a NextAdvisor advertiser) reigns supreme when it comes to longest 0% intro APR — you’ll get 21 months of no interest on balance transfers made in the first 4 months and a 12-month 0% intro APR on purchases. That means you won’t pay interest on any transferred balances until 2020! There is a 5% balance transfer fee ($5 minimum) to pay, which is higher than most, but considering the nearly 2-year 0% intro APR, the fee you’ll pay to start will pale in comparison to how much you’ll save over the long run. You can also choose your own payment date to align with your paychecks, to ensure that it’s not a problem you’ll have to worry about in the first place. Rounding out this card are Citi-specific perks like Price Rewind, which looks for a lower price on items you buy for up to 60 days afterward and issues a refund of the difference if one is found, free monthly FICO credit scores from Equifax and no annual fee. You do need to have good to excellent credit to be approved for this card.

Discover it Balance Transfer

Fed interest rate hike is imminentStruggling with not-so-perfect credit? Discover it Balance Transfer may be the card for you, as it’s available to those with average to excellent credit (typically considered to be credit scores of 670 and up). In addition to a lengthy 18-month 0% intro APR on balance transfers (note the 3% balance transfer fee) and a 6-month 0% intro APR on purchases, this card can stay in your wallet after you pay off the balance as a solid cash back rewards credit card. It earns 5% cash back (up to the quarterly maximum, currently $1,500, then it’s 1% back) on purchases within specific categories that you sign up for every quarter, as well as 1% cash back on everything else. The quarterly categories can range from Amazon.com to wholesale clubs to gas stations and more, giving you the opportunity to earn cash back on a number of different purchases. Though you probably won’t be able to take advantage of it if you’re using this as a balance transfer credit card, as a new cardholder, you’ll also be eligible for the cash back match bonus, which matches of all the cash back you’ve earned at the end of your first year. Discover provides a host of other great perks for cardholders to enjoy, and this credit card does not charge an annual fee.

Not seeing a balance transfer credit card that strikes your fancy? Read our reviews of the best balance transfer cards to see what other options you have for avoiding interest following the Fed rate hike. Also, enter your transfer amount, monthly payment and credit level into our free Balance Transfer Calculator to find the perfect card for your balance transfer.

Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.