What Fed rate hike means for you

The Federal Reserve just announced a rate hike of 25 basis points, which brings the benchmark federal-funds rate to a range between 2.25 percent and 2.5 percent.

The stock market immediately reacted negatively. But how does this affect you?

The upshot of the interest rate hike is that a couple of interest rates you might be paying will positively go up overnight, while a few others may be affected based on general economic conditions.

Credit cards

Most credit card interest rates are based on the U.S. prime rate, a derivative of the federal funds rate that was 5.25 percent before the latest hike. Now, after the hike, that rate is set at 5.50 percent.

Put another way, the latest rate hike of 25 basis points will show up point-for-point in the credit card interest rate you pay.

If, for example, your floating APR on a credit card was 17 percent before the hike, it will now be 17.25 percent.

Adjustable rate HELOC

Many HELOCs are “prime plus 1 percent.” So before the rate hike, you may have been paying 6.25 percent (5.25 percent + 1 percent).

Now, after the 25-basis-points rate hike, you’ll be paying 6.50 percent.

These kinds of consumer interest rates below are not directly tied to the Fed’s interest rate policy,

Mortgage interest rates

A lot of interest rates are based on the 10-year Treasury yield. Such is the case with mortgage interest rates. Don’t panic if you’re in the market for a mortgage right now or are in an adjustable rate mortgage; the rate you’re shopping or paying won’t go up overnight because of the Fed hike.

Auto loan interest rates

Auto loan interest rates are another area where there’s not a direct correlation between what the Fed is doing and what you’re paying to finance your wheels. They generally follow the trend line of where other interest rates are going — whether that’s up or down.