What a Federal Reserve Rate Increase Means for You

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What a Federal Reserve Rate Increase Means for You


Though the typical car payment has reached its highest levels since 2012, the latest increase isn’t expected to make a meaningful difference — at least not yet.

“Car loan rates will move up as the Fed hikes interest rates but it will be a nonissue for car buyers because it has such a limited impact on monthly payments,” said Mr. McBride, adding that the difference of a quarter percentage point on a $25,000 loan is $3 a month. “Nobody will need to downsize from the S.U.V. to the compact because of rising rates,” he said.

Many people stashed extra money in their bank accounts over the past couple of years, but whether rate increases translate into a more attractive yield depends on the type of account you have and the institution you’re doing business with.

An increase in the Fed benchmark often means banks will pay more interest on deposits — but not necessarily right away. Banks tend to raise rates when they want to bring more money in, but the largest banks already have plenty of deposits. That gives them little incentive to pay depositors more.

Smaller banks and online banks tend to pay better rates more quickly than larger institutions, according to Ken Tumin, founder of DepositAccounts.com, part of LendingTree. And some of them, particularly the savings arms of credit-card banks including Capital One and American Express, have already begun increasing their rates a bit, he added.

But overall, rates remain quite low. The average online savings account was paying just 0.49 percent in March, according to DepositAccounts.com; the average was 0.48 a year ago. At brick-and-mortar banks, the average savings account paid 0.12 percent in March, down slightly from 0.15 the year prior.

Certificates of deposit, which tend to track similarly dated Treasury securities, have already begun to move a bit higher, particularly among online banks: The average one-year C.D. at online banks is 0.67 percent in March, up from 0.51 percent in January, while the average five-year C.D. is 1.08 percent, up from 0.86 percent in January.



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