A rate hike is when a central bank raises the price banks pay to borrow money from each other overnight; that cost then passes into nearly every consumer loan in the country. The Federal Reserve just raised that rate by a quarter of a percentage point. Credit cards, car loans, mortgages, and savings accounts are all in the path of that move.
What changes for borrowers
Credit cards are where most people feel a Fed decision first. The interest rate on a revolving balance is typically indexed to the federal funds rate, which is the rate the Fed just adjusted. Most card agreements build that indexing in explicitly, so a quarter-point hike can push the annual percentage rate, the yearly cost of carrying a balance, higher by the same amount. Some issuers move within a billing cycle; others take a month or two. Either way, anyone carrying a balance will pay more.
Car loans follow a similar logic. Auto lenders price financing against short-term market rates that tend to track Fed decisions closely. A rate hike puts upward pressure on what a buyer is offered, whether the purchase is new or used.
Mortgages split depending on the product. A fixed-rate mortgage is locked at closing and priced off long-term Treasury yields; a Fed hike does not change what an existing fixed-rate borrower already pays. An adjustable-rate mortgage resets periodically against short-term benchmarks. Anyone whose reset date is approaching may see a higher rate after this move.
What changes for savers
Deposit rates, meaning what a bank pays you on a savings account, a money-market account, or a certificate of deposit, can climb when the Fed raises its rate. In plain terms, a higher rate environment gives banks more latitude to compete for deposits by offering better returns. How quickly any given bank moves is a separate question, and one worth checking against your own account.
The quarter-point increase by the Federal Reserve raises the cost of carrying most consumer debt. Deposit accounts may improve, but when they do depends on the bank.