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8 ways rising interest rates affect consumers?
Mike about Money | rising interest rates
8 ways rising interest rates affect Consumers like YOU!
After the Federal Reserve raised interest rates for the third time in 2017 and set a plan for several rate increases in 2018, concern is growing among consumers worried about how the hikes may impact their personal finances. In response to the interest rate increases, here is some important information about what consumers should know about the changes.
Experts say a strengthening and growing economy is usually accompanied by higher interest rates to avoid inflation and it's vital that consumers understand what rising interest rates mean and how they can impact their finances and outlook.
According to a recent survey by Bankrate, almost half the respondents (49 percent) said they were concerned about the effects of rising interest rates compared to the 41 percent who voiced this same concern in 2016. Respondents biggest concern regarding the rise in interest rates is the economy and stock market (21 percent) followed by personal finances (18 percent).
Consumers should be most concerned about the impact of higher interest rates on their Credit Card debt although this does not seem to be a big priority, at least not yet.
Savers have the opportunity to earn more interest on the money they have saved in the bank and more interest means more retirement savings for retirees to live off of.
Higher interest rates cause the US dollar to become stronger and gives Americans traveling abroad the power to buy more and may continue to strengthen as the Federal Reserve raises the rates in 2017. Although a raise in interest rates leads to higher mortgage rates, this could help first time home buyers by bringing the housing prices down.
Of course, there are negatives to higher interest rates as well. As mentioned, a rise in interest rates can significantly increases costs and money owed for those who carry a balance on their credit card. Most credit cards carry variable interest rates now so the rates rise with each increase.
Bank lending is impacted because the cost of borrowing rises. Mortgages are such a large sum of money even a small increase can lead to thousands of added dollars for buyers.
People tend to save their money when interest rates are high rather than spending on big purchases – affecting consumers, businesses and the overall economy.