What rising interest rates mean for your credit, loans, savings and more

Editor’s Note: This is an updated version of a story that originally ran on September 22, 2022.

The Federal Reserve raised its benchmark interest rate for the sixth time in a row on Wednesday, to a range of 3.75% to 4%.

While there may be plenty of downside in the form of higher borrowing costs for consumers, one positive outcome is that your savings may actually start earning a little money after years of barely-there interest.

“Interest rates have increased at the fastest pace in 40 years,” said Greg McBride, chief financial analyst at Bankrate.com. “Mortgage rates have rocketed to 20-year highs, home equity lines of credit are the highest in 14 years, and car loan rates are at 11-year highs. Savers are seeing the best yields since 2008 – if they’re willing to shop around.”

Here are a few ways to situate your money so that you can benefit from rising rates and protect yourself from their costs.

If you’ve been stashing cash at big banks that have been paying next to nothing in interest for savings accounts and certificates of deposit, don’t expect that to change much, McBride said.

Thanks to the big players’ paltry rates, the national average savings rate is still just 0.16%, up from 0.06% in January, according to Bankrate.com’s October 26 weekly survey of large institutions.

But all those Fed rates hikes are starting to have a more significant impact at online banks and credit unions, McBride said. They’re offering far higher rates – with some topping 3% currently – and have been increasing them as benchmark rates go higher.

As for certificates of deposit, there’s been a noticeable increase in return. The average rate on a one-year credit union CD is 1.05% as of October 27, up from 0.14% at the start of the year. But top-yielding one-year CDs now offer as much as 4%.

So shop around. If you make a switch to an online bank or credit union, however, be sure to only choose those that are federally insured.

Given today’s high rates of inflation, Series I savings bonds may be attractive because they’re designed to preserve the buying power of your money. They’re currently paying 6.89%.

But that rate will only be in effect for six months and only if you buy an I Bond by the end of April 2023, after which the rate is scheduled to adjust….