A reader is fed up with hearing about the Federal Reserve and its rate hike.

Question: I’m not a CEO,  a Wall Street investor, or an economist. So all I really wanna know is: How does all this talk about last week’s Federal Reserve’s rate hike, and maybe more to come, really affect me as a regular guy with some CDs and a little retirement savings that aren’t making much?

— Henry in Louisiana

Howard Dvorkin CPA answers…

For you, Henry, this rate hike might be good news.  Not so with many of your friends and neighbors.

I emailed you after receiving your question and learned you have no credit card debt— you pay off your balances each month. You also refinanced your mortgage a few years ago at an excellent rate and drive a used car you paid off long ago.

So for you, the Fed’s rate hike — the first since 2006; will eventually boost the interest on your savings while having little impact on your spending. Let’s break it down…


“The benefit could be anyone who has money in a bank account,” says Fortune magazine. Collectively, Americans have more than $8 trillion in savings accounts. Fortune estimates a .25 percent hike “could mean an extra $21 billion in interest, or about $163 per American household, a year.”

It all depends if the banks pass along those savings to their customers. I think they will, since banking has become so much more competitive with the acceptance of online-only banks.


As with many Americans, your retirement savings are tied to the stock market. If you have a 401(k) or an IRA or other saving instrument, chances are they’re part of a stock or bond fund.  CNN reports, and many experts agree, the Fed hike “could trigger volatility in stock and bond markets, which are already on a roller coaster ride.”

However, that’s just one of many volatile developments in the stock market, which includes “falling oil prices, China’s continued economic slowdown and actions from other central banks around the world.” So for long-range retirement funds, there’s no reason to panic just yet.

Mortgages and auto loans

If your friends and family plan to seek home or car loans, “That could lead to higher borrowing costs for home buyers, but it’s not guaranteed,”>The Washington Post has reported. “The higher rates may increase borrowing costs and make it more difficult for them to afford a car loan.”

In fact, the higher interest rates might make cars themselves more expensive, by making it “more expensive for dealers to hold inventory of unsold cars on their lots.”

Credit cards

Good thing you pay off your credit cards each month, Henry. As Yahoo! Finance reports, “credit card rates are likely to rise almost immediately.” With the average credit card borrower owing more than $5,000, that’s an immediate shock to the pocketbook. If there’s any silver lining, this will hopefully push those burdened by credit cards to seek credit counseling.


If you sense some hedging in all these news reports — could, may, likely — it’s because the Fed’s decision is similar to a rock thrown in a pond: The ripples are hard to predict. The Fed made its decision, and now banks, lenders, and investors are responding. Their response isn’t just to this rate hike, but the likelihood of future hikes.

As you can seem, Henry, paying off debt is helpful in the best of times, but it really pays off in the tense times. You’ve made the right financial moves in the past, so the present shouldn’t stress you out.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC