RICHMOND, Va. (WRIC) — The Federal Reserve has increased interest rates several times this year — hikes aimed at combating high inflation that impact people’s finances in many different ways.

The Fed raised its key interest rate by 0.75 percentage points on Wednesday, the third time in 2022, in a move that could lead to a recession, job losses and other financial consequences. Interest rate increases mean higher borrowing costs for purchases such as houses, cars, businesses and more.

“The interest rates are going up at the fastest pace in 40 years,” Greg McBride, chief financial analyst at Bankrate.com, told 8News.

The central bank’s benchmark interest rate is now in the range of 3% and 3.25%, with expectations for it to rise again before the end of the year.

“The cumulative effect is significantly increasing borrowing costs,” McBride said. “That will have the effect of slowing consumer spending, slowing business investment, slowing job growth and slowing the overall economy.”

The Federal Reserve lifting its key interest rate this week — the fifth time this year — will affect people’s financial lives moving forward. Here’s what it means for borrowers, credit cards, savers, purchases and tips you can use to respond to higher interest rates.

Credit Cards

Borrowing rates for credit cards hit their highest level since 1996 before the Fed hiked rates, data from Bankrate.com shows. The average rate was 18.16% as of Sept. 21, roughly a two-percent increase since March, and cardholders can expect to see higher rates due to the Fed’s move.

The use of credit cards has increased in 2022 and so has people’s debt. Data shows that there were 500 million credit cards in the country at the end of June, compared to 465 million from the previous year. Debt for credit card users this year went to nearly $900 billion, according to LendingTree.

The rate increases impact credit card’s annual percentage rate (APR), the interest rate that determines how much extra someone will pay on a balance not fully paid off at the end of a billing cycle.

"We are seeing that credit card debt is rising as more households are having to lean on credit to cover increasing household expenses," McBride told 8News. "Debt means lugging more credit card debt into a much higher interest rate environment."

McBride said people should be prioritizing getting their credit card debt down and paid off with interest rates up. One step they can take, he said, is grabbing a low rate, zero percent balance transfer offer for a debt reduction plan.

If someone has good credit, McBride said some offers are good for as long as 21 months and can help people make "serious headway to clearing" their debt. "There's no better time than the present," he added.

Loans

Borrowing costs for consumers and businesses have increased with interest rate hikes and are expected to continue to rise. The Fed's rate hike won't impact fixed-rate loans someone has, but it will affect variable-rate financing and new borrowers with increased costs and monthly payments.

Auto loans

Auto loan interest rates have continued to rise as interest rates have moved up. According to Bankrate.com, the average interest rate on a 60-month new car was 5.02% as of Sept. 21, compared to 4.82% in late June.

Student loans

The Fed rate hike won't impact those with outstanding student debt, McBride said, but the move is expected to bring higher costs for new borrowers as rates for federal loans continue to move up from the current levels.

President Joe Biden federal announced a federal student loan forgiveness plan -- up to $10,000 for those earning below $125,000 a year, or households making less than $250,000 and erasing $10,000 for people who received federal Pell Grants -- and student loan payments have been suspended with zero interest until the end of the year.

Mortgages

Similar to other loans, those with a fixed-rate mortgage won't be impacted by the rising interest rates. But people looking for a new home or with a variable-rate loan will have higher costs.

The average U.S. mortgage rates moved over 6% -- up from 3% earlier this year -- for the first time since 2008, according to the mortgage buyer Freddie Mac. The 30-year fixed-rate went to 6.29%, compared to 2.88% last September.

Tips for savers

McBride said higher interest rates will help savers as yields have risen and will continue to do so. But he said people need to know what accounts pay higher rates.

"Rising interest rates are good dues for savers if you're looking in the right place," he told 8News.

"A lot of banks are still very stingy with their deposit payouts. So, move your savings to an online bank, community bank or credit union that is offering a more competitive return," McBride suggested.