On Dec. 13, 2017, the Federal Reserve Open Market Committee raised the federal funds rate for the third time this year. As a result, the prime rate — the rate banks typically charge their most credit-worthy customers — will also increase. The prime rate is used to determine rates on consumer loan products such as credit cards or auto loans. If you have a fixed rate, the prime rate increase will not impact your existing products. However, new credit products and any existing variable rate products will likely be impacted.
What does this mean for USAA members? Members with variable rate USAA credit card accounts will see the new rate reflected in their January statements, which may lead to an increase in the minimum payment due. Over time, if the prime rate continues to rise, you can also expect to see an increase in fixed rates for any new loans you take out, such as auto loans or personal loans. On a positive note, it is possible that deposit rates could begin to increase slightly.
How can you lessen the impact of higher interest rates?
Rates may be gradually increasing, but they are still far below what we have seen in the past (13% in 1984). Following sound money management principles can help reduce the impact and alleviate the stress associated with increasing rates. As always, USAA is here to help, so feel free to let us know if you have any questions or comments.
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