MADISON, Wis. — The Federal Reserve boosted interest rates by the biggest margin since 1994, and the 0.75% hike likely won't be the last this year. The Fed also left the door open for another significant rate increase as it tries to get a handle on the worst inflation in 40 years.

What You Need To Know

  • The Federal Reserve boosted interest rates by the biggest margin since 1994 and indicated the 0.75% hike likely won't be the last

  • Interest rates on credit cards will also adjust making any balance more expensive to pay down. Look for a limited time 0% APR and transfer the balance for a quick pay down

  • Prepare for the worst: set aside cash or cash-like money that's accessible so you can cover additional costs

The Fed chair did note the central bank can't control every factor driving inflation, like high oil prices caused by Russia's war in Ukraine. 

So what does this mean for all of us?

Cliff Robb is an associate professor and department chair at UW-Madison's School of Human Ecology. He said right now it's important to be mindful of the kind of debt you're taking on. "When you look at something like credit cards, these are already higher interest rate products," he shared. "As interest rates rise those rates are going to adjust so it becomes more expensive to borrow through credit cards."

Robb added this is a good time for consumers to look at consolidating those cards under a personal loan while rates are still relatively lower, or to consider making a transition to a teaser rate card. "If you do make a balance transfer you need to make sure you are fully informed of the costs of the transfer as well as the time frame under which you might have a teaser rate," Robb explained.

He noted you can often get a zero percent APR for a set time frame, but you have to make sure you can commit to pay down the balance in that window.  

A consolidation strategy can also include a personal loan to pay off any debt. "Usually you can get those loans at a fixed rate and structured to a certain term so you're gonna avoid those rate hikes that may be coming with credit cards in the future," Robb said.

He also shared it doesn't hurt to be prepared for the worst. "I think it's always good to focus on having that strong emergency fund. So having some money set aside, cash or cash-like ... money that's accessible so when you get into a situation or we start to see cases where the budget is getting stretched you can draw from those emergency savings first rather than having to dip into borrowing to facilitate the spending."