Here's how the latest Fed rate hike will hit your wallet

CBS/ ‘The Late Show’Stephen Colbert with the former Federal Reserve chair Ben Bernanke.

  • The Federal Reserve hiked interest rates to a range of 1.25% to 1.5% on Wednesday.
  • In response, banks across the US raised their prime lending rate to 4.5% from 4.25%.
  • This will affect the rates for credit cards and other nonmortgage loans.

The Federal Reserve on Wednesday lifted its fed funds rate by 25 basis points to a range of 1.25% to 1.5%. It marked the fifth interest-rate hike since the financial crisis and most likely the last of Fed Chair Janet Yellen’s tenure.

While the rate hike will have a long-term impact on the economy, there is another impact that will hit your wallet almost immediately.

Most simply, the fed funds rate determines the interest rate at which banks borrow short-term money.

Increases are passed on to other borrowers, mostly consumers, through higher rates on things like credit-card debt.

This debt is based on the banks’ prime loan rate, the interest rate used as a starting point for nonmortgage loans.

The Fed’s decision to raise the fed funds rate had an immediate impact on these rates Wednesday, sending them to 4.5% from 4.25%, mirroring the magnitude of the Fed’s increase.

And so after what seemed like an arcane and abstract policy change from the Fed on Wednesday, this is the impact that may matter to those who don’t follow the news as closely as they follow their credit-card bill.

Here’s the quick rundown of the changes to prime loan rates – all to 4.5% from 4.25% – announced at major US banks so far:

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