How a Fed rate change reaches your wallet
The Federal Reserve sets a target range for the federal funds rate, the rate banks charge each other overnight. It doesn't set the rate on your loans directly, but it moves the benchmarks many of them are built on.
| Product | Tied to | How fast it moves |
|---|---|---|
| HELOC | Prime rate + a margin | Usually your next billing cycle |
| Credit cards | Prime rate + a margin | Within one or two billing cycles |
| Savings, money market | Bank's choice; tracks the fed funds rate | Days to weeks; often less than the full change |
| Adjustable-rate mortgage | An index such as SOFR, plus a margin | Only at the next reset date, within caps |
| New fixed-rate mortgage | Mostly the 10-year Treasury yield | Anticipates the Fed; can move either way |
| Existing fixed-rate mortgage | Nothing: the rate is locked | Never changes |
The prime rate is the key link. Major banks set it at the top of the Fed's target range plus 3 percentage points, so when the Fed moves 0.25, prime moves 0.25 and so do HELOC and credit card rates.
The math behind the calculator
For HELOCs, credit cards and savings, the change in monthly interest is simply your balance × the rate change ÷ 12. A $50,000 HELOC and a 0.25-point hike: $50,000 × 0.0025 ÷ 12 ≈ $10.42 more per month.
For mortgages, the calculator reruns the standard amortization formula with the new rate over the years remaining:
where B is the balance, r is the annual rate ÷ 12, and n is the number of months left.
Example
With the example numbers above and a 0.25-point hike: the HELOC costs about $10.42 more a month, the credit card about $1.25 more, and the high-yield savings account earns about $4.17 more. The net effect is roughly $7.50 a month against you. Small for one move, but hikes and cuts tend to come in series.
What to do after a Fed hike
- Pay down variable-rate debt first. Credit card and HELOC balances get more expensive immediately; every dollar paid off earns the full APR.
- Check your savings rate. If your bank doesn't pass along the increase, high-yield accounts and Treasury bills often do.
- Don't panic about a fixed-rate mortgage. Your payment doesn't change.
- If you have an ARM, find your next reset date and rate caps in your loan documents.
Frequently asked questions
Does a Fed hike raise my fixed mortgage payment?
No. A fixed-rate mortgage keeps the same rate and principal-and-interest payment for the life of the loan. Your escrow for taxes and insurance can change, but not because of the Fed.
Do mortgage rates go up when the Fed raises rates?
Not directly. Rates on new 30-year mortgages follow the 10-year Treasury yield, which reacts to inflation and economic expectations. Mortgage rates often move before a Fed decision, and sometimes fall after a hike.
How soon will my credit card rate change?
Most card APRs are variable and tied to the prime rate, so the new rate usually shows up within one or two statements.
Will my savings account rate go up?
Online high-yield accounts usually raise rates within days or weeks. Traditional banks often raise them slowly, or not at all.
What's the current prime rate?
With the fed funds target at 3.75%–4.00% after the September 16, 2026 hike, the prime rate is 7.00%.
Estimates only. Your actual rate changes depend on your loan and account terms, margins, caps and timing. Rates as of September 2026: federal funds target from the Federal Reserve; 30-year average from Freddie Mac's Primary Mortgage Market Survey (September 24, 2026). Not financial advice. Last updated September 29, 2026.