When it comes to their personal finances, Americans are torn. On the one hand, things seems to be looking up. Unemployment is down, and retirement portfolios are better off now than they were five years ago, despite recent market turbulence. Some experts are even predicting that wages will see much-needed gains this year.

But that hasn’t stopped people from worrying about the future. According to a recent report from Bankrate, 41 percent of Americans are concerned about rising interest rates in 2016. Millennials — adults between the ages of 18 and 34 years old — are particularly worried about how rates will affect their personal financial situation. For a heavily indebted generation that is largely afraid of investing, that fear is not surprising. But even older generations, those who have lived through previous interest rate cycles, are nervous about how this year will play out. Thirty-seven percent of Americans over the age of 65 say they are worried about rising rates.  

“People are concerned about the future. They think if the Fed starts raising interest rates they’re going to keep raising them,” said Robert Scott, Ph.D., associate professor of economics at Monmouth University in New Jersey.

Robert Tipp, chief investment strategist and head of global bonds for Prudential Fixed Income, said these fears stem from recent history. “The Fed has tended to hike until the system rolled over into recession or financial crisis," he said. "Based on the track record, you can definitely see the basis for these concerns. But this Fed does not want to be the Fed that knocks the economy into recession."

Gallup’s Economic Confidence Index currently stands at -12, based on an average of two factors: how Americans feel about current economic conditions, and whether or not they believe it is getting better. The index reached a historical high of +5 in January 2015. Currently, 26 percent of Americans consider the economy to be excellent, but 58 percent believe it is getting worse.

Financial media may play a larger role in that sentiment than actual economic conditions. “The risk of recession has not increased, but the rhetoric has. The problem is that consumers get swept up in the negative news. It becomes a self-fulfilling prophecy,” said Sam Stovall, chief U.S. equity strategist at S&P Capital IQ and SNL.

Concerns exist across all ages and income levels, but one group is especially anxious about the threat of increasing interest rates: those who earn less than $30,000 a year. The majority of Americans, 51 percent, now fall into that category, based on the average wage index. According to Gallup, 49 percent of those earning less than $30,000 say their finances are worse off now than this time last year, compared with only 18 percent of those earning $75,000 or more. Lower-income Americans are the most likely to fear rising interest rates, with 50 percent reporting they feel concerned. Those with only a high school education also have high rates of anxiety, with 47 percent reporting fear of rising rates.   

"If a student graduates from high school today, what jobs are available to them? Not a lot. You need a minimum of a college degree in order to have any chance to get to a middle class lifestyle,” Scott said.

When income is too low to cover basic expenses, credit cards often fill in the gap. Part of the problem, Scott said, is increasing costs for healthcare and education, as well as emergency expenses, which hit lower earners the hardest. Increasing interest rates could magnify financial troubles, with the average credit card interest rate already high at 15 percent. 

“Even though interest rate hikes aren’t that significant, generally speaking, if you’re living paycheck to paycheck and every dollar has to count, then even a few dollars more on a credit card payment can make a big difference,” said CreditCards.com’s senior industry analyst Matt Schulz.

Overall, rising interest rates signal that the U.S. economy is growing stronger. For the most part, consumer debt will not be affected. Mortgages, student loans and auto loans with variable rates may see some change, but they’re not likely to go up much, according to Tipp.

“The problem with the federal funds rate is that it’s such a narrow rate. It doesn’t necessarily affect some of the debts, like credit card debt, as much as people might think,” said Scott. “But psychologically they see any interest rate increase as an increase in the cost of debt, and that would make anybody with debt nervous.” 

In fact, credit card companies can hike interest rates whenever they wish, regardless of federal interest rates. Unlike a mortgage or a car loan, which both have an underlying value associated with the debt, credit card debt does not, making it particularly risky for lenders. If a borrower stops making payments on a mortgage, the bank can take back the house. But if a credit card borrower defaults, there’s no way for the bank to repossess last year’s vacation.

“Credit card companies have no limit to the interest rate they can charge. They could set them at 1,000 percent if they wanted to,” said Scott. But they don’t, mainly because they want to keep their customers around. “If interest rates are too high, then the credit card companies are going to lose business,” he added.

Consumers who are tight on cash and concerned about rising interest rates can use this knowledge to their advantage, even as rates do continue to climb, according to Schulz.

“People have more power in negotiating with their credit card company than they realize. You can make a phone call to your credit card issuer and ask for a lower interest rate, or an increased credit line, or a fee to be waived,” Schulz said. “Odds are they’ll listen simply because it’s such a competitive time in the credit card marketplace. The worst thing that can happen is they tell you no, so it’s certainly worth the call.” 

Despite fears, experts say 2016 is going to be a pretty good year for most people in the U.S. “We’re still looking at a situation in which the consumer has buying power because they’re earning more than inflation is taking away. Interest rates are well below the rate of inflation. Usually it’s the other way around,” said Stovall.

Americans aren’t likely to overlook that purchasing power. If they have the ability to spend, they typically do. With 70 percent of the U.S. economy dependent on consumer spending, that could mean a relatively good year for the country as well. Even China may benefit from strong purchasing power of American shoppers.

"China needs us more than we need them. We buy from them four times what we sell to them. And so we actually could be helping them if the value of our dollar is improving or strengthening," said Stovall.

The key, of course, will be knowing when to rein in your spending. At some point, another recession is inevitable. It’s a normal part of a healthy economy, as are periods of higher interest rates. Prudent consumers will take advantage of strong employment over the coming year to pay down lingering debt and increase savings.

To a certain extent that's already happening. “We’ve seen slight upticks in the number of people who are paying their balances in full at the end of every month,” said Schulz.

That’s a good goal for 2016, according to Scott. “If people didn’t rack up credit card debt, then the interest rates wouldn't matter. They could be a million percent and it wouldn’t really matter,” he said.