Who gets the extra money when interest rates rise?

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Do banks and credit cards make more money? Or is all the extra money they collect going to pay extra interest on loans from the government?

Does the government make more money?

Who’s getting the 5% extra on my credit card interest?

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Whoever lent you the money get that extra money. If they owe money (to other banks, to the government), they’ll have to pay extra to whoever they owe to. Of course, that depends on the agreement. AFAIK, most debts follow the interest rate contracted and won’t change. So only new loans will get that higher interest.

The reason for the rise in interest rates is usually to control inflation (unless you’re borrowing from loan sharks; in that case, their rates are high because borrowers are desperate enough). When rates are higher, people are less likely to borrow, which means less spending.

On the flip side, interest rates on investments also increase (on investments that depend on interest rates and not growth). So if you have spare money, that’s the best moment to invest (unless you believe rates will go even higher, I guess).

Banks often profit of rising interest rates. (long term)

They can charge more on loans, and credit cards. They do have to pay more on deposits, but they generally have a greater spread as interest rates rise.

Banks can absolutely be harmed by interest rates as well, especially in the short term. For instance, Silicon Valley bank was not prepared for interest rates to go up. They had lots of money in government bonds which paid low interest rates, which caused the value of those bonds to fall.

Other places like insurance companies profit as well. For instance, a hurricane hits, and a major insurance company pays out billions. That means they have billions set aside for claims, and benefit from higher interest on those deposits.

The US government will lose money on higher rates, as we have a lot of debt, and higher interest rates mean larger interest payments. Even if a lot of debt has a fixed rate, new debt is issued based on today’s rate.