How the Recent Fed Interest Rate Cut Applies to You

Thursday, September 12th, 2019
Updated: September 12th, 2019
The content is accurate at the time of publication and is subject to change.

Do you own a credit card with a variable APR? If so, in case you attentively read your monthly statements, you probably noticed slight changes in interest rates last time. But in case you noticed no difference yet but have already managed to get upset after reading the previous sentence, take it easy! The changes play into your hands since the rates have dropped!

What Happened?

In a nutshell, variable APR means that it can possibly change over time in case the federal funds rate and a prime rate, in turn, undergo changes. Typically, the rates are expected to increase. So did they in the past 11 years.

However, on July 31 of this year, the Federal Reserve came to a decision to cut interest rates by one quarter percentage point. This case became the first since the financial crisis in 2008 and only the fifth for the past 25 years.

Who Is Affected?

If your credit card agreement says “Variable” next to the APR amount, then you are one of those lucky cardmembers whose interest rate and monthly payments accordingly have already been or will be in the nearest future miraculously reduced.

Thus, for example, Discover variable go-to APR for purchases on the Discover it® Miles, Discover it® Cash Back, Discover it® Balance Transfer, Discover it® chrome, NHL® Discover it®, Discover it® Secured and student credit cards successfully dropped by 0,25%. Another major credit cards issuer, HSBC, also changed the variable ongoing purchase APR.

In addition to credit cards with variable rates, the cut can also affect some personal loans, car loans, and mortgages. If you keep one of such credit products, don’t be too lazy to check whether you are concerned.

Nevertheless, while this news is a reason for borrowers’ joy, those who have bank deposits or savings accounts may feel a bit downcast. Fed interest rates changes usually impact the interest consumers get credited to their accounts when they keep cash in banks as well. In case of the rates cut, financial organizations don’t typically stay aside and take the opportunity to reduce the interest paid.

What to Expect Next?

If we recall the previous cases of reduction in rates, it turns out that such a decrease has never been single. There was always a series of similar rate cuts followed within several next months. As for the current state of affairs, it stays quite hazy. So far, the Fed neither confirmed nor denied this assumption. In any case, it will not be superfluous to check the terms of your credit or savings products to be ready for any further turns.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.

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