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BillSavings.com Blog

Fed Rate Cuts And You

Posted By Frank

BillSavings.com Brief:

The Fed has cut interest rates to an all time low, and that could mean relief for your credit card balances.

The Federal Reserve recently announced that it'll be cutting rates to near zero in a move that many investors believe will be the last and most desperate of the many interest rate cuts we've seen recently. The Fed, for all intents and purposes, is throwing out everything and the kitchen sink in an attempt to revive the economy. Unfortunately this also means that if, despite recent efforts, the economy continues to falter, the Fed is also increasingly up against a wall and lacking in additional options to help the economy. They'll also be printing additional money..a lot of additional money, which could affect your credit cards and other debts if inflation takes off.

The tactic, known as "quantitative easing" is the Fed's way of pouring money into the economy in order to get it rolling again. The Fed has continued to increase it's lending practices to financial institutions as well as working together with foreign banks to make coordinated rate cuts. Of course, it doesn't exactly have all of these billions of dollars on hand, so it's decided to fire up the printing press and continue it's extensive lending practices.

What does this mean for you? Ideally speaking, this huge increase in Fed lending will cut down the cost of your borrowing. Things like credit cards, for example, may continue to see their rates lower, albeit slightly, as the ease of credit opens up more opportunities for borrowers.

Category: Debt Solutions

12/16/2008

2 Comment(s)

Leave Your Comments

Frank@BillSavings - 12/23/2008
WB, It's true that providers have been increasing rates and fees across the board, but that will likely be curbed by new rules governing how credit card providers charge their consumers. Thanks for your comment!

WB - 12/17/2008
I'm not seeing this expected outcome. I just got a letter from Wachovia informing me that they're changing my credit card's APR calculation to use the WSJ prime rate or 6%, whichever is greater. That is, if the prime rate is below 6%, they will use 6% instead of the prime to determine my APR. It means they have already drawn a line in the sand when it comes to lowering rates, and in fact rates are going up since the prime is currently 3.25% and has been under 6% for months. American Express has also informed me they're jacking my APR. And of course this doesn't just affect my future credit card purchases, it retroactively applies to what I've already borrowed.

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