Fed Rate Cuts Explained: What They Mean for Your Savings, Loans, Credit Cards, and Investments

DrackNight

When the Federal Reserve cuts interest rates, it impacts more than just Wall Street — it affects your daily finances. In this video, we break down how rate cuts influence your bank accounts, savings, loans, mortgages, credit cards, and investments.

✅ Learn how lower rates can reduce borrowing costs but also shrink savings returns
✅ Understand what it means for your credit card debt and personal loans
✅ See how investors react and where opportunities may lie

Stay informed and make smarter financial decisions in a changing economy.

#Fed #InterestRates #Investing #Loans #CreditCards #Finance

Danh mục

🗞

Tin tức

Phụ đề

Hiển thị phụ đề video đầy đủ

00:00The Federal Reserve just delivered a long-awaited quarter-point rate cut this week.

00:04But what does that actually mean for your money?

00:06It can affect everything from your bank accounts, to loans, to credit cards, and even your investments.

00:12I'm joined now by Yahoo Finance personal finance editor Casey Bond to break it all down.

00:16So Casey, let's start with the basics here.

00:18How does a Fed rate cut affect checking and savings accounts?

00:23Sure.

00:24Well, checking and savings account rates are set by individual financial institutions.

00:29Based on a number of factors, that includes market competition, whether or not they want to encourage more deposits.

00:37But in general, they also do follow the federal funds rate.

00:40So when the Fed raises or lower rates, savings and checking accounts tend to fall in line with those movements.

00:47With this recent rate cut, it was a modest one.

00:50So we shouldn't expect rates to change too dramatically.

00:53But the best savings account rates in particular have hovered around 4% APY.

00:59So we may see fewer accounts offering rates that high.

01:03And what about certificates of deposits, otherwise known as CDs?

01:07How would this cut maybe affect those types of savings?

01:11Sure.

01:12Well, similar to savings and checking accounts, CD rates also are tied to the federal funds rate.

01:17So with this most recent cut, we can't expect those rates to start coming down.

01:22The unique benefit of a CD, however, is that it allows you to earn a guaranteed rate through the entire term,

01:29whether you choose, you know, six months, one year, two year.

01:32So if you know that rates are going to be falling and there are additional cuts on the table for 2025,

01:38it's a great strategy to put your savings into a CD and lock in that higher rate now.

01:43So as rates fall, you're still earning a more competitive rate.

01:47And how do personal loans change when rates come down?

01:50Sure.

01:51Well, personal loans are typically one of the more affordable financing options,

01:56whether you're looking to consolidate credit card debt or, you know, finance a large purchase.

02:01And in recent years, the average rate has hovered around 12%.

02:05So, again, with the recent federal funds rate cut, we can't expect that rate to drop slightly.

02:13But it is important to note that personal loan rates are tied to the individual applicant's credit as well.

02:20So those who have good to excellent credit are really the ones who are going to achieve the best rates available,

02:27even into the high single digits.

02:30You mentioned credit card debt, and let's stick to the borrowing conversation.

02:33What happens to credit card rates in this type of environment?

02:36Sure.

02:37So when it comes to credit card rates, those are very closely tied to the prime rate,

02:42which is basically the interest rate that banks reserve for their most creditworthy customers.

02:47Of course, that prime rate is also tied to the federal funds rate.

02:50So there is a correlation between the Fed's target rate and credit card rates.

02:55Credit cards remain one of the most expensive borrowing options today.

02:59And lately, the average rate has hovered around 21%, 22%.

03:03So even if rates do come down a little bit, it's still not great to carry a lot of credit card debt.

03:08And it's as great of time as any to look into ways to consolidate and lower that rate,

03:13whether it's through a personal loan or even a 0% APR balance transfer card.

03:18And finally, Casey, how does the Fed's interest rate policy filter through to investments for everyday Americans?

03:24Sure.

03:26Well, Fed rate cuts are generally good news for the market.

03:30When it costs less to borrow money, companies can afford to spend more money on daily operations and expansion,

03:38and that translates to higher stock values.

03:41So in the coming days, many investors will probably see their investment values tick upward.

03:46It is important to note, however, that investing is really a long-term play.

03:51So you should be basing those decisions around having, you know, a well-diversified portfolio,

03:57your time horizon, your risk tolerance, and not so much what the Fed is doing day to day.

04:05Casey, some great advice there. Thanks so much. Appreciate it.

Hãy là người đầu tiên nhận xét

Thêm nhận xét của bạn

Được khuyến cáo