In response to concerns about how COVID-19 — aka the coronavirus — could impact the U.S. economy, the Federal Reserve announced an emergency cut in interest rates this week.
Officially, the Federal Open Market Committee lowered the target range for its overnight lending rate to between 1% and 1.25% — a half of a percentage point from the previous level.
The committee stated in its March 3 press release that it will continue to closely monitor the implications of the virus on the economy.
What does all that mean for you?
How the Interest Rate Cuts Affect You
If you’re a borrower, a rate cut can help reduce the interest you’re paying on your debts.
Credit cards, auto loans and home equity loans could all see reductions in the interest you pay each month.
And with the hopes that the coronavirus impact is short-term, you should call your lender to lower your interest rates and ask for a rate reduction on your account now. (And in case you need a reminder, here’s an explanation why you’re wasting money by carrying a credit card balance.)
If you regularly carry credit card balances, it’s worth the call, considering interest rates have steadily increased over the last five years — the current average interest rate is nearly 17%.
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We have plenty of strategies for lowering your credit card interest rate, but this call should be an easier one to make since you have hard proof that interest rates across the country are lower.
Mortgage rates are already at historically low rates, and adjustable rate mortgages generally reset annually, so the rate cuts won’t affect mortgages as much or as quickly.
Federal student loan rates are fixed, so they won’t be affected by the rate cut, at least in the short term. However, if you have private student loans, you could refinance your loan at a lower rate.
For savers, the rate cut also means you’ll earn less in interest on your savings accounts. Alternatively, we have a beginner’s guide to investing to help you earn more on your money.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.