Dropping Interest Rates - What Effect Will This Have?

Earlier today, Federal Reserve Board Chairman Ben S. Bernanke announced that he’s prepared to lower the interest rates another half percentage point. That would take the current 4.25% interest rate down to 3.75%. This could be good news for you, or it could be bad news for you - it depends what your situation is. So, if the rate is actually cut on January 28th, what kind of impact will it have?

1. Variable rate loans: the interest rate on variable rate loans will go down. If you have this type of loan, this would be a good opportunity to make some extra payments to pay down the balance.

2. Variable rate credit cards: cards tied to the prime rate will see an interest rate decrease, too. Depending on your situation, it may be a good time to make extra payments on these cards.

3. Savings account interest: these accounts will also see a rate decrease. However, unlike loans and credit cards, this doesn’t work in favor of savers.

January 10, 2008 | Filed Under Markets 

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