The Federal Reserve (FED) lowered its key interest rate this week by a quarter percentage point (.250 basis points). It’s the second time rates have been cut in 2024, which is a strong indicator inflation could be easing.

The FED sets the “benchmark interest rate,” which is considered by your financial institution when determining rates for account holders.

The move will continue to provide some relief to consumers who have battled higher borrowing costs for things such as a mortgage, credit card, or auto loan. Here’s how the change could impact your finances.

Lower Interest on Credit Card Debt

The lower the FED key interest rate, the lower your annual percentage rate (APR) could be on your credit card balance. So, if you’re carrying an outstanding balance month to month, it will cost you less in monthly interest charges on the amount. If you have numerous credit card balances, consider consolidation that debt to a single lower-rate credit card. Some financial institutions offer low-rate balance transfers with a low introductory rate.

Improving Housing Market

The home-buying market has been a challenge for many consumers due to inflation and a limited supply of homes. With inflation beginning to ease, you may start to see more homeowners begin to downsize, thus bringing more homes to the open market. If interest rates continue to drop over time, current owners who bought at a higher rate can consider refinancing their mortgages as well as increased home equity.

Bad News for Savers

Financial institutions typically raise their APY for savings accounts in a higher interest rate environment and vice versa. So, if you’re a consistent saver, a lower rate market means less money in your pocket. A savings strategy is not particularly exciting or dramatic, but it is an important foundation for your financial well-being. It just means fewer rewards for building up your savings account balance(s).

Bottom Line

These are just a few examples of how changing interest rates can impact your money and the financial institution(s) you bank with. If you’re in the market for a larger purchase, such as a new home, continue to monitor the market to help maximize your finances.

If you are unsure if it’s the right time to borrow, consider speaking with a financial professional who can provide additional insight into your current situation. If you’re a Cinfed member, you can schedule a meeting with one of our financial reps for FREE at your nearest branch location.