How Fed Meetings This Week Could Affect Your Wallet
Yesterday, the Federal Reserve announced that it would keep its benchmark interest rate close to zero. “We don’t even think about thinking about raising rates,” Fed Chairman Jerome Powell saidat a press conference . As the number of coronavirus cases continues to rise, the Fed also plans to extend its lending programs until the end of the year, but predicts a long road ahead for economic recovery.
While the latter move could make it cheaper to borrow money, some banks have already tightened lending standards on products such as mortgages, refinancing and business loans to protect themselves from future economic downturns.
If you have a credit card balance, you may not see your interest rate drop. According to CNBC , rates on credit cards has fallen to 16.04% – four-year low, according to Bankrate.
“With all the economic turmoil that is taking place in the country right now, and especially with continued high unemployment, banks cannot determine exactly who is a reliable borrower and who is a risky borrower,” said Matt Schultz, an expert on the credit industry. at CompareCards . Unfortunately, some banks have also cut credit card limits or closed accounts. Schultz said many loan issuers have also slowed down their lending in response to the pandemic.
For those willing to finance a car purchase, you can still qualify for low interest rates – provided you are among the most creditworthy borrowers. Although Edmunds reported a small rate hike this month, the company says rates are still at an all-time low – and 19.4% of new car purchases meet 0% funding criteria.
Student loans are another area where people can pay less in order to borrow money. Federal student loan rates for the academic year 2020-2021 also hit an all-time low. You can also pay less for variable private student loans , depending on the lender and the term.
Investors may benefit the least from the latest Fed announcement. Since the average savings account only pays 0.06%, it can be difficult to find banks offering competitive interest rates . You can only find the best deals in online banks. “The 1.04% average online savings account rate remains well above the federal funds target,” said Ken Tumin, founder and editor of DepositAccounts .