Buzz
Yesterday, the Federal Reserve revealed it would keep its benchmark interest rate near zero. “We’re not even thinking about thinking about thinking about raising rates,” said Fed Chair Jerome Powell during a press conference. With COVID-19 cases still on the rise, the Fed also intends to extend its lending programs through the year’s end, though it expects a prolonged road to economic recovery.
While this decision may lower borrowing costs for some, many banks have already started to tighten lending requirements for products like mortgages, refinancing, and business loans to shield themselves from future economic challenges.
If you have a balance on your credit card, don't expect a drop in interest rates. As reported by CNBC, credit card rates have already decreased to 16.04%, marking the lowest level in four years, according to Bankrate.
“Amid the current economic turmoil and persistent high unemployment, banks are struggling to identify which borrowers are safe and which are risky,” said Matt Schulz, Credit Industry Expert at CompareCards. Unfortunately, many banks have reduced credit card limits or closed accounts. Schulz added that numerous credit issuers have also cut back on lending due to the pandemic.
If you're in the market for a car loan, you might still qualify for favorable interest rates—provided you're among the most creditworthy applicants. While Edmunds reported a slight uptick in rates this month, they remain historically low, and 19.4% of new car buyers have secured 0% financing offers.
Student loans are another area where borrowing costs may be lower. Federal student loan rates for the 2020-2021 academic year are at record lows. Additionally, private student loans with variable rates may offer lower rates depending on the lender and loan terms.
Savers might feel the least benefit from the Fed's latest decision. With average savings account rates lingering at just 0.06%, it may be hard to find banks offering competitive interest rates. Online-only banks tend to offer the best deals. As Ken Tumin, founder and editor of DepositAccounts, noted, “The average online savings account rate of 1.04% still significantly outpaces the federal funds rate target.”
