The Federal Reserve cuts interest rates by another quarter point. Here’s what that means for you

The Federal Withhold announced Wednesday that it will lower its benchmark rate by another quarter point, or 25 basis times. This marks the third rate cut in a row — all together shaving a full percentage point off the federal funds rate since September.

For consumers struggling beneath the weight of high borrowing costs after a string of 11 rate increases between March 2022 and July 2023, this moving b on the go comes as good news — although it may still be a while before lower rates noticeably affect household budgets.

“Curiosity rates took the elevator going up in 2022 and 2023 but are taking the stairs coming down,” said Greg McBride, chief fiscal analyst at Bankrate.com.

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Although numberless people, overall, are feeling better about their financial situation heading into the new year, nearly 9 in 10 Americans think about inflation is still a problem, and 44% think the Fed has done a bad job getting it under control, according to a recent survey by WalletHub.

“Add in talk of widespread imposts, and you’ve got a recipe for uneasy borrowers,” said John Kiernan, WalletHub’s managing editor.

In the meantime, high interest reproves have affected all sorts of consumer borrowing costs, from auto loans to credit cards.

December’s 0.25 cut point cut will lower the Fed’s overnight borrowing rate to a range of between 4.25% and 4.50%. Although that’s not the toll consumers pay, the Fed’s moves still affect the borrowing and savings rates consumers see every day.

From credit cards and mortgage figures to auto loans and savings accounts, here’s a look at how the Fed rate reduction could affect your finances in the year in the lead.

Most credit cards have a variable rate, so there’s a direct connection to the Fed’s benchmark. Because of the median bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to assorted than 20% today — near an all-time high.

Since the central bank started cutting interest rates, the ordinary credit card interest rate has only edged off extremely high levels. 

“Another rate cut is welcome intelligence at the end of a chaotic year, but it ultimately doesn’t amount to much for those with debt,” said Matt Schulz, LendingTree’s recognition analyst. “A quarter-point reduction may knock a dollar or two off your monthly debt payment. It certainly doesn’t change the details that the best thing cardholders can do in 2025 is to take matters into their own hands when it comes to aged interest rates.”

Rather than wait for small annual percentage rate adjustments in the months ahead, the superior move for those with credit card debt is to consolidate with a 0% balance transfer card or a lower-interest particular loan, Schulz said.

Otherwise, ask your issuer for a lower rate on your current card — “that jobs way more often than you’d think,” he said.

Auto loan rates are also still sky-high — the average auto loan rates for hardened cars are at 13.76%, while new vehicle rates are at 9.01%, according to Cox Automotive.

Since these loans are fixed and won’t alter with the Fed’s rate cut, “this is another case where taking matters into your own hands is your finest move,” Schulz said.

In fact, anyone planning to finance a car may be able to save more than $5,000, on undistinguished, by shopping around for the best rate, a 2023 LendingTree report found.

Because 15- and 30-year mortgage measures are fixed and mostly tied to Treasury yields and the economy, they are not falling in step with Fed policy. 

As of the latest stub, the average rate for a 30-year, fixed-rate mortgage increased to Student loans