Credit Do Federal Interest Rates Affect My Debt? Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Aug 7, 2019 - [Updated Apr 20, 2021] 2 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Updated – 9/18/2019 The Federal Reserve announced on Wednesday that it would cut interest rates by a quarter percentage point for the second time in seven weeks. Before we detail what this means, let’s backtrack: what exactly does the Federal Reserve do? The Federal Reserve, AKA the Fed, was founded by the U.S. Congress to maintain economic and financial stability. The Fed sets the interest rates that banks charge each other for loans by increasing or decreasing the amount of cash that is available in the banking system. With the latest announcement, the new short-term range will be between 1.75% and 2%. This follows July’s interest rate cut, which was the first time the Fed had done this since the 2008 financial crisis. So, how does all of this affect your debt? Generally, the rate cut is good news for consumers, as it makes borrowing money from banks, whether it be a credit card or a home loan, cheaper. It also comes with some positive news for people with credit card debt. For example, if you have credit card debt, the lowering of rates can make paying off debt slightly cheaper. A quarter-point cut on a $5,000 credit card balance would lower the minimum payment by $1 a month. For credit card holders, thanks to the Credit Card Accountability Responsibility and Disclosure Act of 2009, there are limits on banks’ ability to raise interest rates on existing accounts. “This means card issuers “can’t reprice you once they sell you a card – so they have to price [more risks] in, broker John Hecht of Jefferies told Los Angeles Times.” As for student loans, federal student loans have a fixed interest rate set by Congress and are not affected by the Fed’s move. For private student loans, some come with variable interest rates that follow the prime rate. For example, your monthly payment will likely decrease for those on a regular payback schedule. However, if you’re on an income-repayment plan, your monthly payment won’t change, but a lower portion will go toward interest rather than principal. Previous Post Unique Little-Known Ways to Find Grants And Scholarships Next Post Moving Abroad: What You Need To Know About The Actual… Written by Mint.com More from Mint.com Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? Financial Planning WTFinance: Annuities vs Life Insurance