Here’s what that means for you

The Federal Reserve announced Wednesday it will lower its benchmark rate by a quarter point, paving the way for relief from some of the high borrowing costs that have weighed on consumers.

The federal funds rate, which is set by the Federal Open Market Committee, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the central bank’s moves still affect the borrowing and savings rates they see every day.

“The impact on household finances is likely to be mixed,” said Brett House, economics professor at Columbia Business School.

“For households with variable-rate loans or other forms of credit obligations, they are going to see the interest rates on that borrowing come down, almost immediately,” he said. But some longer-term fixed rates remain stubbornly higher than they were a year ago, he added, and many Americans must still contend with lingering inflation, which is driving the cost of goods up.

From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at all of the ways a Fed rate cut could affect your wallet in the months ahead.

Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark.

With a rate cut, the prime rate lowers, too, and the interest rate on your credit card debt is likely to follow. But even then, APRs will only ease off extremely high levels.

“Existing borrowers could see their rates go down by half a point or so — maybe a little more — by early 2026,” said Ted Rossman, senior industry analyst at Bankrate.

Still, the average credit card rate is currently more than 20%, according to Bankrate — near an all-time high, so APRs will remain close to 20% at least into next year, Rossman said.

Now, the average rate for a 30-year, fixed-rate mortgage is 6.13% as of Tuesday, according to Mortgage News Daily, down from their peak at over 7% back in January.

“The Federal Reserve rate cut this week has already been priced into mortgage rates, so the immediate impact will be minimal,” said Selma Hepp, chief economist at Cotality.

“However, while a single rate cut may not cause a significant additional drop, a series of anticipated cuts for the rest of 2025 and into 2026 could continue to put gradual downward pressure on mortgage rates,” she said.

But since most people have fixed-rate mortgages, their rate won’t change unless they refinance or sell their current home and buy another property. 

Even though auto loan rates are fixed, potential car buyers could benefit if borrowing costs come down on new loans, according to Jessica Caldwell, Edmunds’ head of insights.

The average rate on a five-year new car loan is currently around 7%, according to Edmunds. Going…