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INTEREST rates may finally fall for Americans, but experts encourage them not to lower their payments.
The Federal Reserve has kept interest rates between 5.25% and 5.5% since July 2023.
The Federal Reserve may finally be lowering interest rates[/caption]
The 20-year high might finally settle down, much to the relief of credit card holders nationwide.
The Fed could cut rates at the next Federal Open Market Committee meeting, starting September 17.
This comes after consumer prices experienced a modest rise of 0.2% in July, bringing the annual inflation rate to 2.9%—the lowest rate since March 2021.
While this could also change credit card rates, it’s important that Americans avoid making minimum card payments, according to the experts at Yahoo Finance.
Lower interest rates could decrease the required minimum payment, but paying off that amount only can leave people with mounting balances.
Average credit card interest rates have increased from 16% in 2022 to 21.5% today, pushing balances even higher, according to the Fed.
The new Fed rate would likely be between 4.75% and 5%, which would have little effect on cards with APRs near 25%.
For example, someone with a $5,000 balance on a card with a 21% APR who makes minimum payments of 1% of the balance plus interest would be paying down their debt for over 23 years.
However, if they pay $200 more monthly, they would be done in 37 months.
CHARGE IT
A finance expert warned Americans aren’t safe from future increases affecting their current loans and credit rates.
Greg McBride, a financial expert from Bankrate, told The U.S. Sun that there “isn’t anything compelling” for the Fed to cut rates.
“They want more time for the current level of interest rates to have the desired effect – reducing demand and getting inflation moving sustainably toward 2%,” he said.
“For borrowers, interest rates won’t come down soon enough or fast enough to provide meaningful relief.”
He suggested Americans pay down high-cost debt and take advantage of 0% interest balance transfer offers.
More on The Fed
The Federal Reserve maintained its key lending rate at 5.3% since July 2023, per the BBC.
By keeping interest rates elevated, the Federal Reserve aims to discourage borrowing and reduce the demand pressures contributing to rising prices for homes, cars, and various goods.
As consumers buy less, inflation should cool.
However, several factors contribute to high inflation, including labor shortages, supply not keeping up with demand, rising raw material costs, and price gouging.
Americans can also take advantage of high rates by investing in high-yield savings accounts.
“Returns on savings accounts, CDs, and money markets are at the highest levels in more than 15 years and at levels that are well ahead of inflation, a rare occurrence,” McBride said.
“Better still, this environment is slated to continue for the foreseeable future as interest rates are unlikely to come down significantly in the near term.”
Walmart is helping shoppers fight inflation by dropping the price on 7,200 items.
And see the cheapest back-to-school essentials, according to a retail expert.
