Since the March 15 federal funds rate cut, which marked the largest cut in the history of the Federal Reserve, interest rates have sat at near-zero. These rates will likely continue through the end of 2022 as announced in Wednesday’s Federal Open Market Committee (FOMC) meeting.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” said the Fed in a June 10 statement.
The Committee expressed their intentions of keeping the rate at a target range of 0-0.25 percent until the coronavirus’ impact on the U.S. economy has run its course and officials are certain the U.S. financial system is “on track to achieve its maximum employment and price stability goals.”
The 2019 rate cuts in summary
The Fed first voted to cut interest rates by 25 basis points at the July 2019 FOMC meeting with the intention of slightly boosting the economy in case of an economic downturn.
“[The cut] is intended to ensure against downside risks from weak global growth and trade policy uncertainty; to help offset the effects these factors are currently having on the economy; and to promote a faster return of inflation to our symmetric 2 percent objective,” Powell said at the July 31 meeting.
The chairman originally stated the boost would not mean a series of further rate reductions, yet this changed as the Fed made two additional cuts — 25 basis points, each — following the July 2019 meeting.
What this means for credit cards
As long as you’re paying your balance in full every month, you likely won’t see an impact from the increase or decrease of rates. But if you have credit card debt or are planning a large purchase in the coming weeks, the lowering of rates can make it cheaper to pay off debt.
Pay off debt now, not later
With the current federal funds rate, now is the time to pay off your credit card debt. Consider balance transfer card options that can help you consolidate and pay off your debt within an introductory zero percent APR window.
The no annual fee Capital One SavorOne Cash Rewards Credit Card, for example, offers an introductory zero percent APR for 15 months on purchases (15.49 percent to 25.49 percent variable APR thereafter). Earn unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores (excluding superstores like Walmart® and Target®), plus 1% on all other purchases.
The bottom line
While the federal funds rate may only marginally impact your cards’ interest rates, it’s still a good idea to jumpstart your debt payoff as soon as possible.