The Federal Open Market Committee cut short term interest rates again today by one half of a percentage point to 3.0%. The Fed's rate cut was in response to the economy's current financial state.
According to the Fed,
"The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets."
The good news for cardholders is that this means that the Prime Rate will fall by half of a point as well to 6%. Over the coming weeks and months, interest rates will fall .50% on variable rate credit cards. About 90% of all cards issued today have variable rates that typically move up and down in response to the Prime Rate.
Curtis Arnold, Founder of CardRatings.com, notes:
Given the recent rate cuts, if you are paying over 10% on your current credit card and you have a credit score above 700, then I would strongly suggest that you search our listings of low rate credit card offers. Simmons Bank, for example, offers a 7.25% fixed rate card.
The rate cut should have an immediate impact on consumers that are revolving credit card debt. The current average rate based on all the cards listed in our comprehensive database is 12.82%. Those applying for a credit card with a variable rate should benefit as well.
Finally, it is also worth noting that the Federal Open Market Committee also cut rates unexpectedly earlier this month by .75% or 75 basis points. Bottom line is that we've had two rate cuts this month that total 1.25%. Can't wait from my own card to reflect these cuts! :-)