Upcoming Fed Rate Cut Will Save Credit Card Users $1.5 Billion

With the Federal Reserve expected to cut its target rate on Wednesday, the personal-finance website WalletHub today released the results of a new Fed Rate Survey gauging consumer sentiment on the matter. Highlights from the nationally representative survey can be found below, along with commentary from WalletHub CEO Odysseas Papadimitriou.

• Rate-Cut Odds: There is a 78% chance of the Fed reducing its target interest rate by 25 basis points on July 31 and a 22% chance of a 50-point rate cut.
• Consumer Support: 72% of people support a Fed rate cut, and roughly 61% think it would be good for the economy.
• Recent Rake Hikes: The Federal Reserve has increased its target rate nine times since December 2015, with no decreases. Due to those nine rate hikes, credit card users were set to pay roughly $14 billion more in interest during 2019 than they would have otherwise.
• Credit Card Savings: 66% of Americans say interest rates on their loans are too high. Credit card users would save roughly $1.5 billion in interest if the Fed cuts its target rate. The average household currently owes $8,390.
• Trump vs. the Fed: 7 in 10 people say the Federal Reserve knows how to grow the economy better than President Trump.

 
You can find additional commentary below. For the complete results of WalletHub’s July 2019 Fed Rate Cut Survey, please visit: https://wallethub.com/edu/fed-rate-cut-survey/63826/
 
Q&A with WalletHub CEO Odysseas Papadimitriou
 
Is it a good idea for the Federal Reserve to cut its target rate?
 
“The Federal Reserve Board is filled with smart people and led by a very capable chair in Jerome Powell. They also have more economic data than anyone. So we have to give them the benefit of the doubt at this point and assume they are simply reacting responsibly to market conditions,” said WalletHub CEO Odysseas Papadimitriou. “Still, the Fed has to make it clear that the move is not politically motivated, especially since the timetable for a cut has accelerated since just a few months ago.”
 
Who will a Fed rate cut help the most?
 
“A Fed rate cut would be great for people with credit card debt, saving them a total of roughly $1.5 billion on interest over the next 12 months. Car shoppers will also benefit, as we expect auto loan rates to drop about 15 basis points from current levels,” said WalletHub CEO Odysseas Papadimitriou. “When it comes to home loans, the forthcoming Fed cut has already been baked into mortgage rates, so shoppers are unlikely to see much of a change after the Fed’s announcement. Unfortunately, the only real losers in all of this are people with online-only savings accounts, whose yields we expect to drop by around 11 basis points. Of course, if the rate cut helps keep the economy chugging along, it will also benefit most of us broadly.”
 
Can consumers do anything to take advantage of the Fed cutting its target rate?
 
“The best thing consumers can do is use lower rates to accelerate their timetable for getting out of debt, not as an excuse to accumulate more,” said WalletHub CEO Odysseas Papadimitriou. “Lower rates may help keep the economic tide rising for longer, but it’s only a matter of time before it recedes. And if people don’t put interest savings toward principal reduction in the meantime, it will be clear they’ve been swimming naked financially when the tide does come in.”

Tags: Press Release