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Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. CNBC will update as changes are made public.
The Federal Reserve's emergency rate cut back in March, which dropped the benchmark interest rate to zero, is likely here to stay. Just last week, the Fed publicly stated that even if inflation starts to pick up again amid the economic recovery from the coronavirus pandemic, it doesn't expect to raise interest rates any time soon as the labor market rebounds.
Wall Street economists predict that these rock-bottom rates may be around for the next several years. In fact, after the 2008 Global Financial Crisis, the Fed kept benchmark rates low for seven years. While this means that borrowing becomes cheaper for those who can get approved for loans, it's not such good news for savers.
Here's how the Fed's efforts to keep interest rates low could impact consumers.
Low interest rates can certainly help when it comes to financing a home. But it depends on the type of mortgage you have, whether it is a fixed-rate mortgage (interest rate remains the same over the life of the loan) or an adjustable-rate mortgage (interest rate varies).
Because fixed-rate mortgages have the interest rate locked in, anyone looking to buy or refinance will benefit from the sustained lower rates. This is true for all fixed-rate financial products, including personal loans and car loans. Unfortunately, if you're already locked into a loan and you're not looking (or able) to refinance, you won't really benefit from lower interest rates right now.
On the other hand, homeowners with an adjustable-rate mortgage should have already seen their monthly payments decrease after the rate cut. This could also be a good time to consider refinancing to a fixed-rate loan if possible, so you can lock in a low interest rate and not worry about your mortgage payments going up later.
Credit card issuers base their variable interest rates off of the prime rate. Since this rate is directly influenced by the Fed's benchmark, a rate cut means that credit card APRs also drop.
For example, the Fed's second rate adjustment back in March resulted in a 1% APR reduction. Therefore, a credit card with a 15.24% variable APR saw a decrease to 14.24%.
As the Fed maintains a low benchmark rate, your credit card's APR likely won't change much more from the March reduction.
Unfortunately, a 1% drop won't make that big of a dent in your outstanding credit card balances. You're better off trying to pay them off or transferring your debt to a balance transfer credit card, such as the U.S. Bank Visa® Platinum Card. With a balance transfer card, you have more time to pay off your debt at 0% interest.
0% for the first 21 billing cycles on balance transfers and purchases
18.74% - 29.74% (Variable)
Balance transfer fee
Either 3% of the amount of each transfer or $5 minimum, whichever is greater
Foreign transaction fee
See rates and fees and our methodology, terms apply.
Just be aware that, due to the pandemic, balance transfer offers have been harder to find and qualify for as card issuers are trying to minimize risk. For those with fair credit, consider applying for the Navy Federal Credit Union Platinum Credit Card for better approval chances.
If you're hoping to see a hike in the rate you're earning on your high-yield savings account, last week's Fed announcement means you'll be waiting awhile.
Because annual percentage yields, or APYs, often fluctuate in accordance with the Fed rate, they likely won't go back up until the Fed decides to raise the benchmark rate. A lower rate means that savers will earn less on their money. Since March, interest rates on high-yield savings accounts have dropped to nearly half of what they were a year ago.
On the bright side, interest rates do — and will — eventually go back up. When the economy is booming again, the Fed will raise interest rates to stabilize borrowing and spending, which gives savings accounts an added edge as banks increase their savings yields.
Although consumers are earning less on their savings these days, they're still earning some interest and that can add up over time. For this reason, high-yield savings accounts make smart financial sense. High-yield rates currently hover around 1%, but that's still 16 times more than the national average savings account rate.
The best high-yield savings accounts, like the Varo Savings Account, come with zero monthly fees and no minimum balance or deposit requirements. Varo also currently offers a higher APY than a lot others at 3.00%, with the option to earn up to 5.00% if you meet certain monthly requirements.
Annual Percentage Yield (APY)
Begin earning 3.00% APY and qualify to earn 5.00% APY if meet requirements
$0.01 to earn interest
Up to 6 free withdrawals or transfers per statement cycle
Excessive transactions fee
Offer checking account?
Offer ATM card?
Yes, if have a Varo Bank Account
See our methodology, terms apply.
Read our Varo Savings Account review.
Information about the Varo Savings Account has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.